Naspers has shut down its R1.4bn SA-focused technology investment fund, Foundry, as the group slims operations and venture capital takes a hit globally.
The group will maintain the investments it has made through the four-year-old fund, which include successful start-ups such as online home-cleaning business SweepSouth and agritech firm Aerobotics.
And it intends to continue to pour millions into such local companies.
However, it plans to align these efforts with the approach it adopts internationally and will no longer have a dedicated team focused on SA start-ups, so it could face pushback from those who see the move as Naspers reneging on its commitment to invest in SA.
Naspers Foundry began operating in 2019 as a start-up fund that aimed to boost the SA technology sector by investing in early-stage companies over three years.
Since then, the fund has invested R740m into companies that include Aisha Pandor’s SweepSouth, with R30m, Aerobotics with R100m and Naked Insurance, which has received over R120m. In total the fund has backed nine companies.
A spokesperson for Naspers told Business Day: “The global investment environment, as well as the local SA one, has changed and we have made clear the need for our business to adapt.
“In line with changes across the wider business, we have reviewed our early-stage investment strategy within SA to bring it in line with our international approach. Naspers will continue to support the development of SA’s early-stage tech sector, assessing the market and new opportunities in a way that is consistent with our other global markets.”
Just last month Foundry led a $15m equity funding round for car subscription platform Planet42, which raised a massive $100m in debt and equity.
Business Day understands that the work of investing in local companies will now be done by the group’s international venture unit, Prosus Ventures.
Though the group intends to continue with local investments, removing the dedicated team for SA could raise questions about its commitment to SA. Its main SA units, Takealot and Media24, make up less than 2% of its interests, and the group has frequently had to reiterate that its local roots are important.
Peter Takaendesa, head of equities at Mergence Investment Managers, says the Foundry move makes sense against a backdrop of rising interest rates, which has reduced venture capital activity because capital is now more expensive.
The global investment environment, as well as the local SA one, has changed and we have made clear the need for our business to adapt.
— Naspers
And like fellow tech investors such as Microsoft and Google, the group has been scaling down operations. It recently announced a 30% cut in corporate staff.
“The concerns and complaints [about Naspers’ commitment to SA] will most likely come up but, at the end of the day, developments in the venture capital market [justify it],” Takaendesa said.
“That area is really becoming challenged by higher interest rates. It also fits as they [Naspers] are trying to reduce their activity globally into very early stage investments that are loss making. So from a business strategy point of view, it seems consistent with what they are doing with many other markets globally,” Takaendesa said.
“In general, we’re likely going to see reduced activity going to venture capital investments and private equity, especially of early-stage businesses.”
Naspers Foundry was launched at President Cyril Ramaphosa’s SA Investment Conference in 2018 as part of the group’s local investment drive.
The group pointed to Foundry when it faced criticism from the Competition Commission about its role in SA’s economy. And when Naspers was looking to list its international assets in Amsterdam through Prosus, it cited Foundry as an example of its continued commitment to addressing SA’s big societal needs and stimulating the local tech sector.
However, SA’s own authorities have not done a good job of trying to get Naspers — which has a $20bn war chest — to spend its billions in SA.
Most famously, competition authorities blocked the group’s bid to take up 60% of WeBuyCars through a R1.4bn deal in 2019. Naspers was very vocal about its displeasure at the time. Given the rapid growth and success of the vehicle trading platform, that move has left a bad taste with tech investors. Transaction Capital bought WeBuyCars, which has been one of that group’s star performers.
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