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Naspers Foundry seeks South Africa’s answer to Tencent

By David Whitehouse
Posted on Wednesday, 5 May 2021 18:45

Naspers Foundry portfolio company Aerobotics uses drones and satellites to provide crop analytics. Photo supplied.

Naspers Foundry is likely to make a new investment in an early-stage financial-services business in June as it continues its quest to unearth a South African tech giant in the making.

The foundry is an early-stage business funding vehicle created by Naspers, which in 2001 made one of the best-ever early-stage investments by putting $32m into China’s tech giant Tencent. The foundry’s main focus areas are fintech, educational tech, food tech and classified advertising. The aim is to create “the next big South Africa tech success story,” Naspers Foundry head Fabian Whate says from Cape Town.

The vehicle takes minority stakes in businesses, which will be the case for the pending financial-services deal, Whate says. Businesses need to be at the revenue-generating stage to be considered. Founders need to have “skin in the game” and a “defensible moat”.

Portfolio companies continue to run themselves, but the foundry sits on the board of each business and that will continue with future investments. The foundry can help portfolio companies with networking, market access and giving advice from internal experts, Whate says.

He is not deterred by South Africa’s poor overall economic performance. “Tech has been the bright sport globally” during Covid-19, he says. The foundry is “not a macro investor. These businesses are a penetration play. They are not operating in saturated markets.”

Patient money

The foundry started out in 2018 with funding of $100m and has so far invested only about $14m. Four businesses are in the portfolio so far.

  • Aerobotics uses artificial intelligence (AI) to provide crop-management tools for the agricultural industry. The company’s solution gives information on the size and health of trees and fruit quality, and generates most of its business in the US. The company had a “great year” in 2020, Whate says.
  • SweepSouth is an online cleaning services platform that connects clients with home cleaners. The foundry says the platform has created jobs for more than 10,000 people who earn more than the minimum wage.
  • Food Supply Network (FSN) is a marketplace that integrates the ordering systems of food manufacturers, distributors and buyers. FSN operates in Namibia and Zambia and plans to expand to Angola.
  • Student Hub partners with government-accredited vocational training colleges to deliver courses online. Whate says that performance has been “stellar”, with revenues growing fast.

Whate is keen to reinvest if portfolio companies are successful, and it’s hard to predict how the money will be split between new and follow-on investments, he says.

Naspers has time on its side as it seeks a homegrown repeat of the Tencent success story.

The vehicle does not operate as a private-equity fund that needs to find regular exits. Industrial acquisitions or initial public offerings would be logical exit paths, but Whate says the firm has no timetable.

“It’s still very early in our investment programme. We can take a long-term view. The foundry is still a start-up itself.”

Bottom line

A multinational incubator such as Naspers can increase the chances of South African start-ups achieving scale.

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