Q&A: Prosus Ventures' Martin Tschopp

Q: What is Prosus Ventures? How does it relate to the Naspers?

A: Prosus encompasses the internet assets held by Naspers. The venture arm, founded five years ago, is just a formalization of the century-old strategy of the parent company, which started out as a publishing house and has branched into new related verticals like television, telecoms and e-commerce. We try to invest in what's new and what’s commensurate with our understanding.

Q: How do you differ from other VC firms?

A: We are check-size agnostic. Our checks are always commensurate with the risk of the investments, how close it is to our core focus and how much conviction we have. We don't have a fund so we don't have a ticking clock. Our engagement is driven by long-term success, not short-term exit requirements. We typically start slower and build our portfolio over time. This can happen very quickly once we have conviction. In addition, Prosus doesn’t just provide money to companies, we support founders – business strategy expertise, operating experience, and access to resources in key expansion markets.

Q: Is your China strategy effectively Tencent Holdings?

A: While China is the biggest consumer internet market in the world, we don’t focus on opportunities in China due to the group’s broad exposure in the country through its partnership with Tencent, which has invested in hundreds of companies. The group has an excellent long-term relationship with Tencent. When the right opportunity arises, the group collaborates and co-invests. Examples include Mail.ru in Russia and Swiggy in India.

Q: What can we expect from Prosus in Asia? Will you continue to back category leaders in segments like food delivery and education targeting the urban consumer market in India?

A: We fund companies based on a proof point. The Indian middle class numbers over 80 million - a big number for most countries - but it’s far short of the total population of 1.3 billion. It is important to tie the size of the potential opportunity with the reality. Food delivery and education are where we have written the biggest checks because that’s where we have conviction. Prosus is specifically committed to India across multiple sectors and has invested in companies in e-commerce, payments, education, food, and more. We invest in businesses that are addressing big societal needs in high-growth markets and India fits well within that investment strategy. From a capital allocation point of view, India is high on our list. We are also very excited about Southeast Asia for some of the same reasons.

Q: Byju’s, the video-based education provider, is one example of the “next billion” thesis. Are there others in the Prosus portfolio?

A: ElasticRun is another example in India. It provides a last-mile solution to deliver e-commerce packages for the likes of Flipkart and Amazon in cities leveraging the help of kiranas, or mom-and-pop stores, that carry out deliveries in off-peak hours. Working with these stores, they had another idea: only two million out of the 12 million kirana stores in India are served by major brands. Even if the brand’s products are on the shelves, they have little visibility because they are served through wholesalers. ElasticRun is now partnering with 50,000 kirana stores enabling B2B deliveries. This is a clever way of leveraging technology-related changes of recent years.

Q: How is the opportunity changing for those looking at internet-enabled start-ups?

A: A lot of investing activity is moving from bits into bits and atoms and now increasingly more so into atoms. If you look at the history of firms receiving investment you had purely virtual businesses – Google, Facebook, eBay – and then firms like Amazon that realized the total addressable market was larger if they played a part in the real world by owning warehouses and fulfilling delivery. Swiggy, the Indian food delivery firm, has a large driver fleet and now also runs cloud kitchens. ElasticRun built a delivery network in the real world leveraging technology. There's always an important tech angle in every business model we invest in.

Q: As an investor, what are the differences you see in such companies?

A: They have very different dynamics in terms of capital requirements and how quickly they can get market share. The skill sets required in the team are different. We look at how asset heavy the firm is. We ask ourselves what is tech enabling here that is unique? 

Q: What's your view on the sustainability of high cash-burn, consumer-facing business models?

A: I don’t think one can generalize. We evaluate on a case by case basis what approach makes the most sense in line with our expertise and conviction in any given sector or country. This evaluation is based on always keeping both the long-term potential as well as the short term situation in mind, including the level of competitive activity and other considerations.

Q: Apart from select cases like cross-border payments and trade finance, blockchain has not found commercial application. Why is Prosus interested in the space?

A: The amount of money that we invest in blockchain firms is different from what we would invest in Byju's. [A block chain-backed asset] is the digital equivalent of a bearer instrument that is not guaranteed by a government. Many people refer to Bitcoin as digital gold. Gold historically was the ultimate bear instrument - it was easy to test if the gold was real and it is universally accepted. We have invested in Immutable, an Australia-based start-up that offers digital ownership of in-game items, to test this concept. Ultimately, private property is the building block for every economy. If you look at how much more virtual our world has become over the last 10 years, think about how much more virtual it will be in 20 years. Once you have the technology for a digital bearer instrument, you can build entire economies on top of that. We are very patient so we can afford to think in decades.

Q: How does Prosus operate globally?

A: Within Prosus Ventures, we have people in seven countries. We have people in India, Hong Kong, the Netherlands, Brazil, the US, South Africa and the UK. When it comes to the larger Prosus group, which includes OLX and PayU, it expands much further. For instance, OLX has an office in Jakarta and several other places in Asia.

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