We invest for 10-20 years, do not need public listing to exit: Prosus CEO

'Don't get blinded by near term big numbers but think of the decades ahead', said Bob van Dijk

With its $4.7 billion acquisition of BillDesk, Prosus NV, the international investment arm of South African conglomerate Naspers, is showing its quiet aggression in the country. 

As Prosus’ investments touch over $10 billion, its Amsterdam-based CEO Bob van Dijk talks about how its investment approach differs from that of typical venture capital funds in a video interview with Surajeet Das Gupta: 

Venture capital funds that have put money into startups in India generally look for exits in five years. How does Prosus differ?

We are not a venture capital fund, so we stay invested for decades, between 10-20 years. We don’t have a five-year horizon to exit. For us, the key criterion for investing is ‘can we add value to the company’? We almost always have a board seat that helps us in giving direction to the company and we can bring in expertise from other markets. We are not hung up on whether we have a 10 per cent or 20 per cent stake and in some cases even more.

There is a rush of startups going public, which include Byju’s in which you have invested, to provide an exit route to their investors. Many say that they are overvalued, especially after the Paytm IPO debacle. Will you stay invested or exit?

IPO is not an exit for us. We are long-term investors. We do not need a public listing to exit or get validation. It is a real differentiator for us as we don’t push anyone to go in either direction.  For instance, we have a large shareholding even now despite Tencent’s IPO 15 years ago. If we see future growth, we stay invested far beyond the IPO.

But when it comes to capital markets, it is always a question of supply and demand and it is hard to say whether the balance is correct at that point of time, something only time will tell. The opportunity in technology is tremendous and the upside of it. I understand the enthusiasm.  On the other hand, whether it is right for companies to go public at a given point of time remains to be seen.

It distracts companies because they have to communicate publicly. Also, public companies are expected to be predictable so when they take risks, it is difficult to explain. It’s a difficult choice to make.

What do you advise your entrepreneurs? For instance, you are invested in Byju’s which is planning to hit the IPO?

My advice is do what is right for the company. Don’t get blinded by near term big numbers but think of the decades ahead. Do not go public because the market happens to be hot – that is a really bad reason.

How important is the Indian market for you?

A. India has been our number one priority market for years and that has not changed. Prosus started investing in India too early in early 2000 when there were only 5-10 million internet users. In one sense, it was a glorious waste of money and we made lots of mistakes. In another sense, we learnt how to find the right partners and how consumers would want to pay online. We paid our school fees for learning. We were seen as patient investors and as local entrepreneur-oriented rather than having an imperialist approach.

Do you see any of the startups in which you have invested having the potential to go global or offer something globally?

The innovation that comes out of India is actually setting the pace for many other parts of the world. The Swiggy model of food delivery was used by us in the rest of the world. Meesho again is a business model which is ahead of its time and ahead of developments which will happen in other parts of the world. India has been an innovation lab from where new solutions will travel to the rest of the world.

Eruditus was born in India and Byju’s. They started as a home-grown successful model and have built a position globally. There will be other business models which will also be exportable and we will support them. The advantage is they have a large domestic market. It is in many ways similar to the US internet market growth which was also based on innovation supported by a domestic market and then going global.   

What are the newer areas you are looking at? Do electric vehicles or drones interest you?

We have typically not invested in hardware as we don’t have the expertise. It has been software-oriented. We have been investing in blockchain and synthetic biology which we think are transformational. We have invested in the ecosystem around cryptocurrency. But there is a lot of hype so one has to be careful.

Have you made returns on your investments in India?

Most of the businesses we have invested in are at the growth phase and are making operating losses. As we invest all over the world in consumer internet, we are comfortable with starting losses. The most important thing we want to see is good progress, good growth, margins that are improving and a path to profitability. PayU in India has been making profits for a year.    

What does a two-year perspective for Prosus in India look like?

In the last six months we have been very active in investing here. We will surely invest in more companies and are already looking. We do not see any meaningful exits in this period. (Prosus has only exited Flipkart up to now because it would not remain a strategic investor after Walmart went for control).