Naspers, the largest tech company in Africa by market capitalization, has closed down Naspers Foundry, its South Africa-focused venture capital fund, according to BusinessDay. The decision was reportedly made as the venture capital industry globally takes a hit. However, Naspers will maintain investments, including writing follow-on checks, in its nine portfolio companies, such as Planet42, SweepSouth, Naked, Aerobotics, and WhereIsMyTransport. Naspers will align its efforts with Prosus Ventures, which now has the mandate of maintaining Naspers’ local investments, and will no longer have a dedicated team focused on South African startups.
Naspers Foundry launched in 2019 to back South African startups in Series A and B stages that aligned with the internet businesses on which Naspers focuses, such as food, payments, or classifieds, as well as any other digital venture that addresses a societal need. The VC firm had only deployed half its fund size before calling it quits, despite telling TechCrunch that it would invest over three years.
Although it is easy to attribute Naspers Foundry’s closure to the global economic downturn, the firm faced other challenges, such as its relationship with South Africa’s Competition Commission. Last July, the commission published a report that identified institutions that excluded historically disadvantaged persons (HDPs), including people of colour and women, from South Africa’s internet economy. Naspers Foundry was one such company. Of the R700 million disbursed funds to 23 founders, only 13% were people of colour, and 8% were women, further highlighting the diversity problems facing South Africa’s startup and VC landscape. In 2019, the commission also famously blocked Naspers’ bid to buy 60% of WeBuyCars. Local investors claim that the commission’s continued hostility over the years prevented Naspers Foundry from making specific deals for fear of being too dominant.
Despite the displeasure expressed by some local investors at the closure of Naspers Foundry, stabilizing solutions are being put in place to fill the void left by the venture capital firm, which has been a source of growth and development for South African startups.
A Naspers spokesperson said,
“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.”
Since its launch in 2019, Naspers Foundry has funded over nine startups to the tune of over R740 million (~$40 million).
In conclusion, Naspers’ decision to shut down its venture capital fund, Naspers Foundry, is an indication of the challenges facing the venture capital industry globally. The decision was also influenced by the company’s relationship with South Africa’s Competition Commission and the diversity issues facing the country’s startup ecosystem. While Naspers Foundry’s shutdown is a significant blow to the local startup community, it has opened up opportunities for other investors to fill in the gap and support South African startups.