The driving factors of corporate venture capital in Naspers
Date
2015-05-21
Authors
Makhafula, Delta Matseko
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Abstract
The Internet revolution has led to the convergence of media platforms, the
result of which has been the disruption of traditional media platforms. The
media convergence phenomenon has led to the emergence of conglomeration
within the media industry, driven by concentration, which was caused by
external corporate venturing (ECV) activities in the period of 1997-2008. A large
number of these ECV activities were mergers and acquisitions (M&A), which
resulted in massive losses for media companies. The Naspers group (Naspers)
contributed to these ECV activities through corporate venture capital (CVC)
investments, as opposed to M&As. Naspers is reported to be one of the few
media conglomerates that have managed to successfully gain value from media
convergence. In this study, Naspers’ use of CVC is probed through two
questions: What are the driving factors behind Naspers’ choice of CVC over
other ECV tools, and what are the strategic reasons behind these CVC
investments. Information was collected through interviews with senior Naspers
executives. The findings indicate that Naspers places a great amount of
importance on the founders of investee start-ups and their ownership of the
venture, hence the use of CVC, which allows these founders to maintain control
and ownership of their business post investment. The findings further indicate
that Naspers’ use of CVC is also motivated by mitigation of risk and uncertainty,
gaining a window on technology, as well as leveraging innovation from external
sources. The findings contribute to solving the conundrum of how to make
money from media convergence.
Key Words: External corporate venturing, Corporate venture capital, Media
convergence, Internet
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Keywords
Joint ventures ;Conglomerate corporations ;Corporations -- Growth South Africa.