Exclusive: Major int’l VC stealthily buying into SA eCommerce sites

A major US$3.5-billion New York-based hedge fund headed by investor Lee Fixel has been quietly buying up some major eCommerce properties in South Africa over the past five years.

The New York-based Tiger Global Management LLC, which recently invested US$20-million in business social network LinkedIn and US$80-million in Facebook, now holds a stake in the country’s largest online auctions site, Bid or Buy. Add to that a growing portfolio that includes key online properties such as Private Property, the largest online property portal, and Take2, an online shopping site and Kommetjie-based travel bookings site SafariNow. Tiger also enjoys equity in local jobs portal, jobs.co.za and online payment and fulfilment site PayFast.

Tiger’s vigorous acquisition efforts may pose an increasing challenge to the dominant emerging markets internet player in the country, Naspers. The US$18-billion SA-based multinational holds an 85% stake in Kalahari.net and to date boasts a successful run on both local and overseas markets. Naspers owns online publisher News24, mobile instant messaging service MXit and pay-to-view TV network DStv. The company’s extensive online assets extend to countries such as China, where it holds a stake in the world’s second largest social network, Tencent. It also has equity in the world’s largest social network Facebook via Russian-based company investment company Digital Sky Technologies (DST).

Kalahari.net is an online retailer, ranked in the top 50 of SA sites. The retailer recently launched its online bidding marketplace late last year, though so far the Tiger-backed Bid or Buy, founded by local internet entrepreneur Andy Higgins, continues to dominate that online marketplace in South Africa.

Kalahari recently beefed up its business, appointing former eBay director Oliver Rippel to head the operation. The former Kalahari.net boss Gary Hadfield has since moved on to another Kalahari rival, Loot.co.za.

Private Property, a key Tiger investment, is also the largest property portal in South Africa according to the DMMA stats, pipping Naspers’ Property24 – which is reportedly undergoing an overhaul.

It looks like a royal battle is shaping up in the eCommerce sector between Kalahari and the small Tiger-backed Take2. In a further twist, Memeburn has learnt that ex-Naspers exec and former MIH CEO Kim Reid, who looked after Kalahari.net, has secured investment from Tiger and invested his own money into Take2 – that could threaten Kalahari’s market share.

Is an epic battle set to unfold as Reid takes on his former employer?

While Kalahari.net is believed to be the biggest pure online retailer in South Africa, if you exclude Amazon, a Memeburn source believes Take2 is going to be hot on their heels soon. Could Naspers really be under pressure in its own backyard from these internationally-backed local companies? At the same time it also faces a fight from world leaders in the classifieds game on a local front.

“Naspers is not exactly winning the battle on the classifieds front at the moment – Gumtree and eBay are dominating, even if they are not Tiger investments,” the source told Memeburn.

In many respects, this story may have all the appearances of a looming battle, but a deeper investigation reveals that Naspers and Tiger are linked. Both have a stake in Russia’s DST, the company that holds the Facebook, Tencent and mail.ru stake. In fact Naspers acquired its mail.ru shareholding from Tiger.

Bid or Buy is just edging below the Top 20 in South Africa according to Alexa. Kalahari.net is the 40th most visited site, after Amazon at 17, while Tiger’s Private Property is 48th in the ranking, with Property24 following at 75.

In an article last year the Economist noted that Tiger specialises in “investing in startups beyond the West’s well-known technology clusters. Clearly, internet investing is going global and the West is losing its monopoly, not just in thinking up clever ideas for web businesses but in financing them”.

While aggressively buying up eCommerce companies throughout the world, Fixel has personally visited South Africa on a few occasions.

Tiger Global Management, LLC is a privately owned investment firm that manages hedge and private equity funds. Until South Africa caught their attention, they have been investing in public and private equity markets across the globe primarily the US, China, India, Southeast Asia, Latin America, and Eastern Europe.

The company also invests in fixed income markets of United States and hedge funds. Tiger typically invests in real estate, telecommunications, energy, media, and retail sectors. For real estate holding, it invests in India, China, Western, and Eastern Europe. The company was founded in 2001 and is based in New York, New York with additional offices in Beijing, China and Mumbai, India.

It further holds shares in social gaming company Zynga, Apple, 360buy.com and GetJar. The company sold Arab internet portal Maktoob to Yahoo in 2009. The internet and media form the largest part of the fund’s portfolio which also invests in Aerospace and Defence.