Very detailed interview about the emerging markets Internet craze

I had the pleasure of being interviewed by memeburn a few weeks ago. Topics included the following: which emerging markets are most attractive, why tech clusters are no longer required to create successful startups, and why copying concepts and implementing them in new places still requires innovation.

Read the entire interview at:

  • Hi Fabrice,

    This is an interesting interview, thanks. A couple of points which I’d like to make.

    Firstly, you are slightly over-estinating the population of Russia (about 140m rather than 146m) and the number of Internet users (about 50m rather than 68m). Given the number of poor people, large territory and Internet quality, the potential is not than big.

    Secondly, you are a brave man, to invest in Russia now, when wealthy Russians tend to “export” their capital and emigrate. I mean political and investment climate.

    Finally, though I understand your approach of taking only market, but not idea risk, I believe you migh wish to gradually start considering the innovative products in the emerging markets not existing anywhere yet. The “Ideas arbitrage” (excellent definition!) has limited potential. As soon as all the good ideas are “imported” here…

    Anyway, good luck!

  • “I don’t invest in mobile” ….how long will you remain opposed to mobile investments now as with the emerging class of smartphones, a lot of new mobile centric companies are finally starting to see traction…

    • The issue of dependence on operators, Apple and/or Google who can arbitrarily change the rules of the game on you is still there though…

      Every company I invest in has a mobile strategy. I just don’t particularly like mobile only plays.

  • Interesting interview fabrice, sad that I got off the email list, and only saw it today.

    anyway, I wanted to thank you for your concise and topical answer to the ‘why-doesn’t-advertising-pay-for-all-web-businesses’ question. I found your points about intent to be highly relevant to my own web-companies.

    But I have a question. Could you reconcile your points about the social web, and your point about operator dependence, in the context of facebook? Facebook doesn’t seem to have much intent going for it ( as people rarely purchase refrigerators in bars ), and it also seems to fit your definition of mobile operator, as it can ‘arbitrarily change the rules of the game’ whenever it feels like it. If the social web is just starting to get going, how do we monetize in it, when clearly the advertising doesn’t work ( lack of intent ) and the primary platform is a monopoly? Do you therefore, not invest in facebook platform companies like zynga?


    • Visitors to Facebook do not have intent which is why ads on Facebook are much less valuable than ads on Google. However, Facebook has so much traffic that they compensate for that. Moreover, Facebook is going to make tons of money from taking a cut out of other people’s transactions through Facebook Credits. On Tencent in China 92% of the revenues comes from this rather than advertising. It’s part of the reason I am bullish on Facebook, they have tons of opportunities to grow revenues beyond advertising. They are just scratiching the surface right now.

      In terms of what I don’t invest in, one of my 9 business selection criteria is the following: do not invest in businesses where there is a risk of margin compression and/or disintermediation by your customers and/or your suppliers.

      In other words, I would not have invested in:
      * Spotify -> dependency on the goodwill of the music labels
      * Netflix -> dependency on the goodwill of the movie studios (though I would have invested in the Netflix DVD business if I had not thought the world was moving to video on demand)
      * Zynga -> dependency on Facebook for distribution. Zynga is much more dependent on Facebook than Facebook is on Zynga. That’s why they launched Zynga direct. They may be able to wean themselves off of Facebook, but it’s risky. I also don’t like game businesses which are studio type businesses which is another reason I would not have invested in Zynga.

      My approach has its limitations. The three companies above made tons of money for many of their shareholders, but the rules have protected me from investing in many companies that fanned out. The reality is that with my rules I would have also passed on at early stages:

      * Pinterest – no business model yet (even though I suspect they will find one, I like knowing the unit economics upfront
      * Twitter
      * Facebook
      * Foursquare
      * Tumblr

      Despite missing out on these types of deals, my model has served me well and I like to invest in things I can wrap my head around.

  • Thank you for answering my questions.

    On facebook credits. I believe Tencent was successful for specific cultural realities that dont’ apply to the vast majority of facebook’s user base. In that Tencent is a defacto curator/distributour of legitimate goods in a country overrun by counterfeits, stolen goods, and generally bad sales practices on the internet. and I think that outside of purchasing/developing a product like Dwolla, or some other revolutionary payment system, that at best facebook is the exact intermediary that you try to avoid. I understand driving traffic to and getting a cut of shirt sales, but buying shirts on facebook, when the cost is the same or cheaper on doesn’t really do it for me. Amazon is already there. I would be curious to know what you think those other revenue opportunities are though, so I look forward to a follow-up post!

    thanks again!

  • Hi Fabrice,

    I found the interview very interesting because I am an American who is doing business in Mexico. I especially liked how you pointed out how you can’t just bring over a copy, how you have to localize it for the market – for example, online businesses in Mexico that are successful have to offer alternative forms of payment for those customers who are still nervous about entering their credit card information.

    It is refreshing to see someone who sees the potential in emerging markets…I look forward to reading your posts!