Venture capital is a hits business.
What this means is that in order to make up for the high failure rate among start-up companies, you need to achieve a certain number of large, successful exits, or "hits".
These hits make up for the many companies that fail, and generate a return.
One of the big questions historically has been how can you invest in an emerging market in the absence of such a hit?
In other words, if there has never been a Skype or Baidu in your market, how do you know that your market is capable of producing a hit?
Well, the purchase yesterday of Buscape, the Brazilian e-commerce company, by Naspers, the South African media conglomerate, for US$342 million goes a long way toward resolving this paradox, at least as far as the Brazilian market is concerned.
The acquisition also comes as particularly welcome news to Brazilian investors and entrepreneurs who were somewhat shocked and dismayed in June by the sale of Braspag, one of the leading Brazilian e-commerce processors, to Grupo Silvio Santos, for a measly US$14 million.
Hopefully, the fact that a Brazilian web company has sold for such a high price will ratify the investment thesis of venture capital investing in Brazil, and be indicative of deals to come! :)
