Catcha’s betting big on online classifieds in frontier markets

Patrick Grove, founder of Catcha.

Catcha, the catch-all internet holding company started by Patrick Grove, has been making a series of big bets. Some have worked (iProperty), some have not (Ensogo). What’s consistent is that Catcha is still investing. It’s putting a lot of money into a Netflix competitor called iFlix. Patrick’s no stickler for originality: he believes fast execution trumps everything else.

“Just running 1,000 miles per hour is what wins the day,” he said. “In emerging markets, it’s not innovation that wins the battle, it’s rapid execution.”

While iFlix has captured all the headlines and raised a sizable US$75 million in venture capital funding, another Catcha enterprise, Frontier Digital Ventures (FDV), which was started in 2014, is quietly making moves. Most recently, it raised an oversubscribed US$23 million round on the Australian Securities Exchange (ASX), according to a press release.

So what is FDV? In short: Craigslist for frontier markets. It’s a holding company with stakes in various online classifieds companies around the world, covering properties and cars, a very familiar area for Catcha since it ran iProperty and is running iCarAsia. According to its financial report, it has 15 companies in its portfolio, which hail from Pakistan to Myanmar to Cameroon to Costa Rica.

Deep diving into Africa

FDV is betting that online classifieds will take off in those countries, just like it did in the rest of the world. Its IPO prospectus cites figures from Frost & Sullivan stating that global online ad spending has grown year-on-year, even in regions like Middle East, Africa, and Latin America. While those three regions form a small share of the pie, they’ve been rising. The bulk of FDV’s focus is on Africa, and its success predicates on those regions going even higher.

Frost & Sullivan further states that online classifieds form about 10 percent of total advertising spend.

Global spending for online classifieds, according to Frost & Sullivan.

FDV assumes that as more frontier market consumers adopt smartphones and the internet, the use of online classifieds will increase, creating more revenue for FDV. These are reasonable assumptions, although it’s not a given that these markets will follow the exact same trajectory witnessed in more advanced economies.

Investors are buying into its story. Having the ex-CEO of iProperty, Shaun Di Gregorio, to run FDV is a good sign Catcha is serious about this business.

Anyway, here’s what we know about Catcha’s financial status: its IPO prospectus puts its revenue at US$2.65 million and net loss after tax at US$3.53 million in 2015.