Media investment can bring phenomenal returns – in the right market

Not everyone believes media is in crisis. Sasa Vucinic, co-founder and managing partner at North Base Media, venture capital firm with a focus on media, argues that it’s actually the best time to invest in media. 

North Base Media funds new promising media companies across Asia, Latin America and other fast-growing regions. We spoke to him about the reasons for his optimism, comparing the Asian and European media markets and what to look for when investing in new companies.

This interview has been edited and condensed.

ZP: You say it’s the best time to invest in media. Why is that? 

SV: Media are being reinvented. New companies are being formed that have nothing to do with old media. Nobody wants to invest in what we call legacy media companies. 

There are companies that can go from nothing to 50 million uniques in 4.5 years [Jakarta-based IDN Times - Editor]. That company is now worth over 100 million dollars. This is spectacular. We would not invest in media business if we didn't think this is a phenomenal time. 

A new generation is coming online. They have no brand loyalty, no media consumption habits. If they like something they will consume in unlimited quality. 

We just invested in an interesting company in India. Instead of doing news by writing 800 words from beginning to end they break each story into 6-7 chapters of no more than 60 words. 

New formats and new ways of expression are being created. This is literally the time when people go around and mark their territory.

ZP: Your company invests not just in media but also in tech companies. People like to say “media is the new tech.” What do you think?

SV: We completely agree with that. We think tech and media merged and every media company is in fact a tech company at the same time. 

That’s why we invest in media companies or technology supporting the media industry. It has to be connected to the media industry. So we wouldn’t invest in let’s say autonomous vehicles. 

ZP: You focus on Asia. Is that your main market?

SV: We focus on the fastest-growing markets. That’s not Europe, not the UK, not the US, not Australia. Any developed market is not in our focus. We might make an exception if there's a really compelling reason, but we think Asia, Africa, the Middle East, India, Indonesia, other Southeast Asian countries, Mexico and Latin America have much bigger potential.

Two of the fastest-growing markets in the world are Indonesia and India. Based on our models we think Mexico is going to join them. Mexico has a population of 110 million people with very fragmented media landscape. A digital approach can aggregate those numbers. We think Mexico is going to be a very important part of our portfolio.

ZP: Before North Base Media you worked in Europe. How do those markets compare? What is the difference between media markets in Europe and South-East Asia?

SV: Europe is an established market. It’s audience is established. There are lots of players in this segment and not too many things have changed in the last five years in terms of access to smartphones, access to connectivity. Everyone is connected.

In Asia, there are things coming out just now. The timing is good over there because the new generation is coming online without legacy habits.

ZP: Is that what’s driving growth?

SV: It's the main reason. In Asia people understand what media is very differently. Meanwhile, in Europe even new digital media companies look like old media companies. 

The best digital players in Europe are still digital arms of big established media like  the Financial Times, The Guardian, The Economist. They all managed to transform very well. 

European media made an effective transition to digital. In Asia the digital transformation happened so quickly existing companies either didn't have the time or didn’t know how, or the inflow of new audiences was so big they couldn't handle it. 

There is much more space to grow in Asia than in Europe. Let's say you want to start a digital media company in Sweden. My God, then you have to compete with Schibsted. They have all the money in the world, all the experience in the world. They are smart and know how to make a transition to digital, so it's really tough.

ZP: So competition is lower in Asia?

SV: Yes, because there's this audience inflow and old legacy media either did not transform or were too rich to move to digital. The biggest media company in Indonesia has more than a hundred hotels. They have anything you can possibly imagine, a real conglomerate. For them digital transformation seemed impossible.

In Europe the change is different. The emergence of a new generation of media companies is unstoppable.They will come. I just don't think they will have as much space to grow and do it as quickly as those in Asia. 

ZP:  As you said, Asian media don’t necessarily have role models to look to, so they innovate. What can Europe learn from Asia from that perspective?

SV: I think Europe could be more innovative, could dare more. Europe is going step by step. It needs a little risk. Because skills are probably higher here. But I don't think people have enough space to experiment and be creative.

ZP: What about a language barrier? Is it a ceiling for growth?

SV: That's definitely point number one here. For example, the Danish market is six million, right? Jakarta by itself is twice bigger. But the whole idea of the European Union is to overcome that.

ZP: How do you decide whether to invest money in a company? What are the KPIs here?

SV: We look at a lot of different signals. The project has to exist, have a team and ideally at least symbolic revenue. They have to show initial market interest in their product. 

Ideally, we would want the company to exist a year, 18 months. We would look at the market, then how smart and unique the idea is. After that, we would look at the team. Do they cover business, technology and content.

Also, we look at how defensible the idea is. How big is the competition? What are the chances that somebody with a lot of money would come in and steal their market? 

But mostly we look at the team. They need to have a mindset to deal with this constant media sphere crisis and go further all the time.

That’s one side. On the other, we look at soft signals like would we be proud to be associated with the business? It’s hard to explain but especially in media, it’s very important.

ZP: Could you give a bit more detail about your investment model? 

SV: We are in the business of investing in profitable companies that bring fantastic returns.

At this time every high-quality media company has the potential to have fantastic returns, particularly in the markets where we invest.

We also think every investment in a media company, profitable or not, is a socially relevant investment. If you invest in a business publication covering business issues in some country, it would be a social investment as it provides valuable information to the business community and thus helps develop the economy. 

Every media investment is kind of what they fancily call impact investment.