The Road to Consistent Value Creation

Mekong Capital’s initial fund, Mekong Enterprise Fund, invested in family businesses which were typically export-oriented manufacturing businesses. As family businesses, they had a traditional style, more interested in loyalty, stability, and short-term cash flow, rather than maximizing growth, performance, and achieving a long-term vision. In addition, as export-focused businesses, they were subject to competition and cycles of the global economy. These companies operated in sectors such garment manufacturing, plastics manufacturing, toy manufacturing, wood products manufacturing, furniture manufacturing, packaging, cookware manufacturing, wire manufacturing and LPG distribution.

At the time, Mekong Capital was trying hard to add value by sharing best practices with our investee companies, but they weren’t taking actions based on our ideas, or sometimes when they did implement our ideas, it didn’t impact their long-term performance. And they weren’t making any notable progress building more professional management teams. What were we missing?

In 2006, with our investment in ICP (the personal care products company that launched the X-Men brand of shampoo and personal care products), we started to dip our toes into investments in consumer-driven companies. Likewise, we started to invest more into companies founded by small groups of entrepreneurial co-founders rather than family-owned companies. Over the next three years, we would start to make some very successful investments such as Mobile World, Golden Gate, Masan Consumer, Traphaco, PNJ, FPT Software, and Vietnam Australia International School (VAS).

In mid-2007, the founder of Mekong Capital, Chris Freund, joined a personal breakthrough program called the Landmark Forum, followed up by a series of other programs offered by the same organization, Landmark Education. By the end of 2007, Chris arranged for Mekong Capital to engage with an affiliate of Landmark Education to make similar programs available internally to Mekong's team, the first such time these transformation programs were available within Vietnam. In this way, Mekong's transformation was kicked off in December 2007, personally led by Landmark Education's Head of Asia,  Jerome Downes.

In 2008, the main focus of Mekong Capital’s transformation was causing breakthroughs in performance among our team members. This was making steady progress, but at one point, we realized that the future was unclear. So, in mid-2009 we commenced a project to co-create a new future, a process which took around 5 months and 14-full days. By December 2009, it was complete, and a new future was declared. Like a portal to a new world, this set the course of Mekong’s subsequent development, and the contents of that original vision would ultimately be achieved.

By 2010, our transformation process was complete. The vision and corporate culture was in place, and the team was constituted by people strongly committed to that vision and those values. This successful transformation became the subject of Harvard Business School and London Business School case studies published in 2010 ad 2011.

Mekong Capital’s internal transformation led to new and more effective ways of being and communicating by our team. For example, instead of avoiding difficult issues, our team’s communication style became more direct, while we became better and asking questions and listening. Many of the CEOs of our investees noticed, and choose to join similar programs, which Mekong Capital helped to arrange. Some of our investee companies that were early adaptors of these transformational programs included MobileWorld, PNJ, DigiWorld and Nam Long. MobileWorld in particular became a model for the breakthrough performance which is possible from a strong corporate and an ongoing program that enables breakthroughs in leadership and communication.

Based on the success of these companies and others, Mekong Capital launched a value-creation framework, called Vision Driven Investing.

The framework is loosely based on A New Model of Leadership, by the late Michael Jensen. Vision Driven Investing was not answers to questions or any solutions, but rather is a series of questions and perspectives from which to look, all intended for the investee company to identify for itself what will it take to achieve a shared vision for the future. And instead of being a fixed framework, Vison Driven Investing would continually be revised through trial-and-error and evidence of what actually worked or didn’t work at Mekong ‘s investee companies.

Around the time that our initial transformation was completed in 2010, our track record was not yet sufficiently strong for us to raise new funds. Little by little, our management fees from managing our earlier funds were declining, and we had no new source of income. We were losing money and in a constant cash flow crisis. There was some pressure to downsize our team.

But we stood for maintaining and developing a team that would lead to the achievement of our vision, regardless of whatever obstacles were to present themselves. This required a lot of perseverance and creative solutions to our cash flow constraints.

By 2014, our track record was sufficiently robust that we knew it would be possible to launch a new fund. So in 2015, Mekong Capital launched  Mekong Enterprise Fund III, followed by Mekong Enterprise Fund IV in 2019.

MEF III focused mainly on consumer driven investments with some logistics. F88, PharmaCity and Vua Nem all grew significantly after receiving investment from Mekong. Pizza 4Ps and Nhat Tin also achieved some success after the fund’s investment in those companies.

MEF IV continued to invest in consumer-driven companies (MAROU, F88, HSV Group), while also expanding more into biotechnology/healthcare (Gene Solutions, LiveSpo, TNH) and agrotechnology (Entobel, Husk).

Around 2023, Mekong conducted a series of internal meetings to link our personal purposes in life to our work at Mekong Capital. We collectively had the realization that we shared a commitment to a healthy environment in the Mekong region: soil, forests, rivers, ocean, etc. At that time we made the choice to launch a new strategy to expand our investment focus to include regenerative agriculture. Since then we have been building the team, network and partnerships to do this successfully.