PIONEERING ONTOLOGICAL PRIVATE EQUITY

We used to do Private Equity like everyone else.

In our early days, especially from 2001 to 2007, we tried to add value by sharing our valuable ideas, providing solutions, and sometimes doing work for the investee companies. Hence, we applied value-addition programs to implement operational performance enhancement projects (such as six sigma or lean manufacturing systems), financial management, human resources recruiting, and corporate governance advisory.

We were going to Board meetings and giving valuable suggestions. We even hired Six Sigma and Lean Manufacturing experts to show the companies how to improve their operations, but it just wasn’t working. No matter how great our ideas were, they had little or no impact.

And we realized that we were heading to nowhere.

In December 2007, we embarked on a journey from which there would be no turning back. We blew up and reinvented everything about Mekong Capital, including who we are, our culture, how we add value, how we see the world. What emerged was a new model of Private Equity, ontological in nature, grounded in who people are and how things occur to them, rather than the traditional knowledge-and-solutions approach of most private equity firms. We call it Ontological Private Equity.

Vision is paramount.

We believe that most of what occurs as reality is contextual and is constructed in language, communication, and artistic expression. In other words, context is decisive. We can be at the source of the contexts, or ways of seeing things, that we create around anything on which we put our attention.

“ In a Private Equity context, our partnership with each investee company starts with our shared vision for the future of that company, not an aspirational vision but a committed vision.”

Therefore, standing in our shared commitment to each of our investee achieving their visions, we have designed our involvement in such a way that our investee companies take actions to create for themselves ways of looking at things that lead to breakthroughs in performance necessary for their vision to be achieved.

A proven methodology that leads to breakthrough results.

We utilize a framework called Vision Driven Investing, which was originally launched in 2009. The Vision Driven Investing framework is regularly reviewed and refined, at least quarterly but typically more frequently based on careful analysis and insights about what’s working best. The framework is carefully back-tested against our past 42 investments since 2001 to ensure it is strongly correlated with what has led to the best performance among our investments until now.

Vision Driven Investing is an ontological framework, meaning it is the domain of occurring and being, not knowledge. We assert that when people create new ways of occurring and new ways of being, new actions will naturally arise, and new breakthrough results will be delivered. The 15 elements of Vision Driven Investing could be thought of as 15 perspectives, like places to look from and ask questions from.

These 15 worlds can provide a vivid and complete view of what it takes for a company to achieve its Vision reliably and provides access to the necessary transformation. Vision Driven Investing is NOT a set of best practices or solutions. It is not something that we can give or force onto a company. Instead, it is a space in which our investee companies discover and create for themselves, always towards fulfilling their Visions.

Starting from their committed vision, the VDI framework is essentially 15 perspectives to look from. Each company can continuously discover what works for them towards fulfilling their breakthrough vision.

Our investment criteria.

We invest exclusively in consumer-driven businesses

In the early days of 2001 to 2005, we were sector-agnostic but tended to invest in export-oriented manufacturing, which didn’t go well. We were the only PE firm investing in Vietnam at the time, but we totally blew any first-mover advantage that we might have had by making ill-considered investments.

In 2006, with our investment in ICP (the personal care products company with the X-Men brand), we started to dip our toes into consumer investments. Still, we were also experimenting with other sectors such as real estate, software, etc. By around 2009, it became clear that all our best-performing investments were in consumer sectors. So, we decided to focus exclusively on consumer-driven sectors, such as retail, restaurants, education, health care, pharmaceuticals, FMCG, consumer finance, and service providers to those.

We invest in businesses that have chosen to be focused on doing one business model very well

Some of our past investments were in groups that had more than one related business unit. Over time, we saw that companies focused on a single business tend to execute better and grow faster, so we prefer to invest in focused portfolio companies rather than diversified ones.

We look for companies co-founded by entrepreneurs

Many of our early investments were in family businesses until 2007. Generally, we struggled to get these family companies to create a performance-based culture and build up their management teams, whereas our investments in companies founded by entrepreneurs tended to be much more open to this.

For example, our two most successful investments in our second fund, MEF II, were Mobile World and Golden Gate, both companies founded by teams of entrepreneurs. Hence, we typically invest in companies founded by entrepreneurs rather than family businesses or former state-owned companies.

We look for business owners who are open to transformation

After years of mistakes and breakthroughs, we’ve discovered that we don’t know anything useful, and our significant breakthroughs have always emerged from being open-minded and willing to transform. So this is also a characteristic we look for when selecting investee companies.

We’re not interested in investing in companies that think they already have all of the answers – if so, there will be no room for them to discover anything new and transform. Instead, we are looking for companies committed to a big vision for their future, are open-minded about achieving that vision, and are willing to build their team and transform whatever is needed to fulfill that vision.

We invest exclusively in consumer-driven businesses

In the early days of 2001 to 2005, we were sector-agnostic but tended to invest in export-oriented manufacturing, which didn’t go well. We were the only PE firm investing in Vietnam at the time, but we totally blew any first-mover advantage that we might have had by making ill-considered investments.

In 2006, with our investment in ICP (the personal care products company with the X-Men brand), we started to dip our toes into consumer investments. Still, we were also experimenting with other sectors such as real estate, software, etc. By around 2009, it became clear that all our best-performing investments were in consumer sectors. So, we decided to focus exclusively on consumer-driven sectors, such as retail, restaurants, education, health care, pharmaceuticals, FMCG, consumer finance, and service providers to those.

We invest in businesses that have chosen to be focused on doing one business model very well

Some of our past investments were in groups that had more than one related business unit. Over time, we saw that companies focused on a single business tend to execute better and grow faster, so we prefer to invest in focused portfolio companies rather than diversified ones.

We look for companies co-founded by entrepreneurs

Many of our early investments were in family businesses until 2007. Generally, we struggled to get these family companies to create a performance-based culture and build up their management teams, whereas our investments in companies founded by entrepreneurs tended to be much more open to this.

For example, our two most successful investments in our second fund, MEF II, were Mobile World and Golden Gate, both companies founded by teams of entrepreneurs. Hence, we typically invest in companies founded by entrepreneurs rather than family businesses or former state-owned companies.

We look for business owners who are open to transformation

After years of mistakes and breakthroughs, we’ve discovered that we don’t know anything useful, and our significant breakthroughs have always emerged from being open-minded and willing to transform. So this is also a characteristic we look for when selecting investee companies.

We’re not interested in investing in companies that think they already have all of the answers – if so, there will be no room for them to discover anything new and transform. Instead, we are looking for companies committed to a big vision for their future, are open-minded about achieving that vision, and are willing to build their team and transform whatever is needed to fulfill that vision.

Our Successful Exits.

Mobile World - one of Mekong Capitals' successful exits

From our founding in 2001 until the middle of 2008, Mekong had not made any exits. Some of our investors doubted our ability to exit. In fact, some investors were quite upset that we missed the opportunity to exit some investments in our first fund in 2007 when the market was in a bubble. So, the pressure was really on.

Finally, in December 2008, Mekong Enterprise Fund sold its stake in an LPG distribution company, Saigon Gas, to the French oil and gas giant, Total Group, who acquired 100% of the company at valuations that were appropriate for a trade sale to a strategic buyer. This was Mekong Capital’s first divestment, but it opened the floodgates.

Since then, Mekong has completed 28 full exits, through a full range of exit routes: trade sales to strategic investors, sale to other PE funds, listing on the stock market, and selling to other public equity funds, or in some cases, sales back to the founders.

For a complete list of our exit investments, please visit here.

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