Mekong Capital, the Vietnam-focused private equity fund that invests in consumer driven business – including Mobile World, Golden Gate, Phu Nhuan Jewelry and pharma firm Traphaco – holds the distinction of being among the earliest investors in country’s startup scene.
As early as 2007, much before the incubators and the accelerators appeared, Mekong Capital had a strategy in place to support and invest in the burgeoning Vietnamese startups with its Mekong $20 Milllion Challenge. The challenge was designed to select and nurture companies that could – within five years – either be sold for $20 million or listed on the stock exchange with a value of $20 million, with the winner getting seed money of $400,000 from Mekong Capital.
The fund had invested in two such startups before deciding to halt the programme and withdraw completely from the startup funding arena.
“After we made two investments and realised that both were not going as well as expected, we decided to stop,” Mekong Capital founder and partner Chris Freund told DEALSTREETASIA in an interaction.
According to him, the biggest challenge and hurdle in finding the right startup was the human resource or ‘the right team’, even as he added that while most of the founders were strong in some aspects of business, the lack of experience in other important segments of business management often led to failure.
For example, one of the Mekong’s investee startup founders were very strong in sales, and had made some bad purchasing decisions.
“We had another company that was very strong in distribution, pretty good in marketing, but did not know financial management and so they made some bad decisions on how to use the capital,” he explained
The lack of overall experience in the startup founders, was main reason behind the failure of Mekong Ventures, he said, adding that he was still skeptical about finding a good startup team.
According to him, there are not many good quality startups in the country. “Maybe there are better ones out there who I have not met. I am not really sure.”
In some emerging overseas firms, like China’s smartphone distributor Xiaomi, the founders were willing to recruit other co-founders; Xiaomi now has around 10 co-founders, each with a different area of expertise, but they are relevant to what Xiaomi needs. “That may be part of why they are successful, but that is hard to do in Vietnam,” he said.
Affirming the role of the co-founders, Freund said that Vietnam was still missing serial entrepreneurs.
According to him, the Silicon Valley has entrepreneurs who work on multiple businesses and more than one startup, at the same time. “When they get involved in setting up a new business, they bring a lot of knowledge,” he explained.
Vietnam lacks this skill set as there are very few serial entrepreneurs here. One of the prominent examples is that of the electronic transaction processing platform Mobivi, which has been founded by Dung Tan Trung, who has been successful in the US and is running several other businesses in Vietnam.
The exposure abroad seems to be critical and a common thread between the founders in the companies that are in the Mekong Capital’s portfolio, says Freund. The founders who have studied or worked overseas, tend to be a lot more open-minded and it is easier for them to implement new practices.
Old company leaders that have only worked in Vietnam are not familiar with international practices. Meanwhile, though some young local entrepreneurs are proactive in learning new things, they do not flexibly apply the measures into their own businesses. “People are aware of the best practices, but sometimes they just won’t work in Vietnam,” said Freund.
Founded in 2001, Mekong Capital is one of Vietnam’s prominent private equity firms, which is running three funds: Vietnam Azalea Fund and the Mekong Enterprise Fund I and II. The fourth fund, Mekong Enterprise Fund III, will be launched in a few weeks.
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