A private equity company with a concentration on Vietnam is Mekong Capital. Mekong Capital, one of the first private equity companies to engage Vietnam, has been operating there since 2001 and has executed 42 private equity investments (including 28 full exits) through 5 funds with more than 60 full-time staff members. Both Ho Chi Minh City and Hanoi are home to Mekong Capital offices. Mekong Capital concentrated on manufacturing businesses until 2005, but in 2006 it changed its attention to companies that cater to consumers. Mekong Capital is a well-known example of a private equity firm that has made major investments in the growth of both its own corporate culture and the corporate cultures of the firms that make up its portfolio; this firm has been the focus of numerous case studies.
TOKYO — According to a partner at the oldest private equity firm in the nation, startup valuations in Vietnam may drop by 50% from their most recent heights as entrepreneurs prepare for a drop in venture capital investments.
Mekong Capital’s Chad Ovel recently stated during a visit to Tokyo that his company views the development as a “massive opportunity” to profit from and is contemplating establishing a new fund in Vietnam “maybe next year.”
According to DealStreet Asia, lower activity was attributed to increased interest rates and growing political unrest throughout the world. The value of startup agreements in Vietnam was $95 million in the January-March quarter, a 56% decrease from the prior year.
Ovel anticipated that startup values in Vietnam could, in some cases, decrease by 50% from their levels in 2021 over time. As a result of “less capital coming in from the VC community, the founders are more realistic in their valuation expectations,” he claimed. No one is currently accepting the low valuation, but sooner or later, perhaps in another six or twelve months, [they will].
As the first fund in Vietnam dedicated to investing in private enterprises, Mekong was established in 2001. Five funds have been formed since, with the most recent raising $246 million in 2019. It places itself between early-stage investors who concentrate on Vietnam and larger regional investors who operate throughout Southeast Asia with investments ranging from $10 million to $35 million per company.
Regional venture capital groups were paying absurd valuations because there was too much money chasing too few prospects in Vietnam, he claimed. I’m at a loss for words, like eight or ten times revenue… Too much easy money has been available for too long, and the mindset has not changed.
Mekong has responded by continuing to place its emphasis on consumer businesses that offer consistent cash flow and by staying away from more expensive IT projects. “We’re a very disciplined investor,” Ovel declared.
Vietnamese authorities have started to look into one of Mekong’s ventures, the F88 chain of pawn shops. In more than a dozen cities and provinces this year, police conducted raids at F88 sites in the course of an inquiry into claims that employees had extorted or overcharged customers, according to official media.
In a press item it published, F88 stated that company was collaborating with law enforcement and that 10 of its workers were being prosecuted. The post stated that those who break the law or the company’s rules would be held legally accountable. Mekong, which made its initial investment in F88 in 2017 and announced that it was adding another $20 million in March, has declined to comment on the situation.
Ovel noted that Mekong has been collaborating with consumer-focused businesses in which it has invested to put more emphasis on enhancing current stores than on building new ones.
According to Ovel, a lot of businesses “have to shift from the old days where it’s just easy to grow every year to a new kind of business model, which is to optimise and really improve all of their metrics like efficiency.”
We’re taking advantage of this chance to make [the startups] stronger and leaner. After that, we resume growth when capital begins to flow once more.