Unlike Western PE where tasks are outsourced to bankers and lawyers, investors in markets like Vietnam must be entrepreneurial. They need to own every part of the deal process—legal, operational, financial—to navigate local nuances and manage risk effectively, rather than just coordinating experts.
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The developed market private investing model of single-asset-class funds (PE, credit, infra) is poorly suited for emerging markets. The deal flow in these regions is insufficient to support such specialized funds, leading to poor capital deployment and failing GPs.
Capital has become commoditized with thousands of PE firms competing. The old model of buying low and selling high with minor tweaks no longer works. True value creation has shifted to hands-on operational improvements that drive long-term growth, a skill many investors lack.
PE investors often fail to unlock a portfolio company's full potential by only interacting at the board level. Engaging deeper with operational leadership is crucial to understand the team's true quality and identify opportunities to transform the value proposition, which are often missed from the boardroom.
In markets like Vietnam, a signed shareholder agreement is insufficient. Founders often don't fully grasp terms regarding reporting or KPIs. Investors must act as educators to onboard the company and build a true partnership, as legal clauses alone don't guarantee alignment.
Rather than competing in crowded auctions, elite private equity firms pursue a differentiated "executive new build" strategy. They partner with proven operators to build new companies from scratch to address a market need, creating proprietary deals that other firms cannot access.
In emerging markets, founders are highly entrepreneurial but often lack long-term focus. A signed five-year plan is not enough. Investors must remain highly engaged to continually reinforce the strategy and prevent founders from pursuing distracting side projects that derail growth.
The expectation for venture capitalists has shifted. Founders no longer just want finance professionals; they demand investors who have direct operational experience and have been "in the trenches" of building a company. This change reflects a move towards more hands-on, value-add investing.
To maximize value creation, young private equity firm Teopo Capital made a strategic decision to hire a full-time operating partner dedicated to portfolio companies before building out a fundraising team. This signals a deep commitment to hands-on operational improvement as their core strategy.
In Vietnam, the best returns have come from a concentrated, hands-on model similar to a holding company, not traditional diversified PE funds. This approach allows for deep involvement in a few assets within a specific vertical, which is key to navigating the market and driving growth.
Unlike in mature markets where non-compliance is a deal-breaker, it is common in emerging market family businesses. The investor's role during due diligence shifts from pure vetting to actively guiding the company toward compliance, making the process the first step in building a trusting partnership.