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An Do is the Principal at social impact investment fund, Patamar Capital. Impact investing has become extremely relevant over the past decade. This model is born to keep the balance between profits and social impacts. How will this investing model support businesses to keep this balance and adapt to lightning-speed development?
Investing is like planting a mangosteen tree
After finishing university in business, An applied to study investment fund management in the UK, which is also the major she likes. An then got her first job at DWS – one of the biggest private equity firms in the world. In 2014, she returned to Vietnam to look for opportunities before deciding to come back for good.
Thanks to her mentor’s advice, An realized that she had precious opportunities to experience a full life cycle of an investment firm: from capital call, disbursement, company management, strategy development, to effective divestment. It usually takes 7 to 11 years to finish a cycle of fund management. And into her 7th year at DWS, after acquiring all the necessary skills, An was ready to come back to Vietnam.
Explaining the difference between private equity (PE) and venture capital (VC) funds, An compares investing in general with cultivating a mangosteen orchard, her childhood plant that needs 8 to 10 years to bear fruit. An said the PE and VC funds are only different in the risk level that the investor can handle, which relates to the development stage of the startups.
A PE fund will invest in the shares of an unlisted private company. They would want to buy an 8 to 10-year-old mangosteen garden with predictable harvest or output. This way, the investors can focus more on the future potential without the risks of cultivating and planting from the start.
In contrast, a VC fund will buy uncultivated land and a bag of mangosteen seeds. They accept all the unpredictable risks and uncertainties for the next 5 to 8 years.
However, both PE and VC investors want their orchards to be filled with strong trees and luscious fruits.
Change to make impact
During her time at a PE, An mainly worked with businesses that have established business models, proven profits and revenue. Currently, after switching to a venture capital fund, An is looking for businesses that have yet to fully take off. These are the seeds that will grow into big trees in the future.
Working at an impact VC is like wearing two hats at the same time. When appraising a project, she has to consider the business potential, profit, and people through a traditional VC’s viewpoint. At the same time, as an impact investor, An also focuses on the inspirational potential, the social influences of the business, and especially the enthusiasm of the founders.
Switching from PE to VC, An found two challenging changes. One is the difference in the way of approaching startups. When working at PE, she focused on their history development, and the growth rate in past and the future. As a VC, she has to follow the life cycle of a company from the seed stage.
According to An, an enterprise’s life cycle has 3 stages:
- Value hacking: find and prove your value – who are your target consumers? Do you offer a solution to their urgent needs? How do you know you’re on the right track?
- Accelerating and breakout growth
- Determining and cementing your position in the market
A VC will focus on the first stage, and for that, An has to accompany the founding team from the start on their way to the goal. During working together, the human factor is among the most important to An.
Statistically, each startup in America would go through 3 times of changing its business model on average. A product can be adjusted or changed entirely, but people will remain throughout. That’s why An believes that the human factor is the key for startups to survive and continue to grow and transform.
Founded in 2011, Patamar is one of the pioneers in impact VC in Southeast Asia and South Asia, focusing on disbursing and supporting technology startups from seed stage to series A. Some of the projects that Patamar has invested in are Topica, Mai Mai, Kim An, Mio and Vigo, which you may find similar. What sets it apart from other VCs is that Patamar knows what social impact the fund is aiming to make.
Patamar aims to address the social needs of two main audiences: the mass consumers with low to average income and the micro, small and medium-sized enterprises. These are also the majority in Southeast and South Asia. There are four impacts that Patamar desires to bring to these two groups:
- Creating more jobs
- Increasing income
- Reducing the living expenses
- Making essential services and products that are hard to approach more accessible.
These social impacts are not easily measured with numbers. An and the startup founders often have a 60-day discussion to decide how to measure the impact. Usually, An will narrow down the target group to make it easier for the survey. Startups are encouraged to look at the changes of each individual in that target group and even their family, depending on the goal of the project.
During 2 years working at Patamar, An has encountered many prejudices about impact investing. The prejudices are varied and involve mixed-opinion from not only those who are not in the investing industry but also traditional VCs as well. However, An believes that working with a cool head and a warm heart eventually leads to positive and sustainable impacts on society. And that is also the motivation that keeps An going on this venture.
Translated by Bich Tram