Lean Manufacturing – in Vietnam

A small number of venture capital funds with a lean focus have been around for a while. Now there’s another one – in Vietnam, of all places.

            Mekong Capital (based in Ho Chi Minh City) recently announced that it is forming its second private equity fund, the $50 million Mekong Enterprise Fund II, to invest in Vietnamese companies.

            Like most venture capital firms, its goal is to find private companies, buy part of them and make money by taking them public. Mekong says its investments will average around $3 million each and will usually represent 20 to 30 percent of equity (though larger positions are possible).

            The companies sought will generally be two to four years away from going public on Vietnam’s exchanges. In the time between investment and IPO, Mekong Capital “will work closely with investee companies to help them make improvements and prepare for a successful listing on a stock exchange,” according to a news release.”

            What kind of improvements? That’s the interesting part. The fund says it will focus on companies involved in manufacturing, branding and distribution. According to the news release, this focus “leverages Mekong Capital’s strengths relating to manufacturing – such as lean manufacturing, six sigma, activity based costing, as well as Mekong Capital’s experience working with manufacturing companies to improve operational procedures and strengthen management teams.”

            Equally interesting is that this fund, unlike Mekong’s first fund, will “focus more on companies selling into the domestic market as opposed to export markets.”

            This kind of Far East focus on capitalism can seem a bit strange to those of us who grew up through the Vietnam War, when VC meant Viet Cong rather than Venture Capital.

            But my culture shock aside, it’s important for lean devotees to keep in mind that lean is just as global as today’s markets. As more and more companies worldwide adopt lean philosophies, a lean strategy becomes less of a competitive advantage and more of a basic requirement to stay competitive.

            So as you keep an eye out for new competition, be aware that it may be coming not just from across the street, but from across the ocean.

            Incidentally, the first Mekong equity fund was established in 2002 and has made 10 investments in private Vietnamese companies. The businesses of those companies include PP woven bags, furniture (design, retail and export), software development and hardware distribution, magnet wire, wooden toys, package printing, wooden household products, athletic wear, LPG distribution, and kitchenware.