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🎙️ | Johan Rozali-Wathooth, Investing with Impact
Johan is the Founder and CEO of Bintang Capital Partners. Bintang believes in the importance of deploying capital in an innovative, responsible and sustainable way, while still pursuing outsized risk-adjusted returns. So in this conversation, we cover private equity investing in Malaysia, and investing with impact.
And perfect timing with our conversation, Bintang is also now the first private equity firm in Southeast Asia to earn B Corp Certification.
So I hope you enjoy this one as much as I did! :)
Listen to this episode on Apple Podcasts, Spotify, Stitcher, Castbox, Google Podcasts, or on your favourite podcast platform.
My takeaways and lessons:
Journey or the Destination?
“So Big Panda asks a Little Dragon, and he says, what’s more important to you, the journey, or the destination? And Little Dragon says neither. It’s the company. So, I think about a lot of things in life. When we think about it, life is a journey. You can’t run away from it, but I think it’s a lot about the people that you have around you as you’re going through that journey in life, and it can be a difficult journey, but if you’ve got great companions on that road with you, it becomes a lot more fun and bearable, even though the bumps.”
ASEAN Private Equity is still in its infancy
“I think right now we’re in a very young industry, and I feel that there still aren’t enough players and there still isn’t enough capital yet for the industry to reach the level of activity that we see in more developed markets in America or Europe. I think here we’re really touching on an issue of scale. For the industry to scale, I think there are lots of challenges ahead that have to be solved. For one, I think a lot more capital needs to find its way into the private market system and this needs support from a whole bunch of players, including government, the private sector, funders, regulators, and even the market participants. Now this might feel extremely counterintuitive, but I for one have always welcomed news when I hear about new private equity firms being set up. For me, it’s never been about having another competitor. It’s always been about welcoming a new neighbour to the neighbourhood. We need the ecosystem to be a lot broader so that there’s not only a lot more investment activity going on, but also a vibrant ecosystem where when we want to make investments, we can buy from other players, or when we want to sell portfolio company stakes, we can sell them to other firms.”
Learn those soft skills!
“I really can’t emphasize soft skills enough. I’ve met so many brilliant people, they’re so well qualified, but because I think they haven’t spent enough time honing their soft skills, they haven’t gone as far in life as I think they really should have. In an age where I think a lot of young people today, including my kids, who are ten and five, spend so much time online, the art of having conversations and communicating effectively is a dying art. It’s gradually being eroded. It’s also a very personal thing for me. It’s a personal challenge of mine because I am someone who’s very deeply introverted, and I struggle with public speaking and even small crowds. I feel that if I didn’t have this challenge when I started out, maybe my career would have gone a lot further than it has.”
[00:00:31] – [First question] – Background
[00:03:44] – How has a varied experience helped in private equity investing?
[00:06:08] – Advice for those early in their career looking to break into the PE scene?
[00:09:51] – Having a purpose in Private Equity Investing
[00:15:39] – Bintang’s investment process
[00:20:53] – Bintang’s role post-investment?
[00:23:49] – B Corp Certification and Reception
[00:26:31] – What’s next for Bintang?
[00:31:46] – How to approach exits in PE?
[00:36:10] – What do other PE shops think about what they’re doing?
[00:40:58] – The private market space in ASEAN,
[00:43:56] – Underrated experience for university-age students?
[00:49:08] – Influential people or books?
[00:54:29] – Wrapping up
Connect with Johan:
[00:00:31] Kalani Scarrott: My guest today is Johan Rozali-Wathooth. Johan is the founder and chief executive officer of Bintang Capital Partners. Bintang believes in the importance of deploying capital in an innovative, responsible, and sustainable way while still pursuing outsized, risk adjusted returns. So, in today’s conversation, we cover private equity investing in Malaysia and also investing with impact and what that means. So, a super fun and varied conversation and Johan’s, just a great bloke to top it all off. So, I hope you enjoy my conversation with Johan Rozali-Wathooth. So, Johan, thank you so much for coming on. I’d love to just start a bit with your background because it’s pretty interesting. So, you’ve done a bit of everything, a bit of restructuring, private equity, even some high yield bond investing, and some experience working abroad and ending up back now in chaos. So, could you just walk me through you and your career?
[00:01:24] Johan Rozali-Wathooth: Thanks for having me on, Kalani. I’m really looking forward to our conversation. I started my career in corporate restructuring, as you well are aware, but when I graduated from university, like many other fresh graduates, I didn’t really have a clue what I wanted to do with my career. Corporate restructuring sounded interesting. I really thought I’d be a white knight, turning troubled companies around and making them shine again. What I didn’t realize is that I would be more of an undertaker. The work we focused on were things like liquidations, administrations, and receiverships. I found that over the course of three years in corporate restructuring, whilst there were ample opportunities to learn, I didn’t really enjoy the environment of being around terminals, which essentially were terminal companies. The toll taken by these failing companies on their employees and their families was extremely depressing for me. And so, by a series of coincidental events, I ended up stumbling into the world of alternative investing in the summer of 2004 after I qualified as a chartered accountant. The opportunity to work in a field where you are constantly engaging with visionary entrepreneurs, working with talented management teams, getting to know innovative companies, and exploring interesting industries, which was really impossible for me to resist, and I never looked back. So, I started my working life in London as you mentioned earlier, it’s a huge privilege for me. I was in one of the global hearts of the financial system during a boom cycle when lots of groundbreaking deals were being done, and those were really some heady times. I got the opportunity to get to know and work with some of the leaders and pioneers within the alternative investing universe and many of the lessons that I learned have stayed with me throughout the course of my career. I also made some good friends while I was based in London as well. So, there were lots of very privileged things that happened to me at the start of my career. I moved home to KL about a decade and a half ago, for family reasons, but also partly because at some stage I wanted to do something more entrepreneurial. I was excited by the prospect of ASEAN’s growth. So, in a nutshell, it’s been a decade in London and more than a decade in KL and working in both places has been extremely rewarding for me, but in very different ways.
[00:03:44] Kalani Scarrott: How do you think that this varied experience has helped you in private equity investing as well?
[00:03:51] Johan Rozali-Wathooth: I think the experience in the UK was a little bit like a crystal ball exercise for me because the stage of the Western capital markets development is about, I would say, anywhere between 15 to 20 years ahead of where we are in Asia. We were looking at structures that were very groundbreaking in those days. A lot of that stuff hasn’t really made its way to Asia yet. That was very valuable. I think the way that they think about risk in the Western Hemisphere as well is a lot further along than how we look at risk as well. It’s partly a function of the available structures and products that are there that you can’t get access to right now in Asia, not yet anyway, for the vast majority of GPS. And then there is the whole industrial landscape. If you think about where they are in terms of that lifecycle of industrialization, the European economies industrialized a lot earlier than we did in Asia. There are lots of lessons that can be drawn from that earlier experience that we’re still in the process of learning right now. So, it’s like a Back to the Future situation where you have the benefit of that hindsight, which in Asia is foresight and you’re doing this arbitrage between eras of time. I think that’s been very valuable to me. Now, Asia is unique from a cultural perspective. I spent most of my young years growing up in Malaysia. I was born in Australia, in Sydney, but we moved back from Australia when I was very young. So, in essence, I spent most of my growing up years in KL and I very much culturally identify with being Malaysian, being Asian, and I found it much more consistent, I think operating in Asia culturally, for me anyway, than it felt operating in the UK. So, there are pros and cons.
[00:06:08] Kalani Scarrott: Just quickly on the career side before we jump into private equity and investing in Bintang capital partners, but especially with your career path, and I’m sure we have a question, but it’s good to share with probably a broader range of people. Advice for breaking into private equity, how would you give advice to a Malaysian University student today thinking about breaking in?
[00:06:27] Johan Rozali-Wathooth: I’ve got a caveat here and say that my view on private equity is extremely biased. I’m going to say it’s one of the most rewarding, if not the most rewarding, spaces to be in finance. And having the freedom of exploring different industries, looking at lots of different business strategies, is a massively liberating opportunity. I think the opportunity to work with some visionary and talented entrepreneurs is extremely inspiring, even for a grizzled old veteran like me. I can certainly understand why a lot of young graduate’s flock to this industry year after year. However, I don’t think that there is a preset route to get into private equity. My own experience is testament to that. I had a very accidental experience getting into PE, and I would love to say it’s a result of meticulous and careful planning, but it wasn’t. So, I think today there are lots of different types of private equity strategies and firms out there, whether you’re talking about large cap buyouts, middle market firms, impact private equity or even sector specific funds. I feel that each different branch potentially requires slightly different skill sets and experiences for you to break in. But I think there are a few things that graduates, or young professionals can do which are common to enhance their chances of breaking into private equity. For one, I think it’s universal that private equity requires strong technical skill sets whether they are financial modeling skill sets, due diligence skill sets or structuring legal skill sets. I think these are fairly common components or elements of having a career in private equity and you won’t be worse off by developing these skill sets. They certainly will not hurt your chances of breaking into private equity. Another thing that is a little less common is for young people to have or develop a very clear understanding of your purpose in private equity. So, what areas within private equity excite you and why and be able to articulate that reasoning? How does this interest and passion translate to skills and experiences which would be valuable to your prospective employer and then being able to explain that or articulate it? I find that when we interview young people and we start scratching beyond the surface and start to ask them about why they want to get into private equity and what the purpose is in private equity, that’s where a lot of the conversation falters. So, I think young people need to spend a bit more time thinking about that. And then finally, I think, which is very overlooked but extremely obvious, is developing strong soft skills. Communication skills are a vital part of being an excellent professional in private equity. Having presentational skills, writing skills, oral communication skills because huge amounts of work done in private equity involves dealing with lots of different stakeholders, both internal and external. So, it’s very important that you’re able to communicate ideas well and manage stakeholders well as well. So hopefully some of that advice is helpful to fresh grads and young professionals who are trying their luck and they want to break into the private equity space.
[00:09:48] Kalani Scarrott: A lot of threads to pull in there, so that’s a great answer. One interesting point was around purpose in PE, how do you define your purpose in private equity?
[00:09:56] Johan Rozali-Wathooth: That’s a great question, but there isn’t a short answer, unfortunately. I spent the earlier part of my alternative investing career in the UK, really falling in love with private equity because, like I said earlier, there are very few industries in the world where you get this breadth of variety in terms of looking at lots of different opportunities, in terms of companies and their business models and all that. But also, where you have this unlimited opportunity of getting inspired all the time by working with entrepreneurs who are visionary and they’re guys and gals who break the mold. They’re people who disrupt and challenge the status quo and I love that. So, a lot of the time that I spent in the earlier part of my career, I was doing stupid things like sleeping in the office because I just couldn’t get enough of it. I loved it. I spent a bit of time earlier in my career focusing on buyout transactions. So, with buyouts, I hesitate to say it’s almost formulaic, but there is a formula to buyouts, and you go into companies and sometimes you talk about things like revenue synergies, how to grow the business through growing the top line and that’s fun stuff. So, you look at new strategies to increase the addressable market. You look at pricing strategy, you look at lots of things that ultimately help you grow the revenue of the business, but we’d also look at things that we euphemistically call cost synergies. Cost synergies, typically, you look at headcount, that’s the most obvious cost synergy that you can imagine. When you dial into the nuts and bolts of it, it is about cutting the headcounts of the companies. Now, I understand the need for efficiency, but one thing that I struggled with a lot was when we look at cost synergies, we rarely look at letting the C-suite executives go. I can’t remember a time when we actually had a C-level executive goal. It was always the guys at the bottom of the totem pole, the guys who were really deep in the trenches and helping build a company with their hands and fingers. The guys who were doing the heavy lifting. I struggle with that component of cost synergies. Another synergy that we talk about is supply chain synergies. And that’s another euphemism, because what it meant was, you’d be squeezing suppliers and you’d never squeeze the big guys. If you squeeze the big guys, they squeeze back and what you’d end up squeezing are the guys who are really probably the smaller guys, the guys who are a bit more vulnerable, the mum and pop companies, the family companies and guys who are doing it because they had a lot of passion for it and they weren’t really making a lot of money doing it. You’d squeeze those suppliers. Now, why did I struggle with this thing? Why did I have my Jerry Maguire or if you’re slightly older, Richard Gear from Pretty Woman moment? Why did I question my purpose when we were doing all this? I questioned my purpose because I grew up in a household where when I was probably six, seven years old and we’d go out for dinner, my mom, dad, my younger brother and I, people would come up to the table, and they would have conversations with my family, and they would point to my father telling my younger brother and I, you know, your dad is the reason I’m alive today. We’d get older people coming up to the table and pointing to that and saying, you know, the reason that I live long enough to meet my grandkids is because of your dad. Now, my dad is a heart surgeon. He’s a doctor. So it’s unsurprising that we’d be having those conversations and I guess as I got towards the tail end of my 20s, just as I was about to turn 30, I started asking myself, when you have kids, what conversations are people going to have with your kids about what you do? And because of that work that I was doing in Buyouts, I became a little bit paranoid that the conversations people would have with my yet unborn children would be along the lines of, your dad bought over my company, and I lost my job because of it. Or Your dad bought over this company that was buying stuff from my company and we went out of business because he squeezed us. Or I’d get old people coming up to the table and saying to my kids, your dad bought my company and raided my pension fund and now I’ve got to work into my 70s because my pension fund’s been depleted. I asked myself at that juncture, is that the work that you want to do, that you want to have on your epitaph when you’re gone? Is that the private equity firm that you want to build? So, the clear answer to me at that juncture was ‘no.’ So when the opportunity arose for me to build Bintang, I had to ask myself, what private equity firm are we going to build? Are we going to do what everyone does? At the end of the day, it’s the almighty dollar or ringgit or Singapore dollar or is it going to be a business that has a heart to it? And I think because of Dad’s legacy to my younger brother and I, it’s very important that we do something that creates real human impact that helps change lives for the better, rather than doing stuff that actually ends up harming people and hurting their lives. So that’s the purpose that I had when we started building Bintang.
[00:15:39] Kalani Scarrott: Could you explain from start to finish if you could, how do you look for investments and how do you find them and what’s your process going alongside impact and innovation?
[00:15:57] Johan Rozali-Wathooth: We’re very focused on the mid cap space, as you’d be aware. The reason for that is because of our impact orientation, we’re built towards the goal of driving the adoption of impact within our portfolio. It’s about two things: it’s about readiness and it’s about acceptance. When you think about startups and the small cap end of the spectrum, lots of these companies are very young and they’re very focused on surviving. They want to be a going concern. So, from my perspective, there’s not much point for these smaller companies, younger companies, to focus on creating impact, if they’re not ready to survive and be around in the next few years. They have a much more urgent focus that they need to address before they can start looking at things like impact. So essentially, with smaller companies, they just aren’t ready for impact. Now, at the large cap end of the scale, they’ve got the opposite problem. Many of these companies are very well established, they’re very set in their ways and getting them to adopt impact strategies is like banging your head on the wall most of the time, unless there’s a very compelling and very powerful external motivation for them. For example, regulatory pressure, customer pressure, there tends generally to be a lot of inertia towards taking on things like sustainability and impact. So, with big companies, whilst there is readiness, there may not be a lot of acceptance for impact, that is, until they’re forced to do it. So, in the mid cap space, on the other hand, we tend to be dealing with younger entrepreneurs in their thirties and forties. Many of whom seem to be a lot more receptive and open to embedding impact within their business strategy. What has been a huge surprise for me is that a lot of them have already embedded impact into their business without even realizing it. I also find that having conversations with entrepreneurs with that profile about building legacy through their business is a lot easier to have. Many of them, for instance, have families who are in very similar life cycles, life stages to my own. They’ve got young children, they have started thinking about what legacy they’re going to leave behind, not just financially, but reputationally as well for their kids. And I think many of them are very interested in Gen X and beyond, they’re not just interested in building business empires for the sake of financial legacy. A lot of them really want to leave behind a very positive brand, family brand when they exit their businesses. So, I speak a lot to these guys about why I founded Bintang in the first place because I want to leave a better world behind for my kids when I’m gone. I think this message resonates quite strongly with many of them who don’t typically just see their businesses as a single bottom line thing. It goes a lot beyond that. They want to take a more balanced approach towards building their businesses where there are considerations of other bottom lines, namely people and planet which matter to them and their families as well. Unsurprisingly, a large number of entrepreneurs who we’ve engaged with, who are also keen on impact, tend to be highly focused on innovation as well. And that’s the other component of our philosophy because it’s investing in impact and innovation. Many of them drive impact through the innovative business models that they have, and they see impact and innovation as two equal partners or two sides of the same coin. You can’t have innovation without impact, and you can’t have impact without innovation. So, for example, they may see business innovation as a way of reducing energy wastage, which in turn reduces costs and increases their profits. Or they might see supply chain innovation as a way to reduce their carbon footprint, which allows them to open up new markets and customer bases, which are very particular about product carbon footprint, driving revenue growth and increasing profitability that way. So, it’s a lot easier to have these conversations about impact and innovation with entrepreneurs who see the bigger picture and are prepared to make changes to their business model to achieve these objectives. Now, it’s been extremely rewarding for the team and I, who believe in our impact mission fervently to see that our impact strategy resonates with so many talented and visionary entrepreneurs, many of whom generationally are about the same age as us. So, it does help that my team is not all four geese like me. There are a lot of younger guys and gals in there as well and we’re very thankful that the entrepreneurs that we are back and looking to back also believe in our impact mission. So, it’s a two-way street. It’s very important that the message that we carry resonates very strongly with them and they’ve been prepared to commit time and resources to bring their companies into alignment with our impact and innovation strategy as well. So, I think that’s probably one thing that we do at Bintang that’s quite different from a lot of the other PE Gps that you’ve probably spoken to in the past.
[00:20:56] Kalani Scarrott: How does that relationship work with the family of companies you invested in, are you guys’ hands on or is it hands off?
[00:21:05] Johan Rozali-Wathooth: We’re extremely hands on. We always play a very active role in our investments, apart from having bought seats, we always have typically a member of our team in each portfolio company to help them out. The succumbent is in most cases reverse inquired. We rarely force succumbent through where the portfolio company would normally be very open about areas that they need help in, whether it’s financial reporting, supporting MNA initiatives or with business development. And they will typically ask us upfront whether we could spare someone with that skill set to help them out in that specific area. Notwithstanding the support that we can provide in these areas, one area that we’ve universally provided support on is for impact implementation. This is a very new space for a lot of mid-sized companies and many of them would be very lost if we didn’t provide them with support. They wouldn’t even know where to start. So, the help that we offer is actually very well received. And on that front, what we typically do is that we make it a condition before we invest that within two years of Bintang’s capital going into the business, they have to commit to taking on B-Corp certification. So, if you’re not familiar with B-Corp, it’s a movement that originated out of the US. Their head, B-Lab, which is the organization that administers and gives the B-Corp certification, they’re based in Philadelphia, America, and what it typically does is they look at five different pillars, namely employees, customers, environment, community, and governance. And there’s 200 points available across that spectrum of five different pillars and for you to be a B-Corp, you’ve got to get a minimum score of at least 80 points. It’s a very well-established movement in the Western Hemisphere. I’m going to give you some names that you’ve definitely heard of companies like Patagonia, Lululemon, Ben and Jerry’s, the Naan, the guys who make the Yogurts out of it’s a very diversified food group out of France, but they’re primarily famous for the Yogurts. These are all examples of global multinational B-corps. So, we’re very passionate about driving our portfolio towards B-Corp certification. My dream is by the time we hit 2050, if I’m still around, then I’ll be about 70 years old. We’re aiming to have 150 B-Corp portfolio companies by that stage. So, it’s a run rate of creating about six or seven B-Corp companies a year every year between now and 2050. That’s the crusade. That’s the big movement that we’re on for Bintang.
[00:23:49] Kalani Scarrott: How has the reception been from portfolio companies? Are they pretty eager or is it confusion because they haven’t heard about it?
[00:23:56] Johan Rozali-Wathooth: My biggest fear when we started on this path was that the prospective portfolio companies will run away when they see a term sheet from us. We’ve got this extra line in there that says, you got to be a B-Corp within two years of the money going in. They’ll just turn around and say, if I go to the next private equity shop in KL, they’re not going to have that line, so why should I take money from you? So that was my biggest fear when we started on this pathway. What has been really quite surprising is that rather than reducing the subset of conversations that we could have with prospective investees; it’s expanded the universe massively. We started getting reverse inquiries because word of mouth is a funny thing. People started talking and we started getting reverse inquiries by entrepreneurs who said, hey, I had this friend who was talking to you guys about getting investment into his company, and he mentioned that you guys are really big on impact, and one of the things that you’re very keen on is B-corp. Can you sit down with me and tell me a little bit more about B-Corp and why you think B-Corp would be valuable for my business? And B, how do we do something together? Because we’ve never had a private equity firm speak to us about creating impact with our employees, our customers, the community, and the environment. All the typical PE guys care about is how much money you’re going to make. So, we want to have a conversation where we’re talking about these other things and we’re very passionate about those other things. So, it’s really odd because I would travel down to Singapore, for example, because we have historically invested in companies in Singapore. And there’d be guys who randomly reach out to me and say, hey, I heard that you’d be in town, and could we sit down, and can we talk about this whole impact strategy that you guys have? And it’s actually opened up opportunities for us to invest in new companies that we never thought would even be on our radar, to be honest. It’s not all good news, by the way, one of the major challenges that we’ve had is that we did our final close for Fund One early last year in Q-One. We’re running out of capital for Fund One just because it’s been a year. We’re crossing into Q-Two now. We’re in the thick of Q-Two in 2023, about a year and a bit down the road and we’re running out of capital because the pipeline has been so aggressive. So that’s the stuff that gives me nightmares these days. We’ve got the impact agenda, but we need to raise capital so that we can continue that impact agenda and build on that impact movement that we’ve started building over the course of the last year and a half.
[00:26:31] Kalani Scarrott: What’s the next plan? How are you viewing the next step forward?
[00:26:36] Johan Rozali-Wathooth: I think the next steps for us are to build on that whole impact strategy for Bintang, but I’d be lying if I said that we have an easy road ahead. We’re trying to do something that’s quite different and it’s that crossing into that final frontier that unknown and uncharted territory, the uncharted waters and Bintang is a relatively young firm. We’re still at the point where we are I’d be lying if worrying about keeping the lights on and us doing something quite different, focusing on impact PE rather than taking the well-worn path of conventional or traditional private equity, we’re trying to blaze a new and untested trail of doing some impact private equity work and that’s tricky. So, the battle for relevance, the battle for survivability, the drive towards sustainability is a long grind and that’s tough. I think for me, especially as a captain of the ship, the pressure is always on. There’s nothing quite like having so many souls depend on you for their livelihoods and their future careers. I’d be lying if I said it’s not a heavy burden to carry. I’ve aged probably like 50 years in the last five.
[00:28:02] Kalani Scarrott: You’re still looking good, so don’t stress too much.
[00:28:04] Johan Rozali-Wathooth: But it’s not the age, it’s the mileage. I always go back to a very simple thought process and that thought process is asking, why am I and my team doing this? What’s the fundamental reason for us to go on this journey into the unknown? I realized a few years ago, when Bintang was still in its very Founcing years, that the reason I pushed so hard to build this business is I believe that we can make a real difference through the work that we do. That, along with the amazing team I have, these are the things that keep me going and pushing through all the challenges that we have now. There’s a bit of history to this, and my dad faced a very similar situation about 40 years ago when he first moved back from Australia to set up the first open heart bypass team in Malaysia’s history. He started with a small team of about eight professionals, and they were government funded. They had a funding of about three and a half million Malaysian dollars, princely sum at that time, but a lot of uncertainty. Would Malaysians trust a relatively new and young team to perform surgery as complex as open-heart bypass at that time? For context, a lot of Malaysians who could afford it were going overseas for heart surgery. There was no opportunity to do any heart surgery in Malaysia. If you had major congestive heart issues, that’s it. You didn’t have much of a chance unless you had money. So, after a very slow start in the early eighties, the team that dad founded gradually built momentum and eventually built the foundations, which has now become a thriving practice in Malaysia. 40 years on, you hardly hear about Malaysians going overseas for open heart bypass surgery these days. So, what is very interesting to me is this dad’s team, most of his core team of eight people who went to Sydney with him to train, and the team eventually expanded to about double that size. They stayed together for 40 years until dad retired in 2020. That’s remarkable. So, I have a shorter runway than dad because I founded my own team when I was in my late 30s, whereas dad was in his early 30s when he got started. But one thing I live in eternal hope for is that 30 years on in 2050, when I’m 70 years old and when I finally call it a day, I hope that when I look around the room, I’ll see a lot of familiar faces who started this journey to build an impact private equity firm together with me all those years ago. So, what I’m most curious about seeing, if you ask me, what happens in the future, is the faces around the room in 2050 when I call it a day and hang up my boots.
[00:30:55] Kalani Scarrott: It’s so true because nothing good ever comes easy.
[00:30:58] Johan Rozali-Wathooth: It’s all about people as well at the end of the day. There’s a great little cartoon that I like, and it’s about Big Panda and the Little Dragon. They go out on a journey together. So Big Panda asks a Little Dragon, and he says, what’s more important to you, the journey, or the destination? And Little Dragon says neither. It’s the company. So, I think about a lot of things in life. When we think about it, life is a journey. You can’t run away from it, but I think it’s a lot about the people that you have around you as you’re going through that journey in life, and it can be a difficult journey, but if you’ve got great companions on that road with you, it becomes a lot more fun and bearable, even though the bumps. So, I think for me, it’s about the team and the people that I have around me.
[00:31:46] Kalani Scarrott: One point you touched on about other PE shops is they’re often looking for exits or return on capital. I’d love to know just your perspective on exits, because I read somewhere that you did a partial exit on a 3X investment. What’s your approach to that and what’s the reasoning?
[00:32:06] Johan Rozali-Wathooth: When we talk about exits, one of the major things that my team and I are very mindful of is that we don’t want to overstay our welcome. A lot of GP’s generally have this very skewed view of exits being a one-way street where it’s really about their needs as opposed to the needs of PotCo, the partner company. We call them partner companies, so we’re a minority growth investor. One thing that we keep an eye out for is when it may be advantageous for the partner company to have new partners investing in a business who can help the business in ways that Bintang cannot. So that’s very important for us whether Bintang continues to be a part of the journey at the juncture or whether we don’t, I think is a secondary consideration for us. But we’re always thinking, how can another partner add value to PotCo to the partner company in ways that we cannot? So, for example, there may be situations where perhaps the partner comes, he wants to get into a new geography which Bintang does not have access to. Another case would be where they need a specific type of expertise, which we don’t have. So, in these cases, we just have to be really honest with ourselves when we feel that we’ve maxed out in terms of our contribution to the business and perhaps there are better stewards for the business out there that can help grow the business to the next level. We need to start thinking about bringing them in. So of course, the other side of the coin, which is probably the more common side of the coin for most GPS, is we’ve also got exit considerations involving our investors. So Bintang ideally would not want to hold investments for more than six or seven years at a stretch because our investors want liquidity too. So, providing liquidity to our investors as well as validating our investment thesis through exit realizations is always going to be a priority for us as a team. Of course, given COVID and the recent macroeconomic volatility, exits have been a lot harder to execute. There’s no surprise there. So, I think that there’s a few components there that we’ve got to square off. There’s the investor side, our LP side, there’s also the investee side. So Bintang is walking this tightrope, this balancing act of ensuring that when we exit, we also need to get full buy-in from the founder and the management team to ensure that they’re well aligned with our exit strategy as well as the buyers. They are like the buyers of the state that we’re selling now. That’s super important to us. I think I can’t emphasize this point enough. We always want to feel like we’re putting the business in the hands of people who are equally or more passionate and committed about growing the business as Bintang has been in the past. It’s so important that the buyers need to be people that can really work well with the founders and the management team as well. I don’t want to be in a situation where in the future we face a situation where we’ve exited a business and the founder and the entrepreneurial team come to us and say, hey, you know what, we’re not happy with the new guys who’ve come into the business that you guys sold out to. So, in a way, I guess we see ourselves as matchmakers. We’re trying to put them in a good marriage even when our own utility in the marriage is worn out. We want them to have a good dancing partner, a good dance partner to come in and take that dance card over. So that’s really important for us. I think it’s important when you consider it in the overall landscape of Impact as well. Because if you talk about Impact, it’s a lot about relationships and B-Corp talks about it. B-Corp talks about knowing the employees and making sure that there’s good stewards for their employees. It’s about customers and making sure the customers feel that the stewards of the company are very aligned with developing and delivering good value to the customers. So, I think it’s very consistent with that whole mindset around B-Corp as well.
[00:36:10] Kalani Scarrott: When you chat within the industry and the networks, do other private equity shops look at you guys and say what you do is crazy, or they could never do it?
[00:36:21] Johan Rozali-Wathooth: It might be surprising to you, but not really. One of my great heroes is a gentleman called Ronald Cohen and if you’re familiar with Sir Ronald, it’s because he was one of the founding partners of Apex Partners, which is now one of the largest private equity firms globally. One of the books that he wrote is a book called ‘The Second Bounce of the Ball’ which I have a copy of on my desk and its dog eared from the number of times I’ve read this book. It’s one of my reference books for how to do private equity investing. Now, Sir Ronald, when he retired from Apex in the late 2000s, became a major proponent of what has now become the Impact investing space. So, he wrote another book in 2020 about three years ago called ‘Impact’ and it’s all about how capitalism needs to reposition to not just look at a single bottom line. There are other things that capitalism needs to be mindful of. There’s a responsibility inherent in allocators of capital for looking at other things that will affect the future of mankind. So, it’s really about responsible capitalism. So here you have Doyen, a pioneer of the private equity world. This guy started Apex Partners in the early 70s, when people still didn’t know what private equity was all about and now, he’s talking about impact now. Closer to home, I’ve got a local hero here in the form of Mr. Brahmal Vasudevan, who founded a firm here called Credor, which you may have heard of, but Brahmal is an amazing pioneer for the world of what do you call it, philanthropy in Malaysia and its philanthropy with impact. He has not only funded, but he has provided a lot of human capital as well into impact areas that look at things like decarbonization, that look at things like poverty alleviation, which look at things like economic uplift for underprivileged and overlooked communities, for instance. Huge amounts of time, effort, and money are dedicated to those areas of philanthropy. I’m certain that if I sit down with Brahmal and we have a more philosophical conversation about whether if he could turn back the clock 15-20 years ago when he first started in private equity and he could embed impact act into the business model of Credor, whether he’d do it, I think the answer would be a resounding absolutely yes. It’s a misconception, a lot of people think that private equity entrepreneurs creating impact is something that’s fundamentally at odds with them from a philosophical and business perspective. I think there is a minority for which that is true. The guys who only care about how much money they’re going to make and how big their yacht is, the next yacht is going to be and all that stuff. But I do think for the vast majority of guys who end up making it in private equity and it’s unsurprising, a lot of them end up in philanthropy later on in their life. I think a lot of them want to see impact, and that’s a way they want to build a legacy. So perhaps on the surface, yes. A lot of people look at what we do and say, these guys are crazy. But the better word is envy. A lot of the older guys would look at it and say, why didn’t I do that when I set out in private equity? It’s no skin on my nose if I could deliver impact and great returns at the same time, why wouldn’t I do it?
[00:40:17] Kalani Scarrott: If you love what he makes, you love what you enjoy even more.
[00:40:20] Johan Rozali-Wathooth: It gives people in our line a very strong sense of purpose. I think a lot of the challenges that the traditional PE guys have had is that they spend all their career in private equity building wealth, and then they spend their post-retirement years finding their purpose. And that’s when they end up doing things that have a huge impact. They do things in philanthropy and charity and welfare work, and that gives them purpose. There is a third way, and that third way is you can do it in private equity.
[00:40:58] Kalani Scarrott: Before I get into my closing round of questions, is there anything we haven’t talked about in private equity, Malaysian equity or that you want to cover?
[00:41:07] Johan Rozali-Wathooth: If we want to talk about the ASEAN space specifically, apart from Impact, which we’ve spoken about at length. I think the private market space in ASEAN, as I said earlier, is still very much in a developmental stage. So, it needs to grow a lot bigger. I think right now we’re in a very young industry, and I feel that there still aren’t enough players and there still isn’t enough capital yet for the industry to reach the level of activity that we see in more developed markets in America or Europe. I think here we’re really touching on an issue of scale. For the industry to scale, I think there are lots of challenges ahead that have to be solved. For one, I think a lot more capital needs to find its way into the private market system and this needs support from a whole bunch of players, including government, the private sector, funders, regulators, and even the market participants. Now this might feel extremely counterintuitive, but I for one have always welcomed news when I hear about new private equity firms being set up. For me, it’s never been about having another competitor. It’s always been about welcoming a new neighbor to the neighborhood. We need the ecosystem to be a lot broader so that there’s not only a lot more investment activity going on, but also a vibrant ecosystem where when we want to make investments, we can buy from other players, or when we want to sell portfolio company stakes, we can sell them to other firms. So, you need other firms for that to happen one way or the other. Similarly with the development of the ecosystem, one of the things that needs to be addressed, and I think you touched on it earlier, is developing a strong pipeline for talent. We need to make sure that a lot of young people are attracted to join our industry. When they finally make that leap of faith, we need to make sure that there are adequate processes in place and adequate resources in place to trade and mentor them properly once they’re in the industry. Now, apart from the B-Corp legacy, which I’ve spoken to you about a lot, another enduring legacy that I’d love to leave behind is training the next generation of private equity professionals. It’s not just about making them very adept, very competent finance professionals, but it’s also about really instilling a strong sense of purpose in them and that purpose is to drive them to have very impactful careers in private equity beyond just the accumulation of wealth, but really being about responsible capitalism, being responsible capitalists. If I get anywhere close to doing that in the next 30 years, I will feel a very strong sense of satisfaction having achieved something like that.
[00:43:56] Kalani Scarrott: I’ve loved today’s conversation, Johan, because you have that long term view, doing it with people you enjoy. I hope people take this on board because it’s so good. In terms of your life and your experiences, what do you think is the most undervalued life experience that university age students don’t give weight to? So, either an underrated skill or an experience you think they should possess.
[00:44:18] Johan Rozali-Wathooth: I think we’ve spoken off in the previous question, and I really can’t emphasize soft skills enough. I’ve met so many brilliant people, they’re so well qualified, but because I think they haven’t spent enough time honing their soft skills, they haven’t gone as far in life as I think they really should have. In an age where I think a lot of young people today, including my kids, who are ten and five, spend so much time online, the art of having conversations and communicating effectively is a dying art. It’s gradually being eroded. It’s also a very personal thing for me. It’s a personal challenge of mine because I am someone who’s very deeply introverted, and I struggle with public speaking and even small crowds. I feel that if I didn’t have this challenge when I started out, maybe my career would have gone a lot further than it has. I’d have a much larger constituency than I have today. So, one piece of advice which I’ve given time and time again to interns, people who joined us here, the journey at Bintang or even our parent company, which is AHM, is to pick a role model of someone who you feel communicates particularly well. There are tons of examples to choose from, whether you like corporate leaders like Steve Jobs, Elon Musk, Jeff Bezos. They’re amazing communicators or political leaders like Obama, Lee Kuan Yew, or Anwar Ibrahim in Malaysia. Choose one that you particularly identify with or are inspired by, and all these guys have got tons of videos on YouTube from which you can watch and learn from. So go and watch the videos and figure out, train yourself to figure out how it is that they are able to communicate their ideas so well from the words they choose to their intonation and their inflection, to the ways that they organize their thoughts and ideas and how they articulate those thoughts and ideas. Now, why is this so important? It’s because great ideas are useless if nobody finds out about those great ideas. As entrepreneurs and in private equity, that’s what we are glorified capital entrepreneurs, we allocate capital. If you can’t convey your ideas to investors who are going to fund your deals, if you can’t convey your ideas to entrepreneurs who are going to take your money, if you can’t convey your ideas to a team of people who are going to execute your investments, there’s really no way for you to go. There’s nowhere for you to go. I’ve met tons of amazing young people. They’ve got great ideas. Some of these ideas could potentially change the course of human history but because they struggle to articulate the ideas and they get very frustrated; they get frustrated in their careers and they get frustrated in their lives. So, I think one of the most satisfying aspects about the work that I do is having the opportunity to mentor young people and help them articulate ideas and get their ideas out there into the world whether they’re entrepreneurs or people that work with us. It’s just so much fun helping these young people articulate the ideas and get these ideas out there.
[00:47:49] Kalani Scarrott: That’s an interesting answer. I haven’t heard anything like that on the podcast before, so I like that, just look for your favorite leaders and favorite speakers.
[00:47:55] Johan Rozali-Wathooth: I’m surrounded by people that are a lot smarter than I. One advantage that we’ve got is that I’ve got age and that’s helped me hone storytelling a little bit better. So, it’s training storytellers and helping entrepreneurs tell people about the businesses that they do. It’s helping private equity professionals convince very seasoned investment committee members why investing in this business is going to change the world and it’s going to give us a good return and that’s a lot of fun.
[00:48:32] Kalani Scarrott: It might objectively be a business that will change the world, but you have to convince people of that. Some people can’t just connect the numbers, you got to sell them on that.
[00:48:40] Johan Rozali-Wathooth: Where would Elon or Jeff Bezos be today if they couldn’t tell people about why it’s so important to do Tesla or SpaceX or Amazon? We would never have heard of these businesses. They would have just gone away from the dodo. So, I think an important skill set for these very visionary entrepreneurs is the ability to convince others of the veracity and the viability of those visions and why it’s so important to do it.
[00:49:07] Kalani Scarrott: You’ve already mentioned a couple of your mentors in this conversation, but feel free to plug in anymore. Have there been any books or people that have been influential in shaping you and your worldview?
[00:49:17] Johan Rozali-Wathooth: I think you can see from the screen, there’s a lot of books in the office. Visitors who come and pay a visit to us often remark that the office looks more like a library than an office. There are literally a couple of thousand books lying around the office and it’s something that I’m very thankful to my parents for inculcating from a very young age. I love reading and because of the sheer volume of the books that I’ve gone through, I keep them in the office so the rest of the team can pick them up anytime and read them if they’re interested. I think knowledge is only as valuable as if you share it. There are lots of different types of books in the office. I’m not going to say it’s like a finance library or finance bookshop over here. I mentioned a couple of very interesting books in the industry that I love. Ronald Cohen’s books ‘Second bounce of the ball’ and ‘impact.’ These are books that resonate extremely strongly with me from a private equity perspective. It helped shape my approach towards practicing private equity. Outside work related topics, I’ve really enjoyed reading history and biography. One example of a book which I can’t plug in enough is and has shaped my worldview, is a book called ‘Sapiens’ by Yuval Noah Harari and the way he narrates the history of humanity over a 70,000-year period. How our civilization has crossed four eras and compassing the age of sentience, when we started to move away from the rest of the animal kingdom. The age of agriculture when we started farming. The age of political organization, which allowed us to organize our society and finally the age of science now, which we’re going through. He does it in such an engrossing and eye-opening way at the same time and it’s amazing that this body of work is 400 pages long. It should be 4000 pages but it’s 400 pages, so it’s amazing. I love biographies. They’re a great passion of my life. There are many personalities that I either don’t have direct access to or cannot have access to because they’re no longer with us. I feel biographies are a great way of almost following them on their life’s journey. So often when I read their books, I like to imagine that I’m in the same room as they are and going through the emotions and the atmosphere that they’re going through as they’re going through these experiences. So, I like business biographies. There are lots of Malaysian entrepreneurs that are very visionary and have done amazing things. One that I read very recently was Robert Quark’s biography. For literally months on end, this biography was sold out in Malaysia. You couldn’t get your hands on copies and when I finally got my hands on a copy of it, I read it cover to cover several times. He’s just remarkably honest about not only the ups in his career, but also personal life, and the downs as well. I think that’s really important when you’re reading a balanced biography is that people are very honest about their experiences and it’s not just all the way up. There’s some pretty big downs and I think the things that define you as a person are not just the successes you’ve had in life, but also the failures that you’ve had to endure. In terms of real-life people, which is the second part of the question. I’ve had a few, fair few of them, where I’ve had the privilege and worked for quite a number of truly incredible individuals over the course of my career in London. I work with some of the pioneers of the alternative investing space base, including people like Edmund Trueell. Eddie founded Duke Street Capital, which he spun off out of Hambros Bank and he was a pioneer of Mid Cap investing space in London. Ian Hazelton and Zach Summerscale, who were amazing professionals who invested in the private debt space in Duke Street and then at Highland Capital, I worked with some legends like Marco Carter and Apu Mondasri, who shaped my worldview in terms of the investing landscape. And then when I moved back to Malaysia, I had the absolute honor and privilege of working with some legends here as well. People like Tan Sri Loden, who led the Armed Forces Pension Fund Group, which we used to be a part of before were spun off the CBC. Datuk Maimuna Hussein, who led the investment banking business of Afin Huang, and today, Datuk Tengji Y, who’s a CEO of our asset management group. He’s a legendary investor in the Malaysian landscape himself. These are people who I interacted with in person. I work very closely with a lot of their principles, their character, their approaches to work and life, I think, had a massive and profound impact on my own belief systems as well. So, for me, this is a very nice balance of books where you get a lot of somewhat academic experience from, but also personalities in real life where you get discreet lessons that you would not get from reading a book. So, it’s a combination of very nice, passive, and active experiences, which I think are valuable to me as I go through this journey of life.
[00:54:29] Kalani Scarrott: Always good to have a balance. Johann, thank you so much for coming today. Honestly, I’ve loved this every minute and the home office looks immaculate as well. I have got to give you credit for that. Lastly, anything else you’d like to add or where can people find you?
[00:54:43] Johan Rozali-Wathooth: I’d love to say it’s somewhere exciting, like climbing some sheer rock face in the Himalayas or surfing some tropical waves somewhere. I always felt that in that sense, my personality is very one dimensional because I haven’t got thrilled seeking things that I’m into, but the reality is very mundane. I spend too much of my time in Bintang’s offices, which are very nice offices, as you can probably tell from the background, especially with the amazing team that I’ve got as well, building what we hope should make the world a better place. So, we’re here, people know where to find us. I’d love to say as well, it’s been an absolute pleasure speaking with you today as well, Kalani. I’d like to thank you for taking an interest in my team’s journey to Bintang and for bringing this journey to a much wider audience as well. It’s so important for us that we have an audience, and I hope that you’ve enjoyed speaking to me as much as I’ve enjoyed speaking to you.
[00:55:48] Kalani Scarrott: I have loved every second and I think people do need to hear about this.
[00:55:53] Johan Rozali-Wathooth: Let’s do this again sometime.
[00:55:56] Kalani Scarrott: Thank you, Johan.
[00:55:59] Johan Rozali-Wathooth: You’re most welcome, Kalani.