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 onย Apple Podcasts,ย Spotify,ย Stitcher,ย Castbox,ย Google Podcasts, or on your favourite podcast platform.
My takeaways and lessons:
Journey or the Destination?
โSo Big Panda asks a Little Dragon, and he says, whatโs more important to you, the journey, or the destination? And Little Dragon says neither. Itโs the company. So, I think about a lot of things in life. When we think about it, life is a journey. You canโt run away from it, but I think itโs a lot about the people that you have around you as youโre going through that journey in life, and it can be a difficult journey, but if youโve got great companions on that road with you, it becomes a lot more fun and bearable, even though the bumps.โASEAN Private Equity is still in its infancy
โI think right now weโre in a very young industry, and I feel that there still arenโt enough players and there still isnโt 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 weโre 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, itโs never been about having another competitor. Itโs always been about welcoming a new neighbour to the neighbourhood. We need the ecosystem to be a lot broader so that thereโs 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.โLearn those soft skills!
โI really canโt emphasize soft skills enough. Iโve met so many brilliant people, theyโre so well qualified, but because I think they havenโt spent enough time honing their soft skills, they havenโt 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. Itโs gradually being eroded. Itโs also a very personal thing for me. Itโs a personal challenge of mine because I am someone whoโs very deeply introverted, and I struggle with public speaking and even small crowds. I feel that if I didnโt have this challenge when I started out, maybe my career would have gone a lot further than it has.โ
Show Notes:
[00:00:31] โ [First question] โ Background
[00:03:44] โ How has a varied experience helped in private equity investing?
[00:06:08] โ Advice for those early in their career looking to break into the PE scene?
[00:09:51] โ Having a purpose in Private Equity Investing
[00:15:39] โ Bintangโs investment process
[00:20:53] โ Bintangโs role post-investment?
[00:23:49] โ B Corp Certification and Reception
[00:26:31] โ Whatโs next for Bintang?
[00:31:46] โ How to approach exits in PE?
[00:36:10] โ What do other PE shops think about what theyโre doing?
[00:40:58] โ The private market space in ASEAN,
[00:43:56] โ Underrated experience for university-age students?
[00:49:08] โ Influential people or books?
[00:54:29] โ Wrapping up
Connect with Johan:
Transcript
[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 todayโs 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 Johanโs, 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. Iโd love to just start a bit with your background because itโs pretty interesting. So, youโve 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. Iโm 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 didnโt really have a clue what I wanted to do with my career. Corporate restructuring sounded interesting. I really thought Iโd be a white knight, turning troubled companies around and making them shine again. What I didnโt 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 didnโt 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, itโs 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 ASEANโs growth. So, in a nutshell, itโs 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 hasnโt 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. Itโs partly a function of the available structures and products that are there that you canโt 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 weโre still in the process of learning right now. So, itโs like a Back to the Future situation where you have the benefit of that hindsight, which in Asia is foresight and youโre doing this arbitrage between eras of time. I think thatโs 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 Iโm sure we have a question, but itโs 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: Iโve got a caveat here and say that my view on private equity is extremely biased. Iโm going to say itโs 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 graduateโs flock to this industry year after year. However, I donโt 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 itโs a result of meticulous and careful planning, but it wasnโt. So, I think today there are lots of different types of private equity strategies and firms out there, whether youโre 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 itโs 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 wonโt 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, thatโs 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, itโs very important that youโre 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 thatโs 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: Thatโs a great question, but there isnโt 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 theyโre guys and gals who break the mold. Theyโre 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 couldnโt 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 itโs 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 thatโs 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 weโd also look at things that we euphemistically call cost synergies. Cost synergies, typically, you look at headcount, thatโs 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 canโt 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 thatโs another euphemism, because what it meant was, youโd be squeezing suppliers and youโd never squeeze the big guys. If you squeeze the big guys, they squeeze back and what youโd 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 werenโt really making a lot of money doing it. Youโd squeeze those suppliers. Now, why did I struggle with this thing? Why did I have my Jerry Maguire or if youโre 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 weโd 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 Iโm alive today. Weโd 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. Heโs a doctor. So itโs unsurprising that weโd 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 Iโd 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 Iโve got to work into my 70s because my pension fundโs 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 youโre gone? Is that the private equity firm that you want to build? So, the clear answer to me at that juncture was โno.โ 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, itโs 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 Dadโs legacy to my younger brother and I, itโs 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 thatโs 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 whatโs your process going alongside impact and innovation?
[00:15:57] Johan Rozali-Wathooth: Weโre very focused on the mid cap space, as youโd be aware. The reason for that is because of our impact orientation, weโre built towards the goal of driving the adoption of impact within our portfolio. Itโs about two things: itโs about readiness and itโs about acceptance. When you think about startups and the small cap end of the spectrum, lots of these companies are very young and theyโre very focused on surviving. They want to be a going concern. So, from my perspective, thereโs not much point for these smaller companies, younger companies, to focus on creating impact, if theyโre 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 arenโt ready for impact. Now, at the large cap end of the scale, theyโve got the opposite problem. Many of these companies are very well established, theyโre 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 thereโs 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 theyโre 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. Theyโve got young children, they have started thinking about what legacy theyโre 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, theyโre 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 Iโm gone. I think this message resonates quite strongly with many of them who donโt 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 weโve engaged with, who are also keen on impact, tend to be highly focused on innovation as well. And thatโs the other component of our philosophy because itโs 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 canโt have innovation without impact, and you canโt 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, itโs 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, itโs 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 weโre very thankful that the entrepreneurs that we are back and looking to back also believe in our impact mission. So, itโs a two-way street. Itโs very important that the message that we carry resonates very strongly with them and theyโve been prepared to commit time and resources to bring their companies into alignment with our impact and innovation strategy as well. So, I think thatโs probably one thing that we do at Bintang thatโs quite different from a lot of the other PE Gps that youโve 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 guysโ hands on or is it hands off?
[00:21:05] Johan Rozali-Wathooth: Weโre 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 itโs 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 weโve 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 didnโt provide them with support. They wouldnโt 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 Bintangโs capital going into the business, they have to commit to taking on B-Corp certification. So, if youโre not familiar with B-Corp, itโs a movement that originated out of the US. Their head, B-Lab, which is the organization that administers and gives the B-Corp certification, theyโre based in Philadelphia, America, and what it typically does is they look at five different pillars, namely employees, customers, environment, community, and governance. And thereโs 200 points available across that spectrum of five different pillars and for you to be a B-Corp, youโve got to get a minimum score of at least 80 points. Itโs a very well-established movement in the Western Hemisphere. Iโm going to give you some names that youโve definitely heard of companies like Patagonia, Lululemon, Ben and Jerryโs, the Naan, the guys who make the Yogurts out of itโs a very diversified food group out of France, but theyโre primarily famous for the Yogurts. These are all examples of global multinational B-corps. So, weโre very passionate about driving our portfolio towards B-Corp certification. My dream is by the time we hit 2050, if Iโm still around, then Iโll be about 70 years old. Weโre aiming to have 150 B-Corp portfolio companies by that stage. So, itโs a run rate of creating about six or seven B-Corp companies a year every year between now and 2050. Thatโs the crusade. Thatโs the big movement that weโre 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 havenโt 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. Weโve got this extra line in there that says, you got to be a B-Corp within two years of the money going in. Theyโll just turn around and say, if I go to the next private equity shop in KL, theyโre 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; itโs 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 youโre 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 weโve 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 youโre going to make. So, we want to have a conversation where weโre talking about these other things and weโre very passionate about those other things. So, itโs really odd because I would travel down to Singapore, for example, because we have historically invested in companies in Singapore. And thereโd be guys who randomly reach out to me and say, hey, I heard that youโd be in town, and could we sit down, and can we talk about this whole impact strategy that you guys have? And itโs actually opened up opportunities for us to invest in new companies that we never thought would even be on our radar, to be honest. Itโs not all good news, by the way, one of the major challenges that weโve had is that we did our final close for Fund One early last year in Q-One. Weโre running out of capital for Fund One just because itโs been a year. Weโre crossing into Q-Two now. Weโre in the thick of Q-Two in 2023, about a year and a bit down the road and weโre running out of capital because the pipeline has been so aggressive. So thatโs the stuff that gives me nightmares these days. Weโve 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 weโve started building over the course of the last year and a half.
[00:26:31] Kalani Scarrott: Whatโs 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 Iโd be lying if I said that we have an easy road ahead. Weโre trying to do something thatโs quite different and itโs that crossing into that final frontier that unknown and uncharted territory, the uncharted waters and Bintang is a relatively young firm. Weโre still at the point where we are Iโd 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, weโre trying to blaze a new and untested trail of doing some impact private equity work and thatโs tricky. So, the battle for relevance, the battle for survivability, the drive towards sustainability is a long grind and thatโs tough. I think for me, especially as a captain of the ship, the pressure is always on. Thereโs nothing quite like having so many souls depend on you for their livelihoods and their future careers. Iโd be lying if I said itโs not a heavy burden to carry. Iโve aged probably like 50 years in the last five.
[00:28:02] Kalani Scarrott: Youโre still looking good, so donโt stress too much.ย
[00:28:04] Johan Rozali-Wathooth: But itโs not the age, itโs 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? Whatโs 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. Thereโs 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 Malaysiaโs 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, thatโs it. You didnโt 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 dadโs 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. Thatโs 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 Iโm 70 years old and when I finally call it a day, I hope that when I look around the room, Iโll 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 Iโm 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: Itโs so true because nothing good ever comes easy.
[00:30:58] Johan Rozali-Wathooth: Itโs all about people as well at the end of the day. Thereโs a great little cartoon that I like, and itโs about Big Panda and the Little Dragon. They go out on a journey together. So Big Panda asks a Little Dragon, and he says, whatโs more important to you, the journey, or the destination? And Little Dragon says neither. Itโs the company. So, I think about a lot of things in life. When we think about it, life is a journey. You canโt run away from it, but I think itโs a lot about the people that you have around you as youโre going through that journey in life, and it can be a difficult journey, but if youโve 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, itโs 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 theyโre often looking for exits or return on capital. Iโd love to know just your perspective on exits, because I read somewhere that you did a partial exit on a 3X investment. Whatโs your approach to that and whatโs 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 donโt want to overstay our welcome. A lot of GPโs generally have this very skewed view of exits being a one-way street where itโs really about their needs as opposed to the needs of PotCo, the partner company. We call them partner companies, so weโre 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 thatโs very important for us whether Bintang continues to be a part of the journey at the juncture or whether we donโt, I think is a secondary consideration for us. But weโre 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 donโt have. So, in these cases, we just have to be really honest with ourselves when we feel that weโve 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 weโve 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. Thereโs no surprise there. So, I think that thereโs a few components there that weโve got to square off. Thereโs the investor side, our LP side, thereโs 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 theyโre well aligned with our exit strategy as well as the buyers. They are like the buyers of the state that weโre selling now. Thatโs super important to us. I think I canโt emphasize this point enough. We always want to feel like weโre 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. Itโs so important that the buyers need to be people that can really work well with the founders and the management team as well. I donโt want to be in a situation where in the future we face a situation where weโve exited a business and the founder and the entrepreneurial team come to us and say, hey, you know what, weโre not happy with the new guys whoโve come into the business that you guys sold out to. So, in a way, I guess we see ourselves as matchmakers. Weโre 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 thatโs really important for us. I think itโs important when you consider it in the overall landscape of Impact as well. Because if you talk about Impact, itโs a lot about relationships and B-Corp talks about it. B-Corp talks about knowing the employees and making sure that thereโs good stewards for their employees. Itโs 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 itโs 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 youโre familiar with Sir Ronald, itโs 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 โThe Second Bounce of the Ballโ which I have a copy of on my desk and its dog eared from the number of times Iโve read this book. Itโs 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 โImpactโ and itโs 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. Thereโs a responsibility inherent in allocators of capital for looking at other things that will affect the future of mankind. So, itโs 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 didnโt know what private equity was all about and now, heโs talking about impact now. Closer to home, Iโve 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. Iโm 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 heโd do it, I think the answer would be a resounding absolutely yes. Itโs a misconception, a lot of people think that private equity entrepreneurs creating impact is something thatโs 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 theyโre 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 itโs 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 thatโs 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 didnโt I do that when I set out in private equity? Itโs no skin on my nose if I could deliver impact and great returns at the same time, why wouldnโt 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 thatโs 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 havenโt 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 weโve 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 weโre in a very young industry, and I feel that there still arenโt enough players and there still isnโt 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 weโre 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, itโs never been about having another competitor. Itโs always been about welcoming a new neighbor to the neighborhood. We need the ecosystem to be a lot broader so that thereโs 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 theyโre in the industry. Now, apart from the B-Corp legacy, which Iโve spoken to you about a lot, another enduring legacy that Iโd love to leave behind is training the next generation of private equity professionals. Itโs not just about making them very adept, very competent finance professionals, but itโs 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: Iโve loved todayโs conversation, Johan, because you have that long term view, doing it with people you enjoy. I hope people take this on board because itโs so good. In terms of your life and your experiences, what do you think is the most undervalued life experience that university age students donโt give weight to? So, either an underrated skill or an experience you think they should possess.
[00:44:18] Johan Rozali-Wathooth: I think weโve spoken off in the previous question, and I really canโt emphasize soft skills enough. Iโve met so many brilliant people, theyโre so well qualified, but because I think they havenโt spent enough time honing their soft skills, they havenโt 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. Itโs gradually being eroded. Itโs also a very personal thing for me. Itโs a personal challenge of mine because I am someone whoโs very deeply introverted, and I struggle with public speaking and even small crowds. I feel that if I didnโt have this challenge when I started out, maybe my career would have gone a lot further than it has. Iโd have a much larger constituency than I have today. So, one piece of advice which Iโve 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. Theyโre 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? Itโs because great ideas are useless if nobody finds out about those great ideas. As entrepreneurs and in private equity, thatโs what we are glorified capital entrepreneurs, we allocate capital. If you canโt convey your ideas to investors who are going to fund your deals, if you canโt convey your ideas to entrepreneurs who are going to take your money, if you canโt convey your ideas to a team of people who are going to execute your investments, thereโs really no way for you to go. Thereโs nowhere for you to go. Iโve met tons of amazing young people. Theyโve 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 theyโre entrepreneurs or people that work with us. Itโs just so much fun helping these young people articulate the ideas and get these ideas out there.
[00:47:49] Kalani Scarrott: Thatโs an interesting answer. I havenโt 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: Iโm surrounded by people that are a lot smarter than I. One advantage that weโve got is that Iโve got age and thatโs helped me hone storytelling a little bit better. So, itโs training storytellers and helping entrepreneurs tell people about the businesses that they do. Itโs helping private equity professionals convince very seasoned investment committee members why investing in this business is going to change the world and itโs going to give us a good return and thatโs 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 canโt 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 couldnโt tell people about why itโs 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 itโs so important to do it.
[00:49:07] Kalani Scarrott: Youโve 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, thereโs 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 itโs something that Iโm 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 Iโve gone through, I keep them in the office so the rest of the team can pick them up anytime and read them if theyโre interested. I think knowledge is only as valuable as if you share it. There are lots of different types of books in the office. Iโm not going to say itโs like a finance library or finance bookshop over here. I mentioned a couple of very interesting books in the industry that I love. Ronald Cohenโs books โSecond bounce of the ballโ and โimpact.โ 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, Iโve really enjoyed reading history and biography. One example of a book which I canโt plug in enough is and has shaped my worldview, is a book called โSapiensโ 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 weโre going through. He does it in such an engrossing and eye-opening way at the same time and itโs amazing that this body of work is 400 pages long. It should be 4000 pages but itโs 400 pages, so itโs amazing. I love biographies. Theyโre a great passion of my life. There are many personalities that I either donโt have direct access to or cannot have access to because theyโre no longer with us. I feel biographies are a great way of almost following them on their lifeโs journey. So often when I read their books, I like to imagine that Iโm in the same room as they are and going through the emotions and the atmosphere that theyโre going through as theyโre 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 Quarkโs biography. For literally months on end, this biography was sold out in Malaysia. You couldnโt 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. Heโs just remarkably honest about not only the ups in his career, but also personal life, and the downs as well. I think thatโs really important when youโre reading a balanced biography is that people are very honest about their experiences and itโs not just all the way up. Thereโs some pretty big downs and I think the things that define you as a person are not just the successes youโve had in life, but also the failures that youโve had to endure. In terms of real-life people, which is the second part of the question. Iโve had a few, fair few of them, where Iโve 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, whoโs a CEO of our asset management group. Heโs 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, itโs 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, Iโve loved this every minute and the home office looks immaculate as well. I have got to give you credit for that. Lastly, anything else youโd like to add or where can people find you?
[00:54:43] Johan Rozali-Wathooth: Iโd love to say itโs 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 havenโt got thrilled seeking things that Iโm into, but the reality is very mundane. I spend too much of my time in Bintangโs offices, which are very nice offices, as you can probably tell from the background, especially with the amazing team that Iโve got as well, building what we hope should make the world a better place. So, weโre here, people know where to find us. Iโd love to say as well, itโs been an absolute pleasure speaking with you today as well, Kalani. Iโd like to thank you for taking an interest in my teamโs journey to Bintang and for bringing this journey to a much wider audience as well. Itโs so important for us that we have an audience, and I hope that youโve enjoyed speaking to me as much as Iโve enjoyed speaking to you.
[00:55:48] Kalani Scarrott: I have loved every second and I think people do need to hear about this.ย
[00:55:53] Johan Rozali-Wathooth: Letโs do this again sometime.
[00:55:56] Kalani Scarrott: Thank you, Johan.ย
[00:55:59] Johan Rozali-Wathooth: Youโre most welcome, Kalani.