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1/ You were in McKinsey for 14 years and led the company’s Private Equity practice in Southeast Asia for 6 years. What key lessons did you learn from this experience, and what motivated you to transition into entrepreneurship in 2022?
I learned about Search Funds 4 years ago and I was immediately taken by the investment model. I loved how it is a solution tailored specifically to a known problem of succession planning in Asia. Having been in Asia for years, I understood well the difficulties for investors of high valuations, proprietary deal sourcing, cross market growth and exits. With a tweak to the model by providing long-term capital, I believe Search Funds are well positioned to be able to address many of those concerns.
My time at McKinsey prepared me well for Search investing by offering a diverse range of experiences; including exposure to a wide range of industries / markets, experience in commercial due diligence and managing highly capable independent teams. However, after starting off in investment banking in my early career, I felt like I needed to breakout of the professional services role before starting Lighthaven.
2/ After two years as a CEO, you decided to launch Lighthaven. What were your motivations, and could you explain your investment strategy?
I became a CEO of a local, founder owned mid-sized company call Les Amis Group. My explicit intent was to gain the experience and understanding to better support Searchers. I had always been in professional services -investment banking and consulting- and I wanted to be able to understand what my Searchers were going through in order to help them better. This experience allowed me to learn how to operate, and 18 months after my arrival, Les Amis Group reached its most profitable year ever.
3/ Pioneering SF investments in Asia must have been a challenging task. How was your fundraising experience, and how do you convince investors to bet on this asset class?
I am still fundraising, but I had the conviction to start down this path because of years of planning. I started talking to my network four years ago about the potential in this space. Then when momentum for Search accelerated in 2024, I was ready and so were my anchor investors to setup Lighthaven.
Just like acquiring from a seller in Search, fund raising for Lighthaven has been based on trust and relationships. Nearly all of the people I have talked to recognize the growing problem of succession planning for small cap businesses in Asia. They also become very interested in the Search model once it is explained. However, it does take trust to support a novel investment strategy in a new region. My investors have the foresight to see the opportunity and want to support Lighthaven in being the first to support Search in the region.
We will complete our first close in March, reaching around 50% of our $30M target after 3 months of fundraising.
4/ Over the past 12 months, you have invested in various trailblazers across Asia. What does your current portfolio look like? How many searchers do you plan to back with this first fund, and how many deals are you targeting?
Lighthaven currently has seven traditional Searchers and we support an additional 6 self-funded Searchers across Asia. Most of them are either the first or second Searchers in their respective markets. Currently, we have backed Garlic Equity Capital and Mission Kay Capital in Singapore, Nusatu Capital in Malaysia, Floreo Capital in Taiwan, and Milestone Search Capital and Okintek Capital in India. We are targeting 20-25 portfolio investments and 30-35 Searchers over the next 3-5 years. Although deals in Asia have traditionally been smaller, ranging between $10-15M, we aim to establish ourselves as a leading investor in most of them, committing an average ticket size of $1-1.5M per deal, representing up to 20% of the cap table, with a very hands-on approach.
5/ Could you describe the unique characteristics of the APAC market and the countries where you plan to invest?
It is hard to generalize about APAC. That is one of the biggest differences to other regions; each market in APAC is typically very localized. This has several implications 1) Searchers often have to be local to connect with the language and culture of the seller and 2) the optimal way of connecting with sellers is frequently different. A generalization about APAC is that “face” (appearance to others) is more important than Western markets. This has implications on Searcher selection, deal sourcing, seller negotiations, deal structure, leadership transitions and ultimately running the business. Our mandate is for Asia with a focus on Southeast Asia, and we are still evaluating whether to include Australia.
6/ In Japan, most deals in recent years have been executed through accelerators or EIR programs. Do you think this trend will expand into other markets? Are there competitors or potential allies? Additionally, in Japan, leverage can account for up to 80-90% of the capital required for an acquisition, often at very low interest rates. Is this trend similar in other Asian countries?
I believe that the problem of small business succession planning across Asia will become so large that multiple models will flourish. This is a time of rapid development as different models are being attempted. Small cap PE, venture backed acquisition vehicles and accelerators will all have their success alongside the traditional Search model. Clearly, I am a believer in Search but I see many models being successful.
I think that Japan is unique in the debt funding model both in terms of % of transaction value and interest rate. I am working hard with my Searchers to ensure adequate levels of debt funding in each market but it will not reach the same stage as Japan any time soon. We will follow the model of Europe and the USA, targeting around 50% leverage. One specific aspect is that, in addition to traditional bank support, we see many family offices showing strong interest in providing private credit to leverage these deals.
7/ 2024 marks a significant year in which traditional SFs are pioneering in markets such as Singapore, Taiwan, Malaysia, and India. Do you think we will need to wait 2-3 years to assess their success in the search phase before witnessing significant market growth? What are your expectations for the future? Do you see the APAC region as the next booming SF market?
For Search to be successful you need Searchers, companies to buy and capital to fund the system. Momentum on Searchers in Asia will not require the success of the original group as there is already pent-up interest and MBA programs are strongly pushing the model. As mentioned, the problem for small business succession will only grow. There will not be a shortage of companies to buy, given that the retirement window for the Asian Tigers has already begun. If capital doesn’t wait for the success of the first wave, then the momentum going. That is a key role Lighthaven will support.
