S13E16: Turning a Private Equity fund into an impact investment firm, with Kevin Chin (CEO, Arowana)

Kevin Chin
You know, in essence, you are challenging and disrupting people's core values. And, you know, this this is not a a judgmental statement. It's you know, everyone it's it's a free world. Everyone could choose whatever values they they want. It's just that we decided to go down this path. And that did, you know, lead to a turbulence, and that did lead to significant changes at all levels in our organization, and it was, you're very painful.

Richard Medcalf
Welcome to the Impact Multiplier CEO podcast. I'm Richard Medcalfe, founder of X Xquadrant, and my mission is to help the world's top CEOs and entrepreneurs shift from incremental to exponential progress and create a huge positive impact on our world. Now that requires you to reinvent yourself and transform your business. So if you're ready to play a bigger game than ever before, I invite you to join us and become an impact multiplier CEO.

Today, I speak with Kevin Chin. He's the CEO of Arowana. That was a private equity business, that he founded and ran very finance focus for 10 years before realizing that there was a bigger impact that he could make. He transitioned the business to becoming a B Corp focused on a triple bottom line of planet, people, and profits. And he's built 1 of the leading impact investment groups in just less than 5 years, as well as one of the highest ranking b corps. in the world. He's also been recognized as one of the real leaders impact award winners. What I enjoyed, speaking with Kevin is his real commitment to building out impact across the world, across generations, and a commitment to raise up leaders who are also willing to go on that journey with him. and scale and create and Rivendell multiply their impact further. So in this discussion, we actually get into that whole transition from being a private equity firm to an impact business, the obstacles that he had to overcome, internally and externally. as well as what his next level looks like. So I'm sure you're gonna enjoy this fascinating conversation with Kevin Chip. Kevin, welcome to the show.

Kevin Chin
Hi, Richard. Great to, great to be on, and, thanks thanks for the invite.

Richard Medcalf
Yeah. You're welcome. So I'm looking forward to speaking with you today, I know that, in your past, you have had to turn around, software companies in a really difficult situation. Right? You only have 6 weeks of cash left. You turned it into a global leader. you you sold it to Oracle. And then you went ahead and, built a business called Arowana, which has become, I believe, one of the world's highest ranking B corps and, a top impact investment group. So as you know, I'm all about impacts as even the title of the podcast. So let's start there. what led you to build that business? And by a few years later, you know, where are you at in terms of the impact that you're making?

Kevin Chin
Yeah. So I I guess similar to a lot of people who've, pivoted to to impact, if you will, I had a sort of family moments many years ago where my my oldest niece asked me what I did and then asked me why I did it. And, you know, without going to the full details of that, that that really challenged me. And, so at that juncture, I started to look for, you know, a broader purpose for marijuana rather than just, you know, making money. And, whilst I was at a a conference in Miami, this was in 2016, I I stumbled into a session, which was all about b corps and, was very excited and and came back and said to the team, team of marijuana. Hey. We're we're gonna do this. We're gonna become a vehicle. Everyone kinda looked at me strange. but fast forward to today, it's one of the best things that if not the best thing we've done. And really what, what we've committed to in terms of becoming a vehicle is a triple bottom line of not just profit, but also people and planet.

Richard Medcalf
Okay. So Arowana was started off as a regular investment group. Is that right? And then you decided that you wanted to really focus on the impact side.

Kevin Chin
Yeah. So we started, in 2007 as, you know, private equity, funds type of business. And in 2016, late 2016, just on the just on the cusp of our 10 year anniversary was when when I decided, we're gonna we're gonna choose direction, and we're gonna embrace, a bigger and broader purpose and and an impact orientation.

Richard Medcalf
So what was that purpose? How did you come up with that?

Kevin Chin
What what I what I really like about the be called purpose, adventure really is is it's elegance where it talks about the triple bottom line, and the triple bottom line is people, planet, and profit And, you know, that there's there's a lot of conjecture as to whether by embracing such a purpose, you're gonna be diluting your profits as in your investment returns will reduce. That's certainly not the case. And, you know, with a couple of our businesses now, I would argue that, having the broader purpose has actually led to better investment returns than if we were just solely focused on, you know, monetary objectives.

Richard Medcalf
So have you captured the purpose? Is there a specific statement that you have in terms of, like, the kind of impact you wanna make on the planet or on people? is quite broad, right, when you keep it at those categories.

Kevin Chin
Yeah. So we we have measurement tools, within the kid back. And, we, you know, we adopt that for our wire itself as well as all the companies that we we have in the stable. and that's that is largely modeled on the B impact assessment, toolkit that's, vehicle provides and and push it through, you know, when when you wanna when you wanna become a big corp and and do it when you're going through a application process. So as a as a B Corp, you have to research a 5 or 3 years. And by sort of elevator, response to people who are. So what what is what is being called in practice? You know, what does it involve? I say to them is that it's, in essence, ISO 9001 of steroids because not only are you signing up to, you know, having great systems, processes, governance, etcetera, as as you do with ISO. but you're also attesting to a purpose architecture for lack of medicine, and that's gonna be real. It's it it can't be you know, a motherhood statement with nothing behind it. It can't be a pledge.

Richard Medcalf
So, okay, so you started to measure impact. You started to get serious about this. What was the reaction? I mean, you're taking these, you know, these these hardened private equity fund managers or or investors, and you're telling them that now, you know, it's not just about the money anymore. how do they react to that? You know, what was the whole journey that you went on? It sounds like it could be quite a big thing after 10 years of of operating in a certain way.

Kevin Chin
It's a great question, and and I noticed you're you're smiling as you ask that because, you've you've hit on, you know, the the the toughest elements of that transition. where, you know, in essence, you are challenging and disrupting people's core values. And, you know, this this is not a a judgmental statement. It's, you know, everyone. It's it's a free world. Everyone could choose whatever values they they want. It's just that we decided to go down this path. And that did, you know, lead to a turbulence, and that did lead to significant changes at all levels in our organization, and it was painful. Very painful. And, we had to overcome a a a lot of internal strife, if you will, to to get through it. and, you know, culturally, we were not in a greater place when when we did this, but I I would say, you know, 5 years, 6 years after the fact, culturally, and and we're in more places around the world now, with more more lines, than than we've ever been. So it's been worth it, but very difficult at the time.

Richard Medcalf
Yeah. So if you're giving advice to somebody who wanted to make a similar transition, like, what are the big pitfalls, and what specifically would you recommend they do, or what did you do?

Kevin Chin
So I would say the the biggest learning for us or or rather, you know, the thing we underestimated if if you like going in was we we didn't expect it to be as tough as it was to, you know, to to certify for being vocal. I mean, for us, it took almost a year and a half to get certified. And, you know, we had to improve a lot of things. We had to change up a lot of things. and, you know, but one of one of the aspects about B Corp, which is, I think, not terribly well understood is it's an attestation to give up the shareholder primacy objective that is the key driver for for for many organizations. and this stems back from, you know, Milton Friedman 40 plus years ago. and that's that's a legal change within the constitution and memorandum and and articles. So That can be very difficult. It's your, you know, for example, enlist company. And so you've gotta be ready to battle that with your shareholders or sell your shareholders, perhaps. And then you've gotta have a very clear internal and external communications plan And we probably were a little bit naive, you know, and and didn't do that as well as we could have in in Iceland.

Richard Medcalf
Did you actually have to battle external stakeholder shareholders more, or was it internal, employees, or was it both?

Kevin Chin
I would say it was more internal. It's more internal. so as far as our external shareholders and stakeholders, we're concerned, And perhaps it was just a a a lack of standing on on that part. but, we were able to, you know, get through the voting of that, you know, I think it was more than 95% voted in favor. So that wasn't an issue. I would say that you have the other thing to be prepared for is that there are, you know, no sacred cows for lack of better term where you decide to do this, and you've gotta be ready for profound change. As as I mentioned, it's it's it's not just a pledge.

Richard Medcalf
Yeah. So now it's just gonna before we go on to the internal side, the external. So it sounds like these might be, Turkey's voting for Christmas. if you got your shareholders who are voting to remove their primacy, shall we say? So why why did they do that? Was it because they too wanted just to make bigger impact? Was it that they kind of believe actually long term might even be better off? Or, you know, what was going on for them, would you say?

Kevin Chin
Yeah. It's a good question, Richard. I I would say it was the latter as in. They believe that in the long term, It's it's better. and, you know, the the example I I always give, two people who ask you know, why why we've done it and why is it a benefit in the long term is just the example of the Boeing 737 Max where everyone, I think, knows that case study now where we're focused on short term profits and, you know, trying to compete led to shortcuts that, you know, had profound implications for for Boeing even today. So that is never a situation. You know, we would wanna end up in. so I think, you know, our shareholders as as a as a cohort were sympathetic, to that and sophisticated enough to to appreciate that as well.

Richard Medcalf
Okay. So, yeah, so let's let's talk about the internal side, the employees, mentioned that was actually the source of the biggest resistance. So what's going on there? You, you know, you might think why employers might would love to have more of a sense of purpose of mission. That's what we're all told, right, that that's what everybody wants. And yet, when you were trying to implement that, you got pushed back. So, again, what was going on there? And how did you actually win them over?

Kevin Chin
So I think with that, It just so happens we were doing this at at the cusp or the inflection points of when the impacts really started to take off. and when Beagle was just starting to get traction, So at the time we were doing it, so they'd be caught. There were about 2500 big corps in the world. Now there are more than 7000, I believe. So it's been growing very quickly, and the world was really just starting to embrace the impact, and, you know, it's really accelerated from from there. So the resistance I guess, really came from, you know, me coming back from another conference. He's given. He's got another crazy idea. They want to roll out, and I want as big corp anyway. No one's heard of it and why are we wasting time on this, to when there was unpacked further. And, you know, I think some folks realize that hang on a

second. Does this mean this is sacrificing foot? profits and, you know, money for, along its goal and and and sharing sharing the the objectives of the organization with all stakeholders rather than shareholders and and removing that, you know, focus on money, in and of itself. that's that was the trigger, I think, for, you know, it it's challenging. Someone's core values, as as I mentioned, 4 that, that that causes, you know, that that that turbulence. so in terms of overcoming that resistance, honestly, we we didn't. People just left, and, for entirely, you know, we battled people throwing stones back at the organization, but, you know, that that happens and we're not we're not unique or alone in that regards. but fast forward to today, what what I've definitely noticed in the last 3 years is we get a lot more companies that approach us and say, hey. You know, we see what you're doing. We've been approached by this group or this violence, but we'd preferred to, you know, we'd prefer to, a partner with you guys, and every every week, I get about half a dozen to a dozen messages in my my LinkedIn. So love your purpose. can't see if there's opportunities to join, you know, join the firm. So I I think you know, it's only been the last 3 years probably that, impacts really accelerated. Whereas when we did this 5, 6 years ago, was we're just on the cusp.

Richard Medcalf
I hope you're enjoying this conversation. This is just a quick interlude to remind you that my book making time for strategy is now available. If you want to be less busy and more successful, I highly recommend that you check it out. Why not head over to making time for strategy.com to find out the details. Now back to the conversation.

Well, that's a great that's transition. I'd love to talk about the future. This is called the impact multiplier, CEO, podcast. So how would you love the business to multiply its impact, over the over the coming years. Right? What would what would breakthrough success, even where you are now, what would be a whole new level of success and impact for the business.

Kevin Chin
Yeah. Yeah. That's a really good question, Richard. So I think there's 33 elements to that. So num number 1 would be picking the right sectors to invest in. And those sectors would be conducive to delivering impacts across that triple bottom line. You know, people planet a profit. And then what you can do is is segment or unpack people planet profits with reference to the UNSTG Goals, the sustainable development goals of all 17 of them. So we're focused on certain sectors. and and that's that's a big change. Well, that's a material change for marijuana, whereas, you know, when we first started in 2007, We were primarily driven by financial metrics of an investment and whether it would make us money in the right returns or not. Whereas now it's, you know, how do we measure not just the, you know, the the the technical investment returns, but the impact returns to people on the planet. So the sectors that we're involved in include education, electric vehicles, plastic recycling, to name some examples. So element 1 is picking the right sectors where we can have and impacts across those dimensions and a multiplied impact. element number 2 is Building the next generation of C suite leaders, founders, entrepreneurs, who truly embrace impact, and and it's not just, you know, a fashionable thing to say, and it's not just, you know, impact washing for lack of return. but it's it's all to what they wanna do. and what they want to look back on and say they've achieved and be proud of. So one thing that marijuana has done is, we've launched an entrepreneur in residents program. designed to build our, you know, our own, it's like an in house academy, if you will, to grow our own CEOs, that are impact focus and that can help, you know, run a business effectively for impacts. And the 3rd element is also picking markets as in geographic markets around the world where we can make the most impact. and, you know, that tends to be in more emerging markets. although the world is is is, you know, is is is kind of narrowing in terms of that that gap, And in that regard, you know, Southeast Asia, as well as the Middle East, GCC, and and surrounding markets. for areas and focus for us, you know, large populations, lots of people, lots of issues with negative impacts on the planet. and lots of opportunities to solve those problems as well.

Richard Medcalf
Yeah. So I love it. I think it's really clear. You've got that kind of leadership angle. You've got the kind of sector focus, the geographic focus. Let's imagine you were, you know, ninety years old telling your great grandchildren about the ultimate impact you had made with all of this. Would you love to tell them the most?

Kevin Chin
I was actually just having this conversation with, someone who just joined our electric vehicle business that what what I didn't wanna end up at night to see as old if, you know, if I'm lucky enough to get there. just to be able to to look back and say and think that, okay, I've made all this money. I bought all these properties. go on these trips, and I eat all this food. It just seems shallow in in a sense. And and again, it's not a value judgment, you know, uh-uh, it it it's just it's personal for everyone, right, and and I think it would, for me, anyway, not that I think I know it would be a lot more fun, a lot more satisfying to be able to say to a family, you know, the kids that, hey. This is this is what we built. You know, we We electrified these vehicles, which reduced emissions, which, then helped to improve air quality in in the Philippines, for example. And and you can see these things running around, and You know, that's that's that that was a fun project. It was a difficult project, but we made it work. And To me, that would be the sense of pride, if you will, as as a ninety year old, to be able to share something tangible like that. and not just say, got this house, that house, and I've been here, been there. I've been in this and and and, you know, beyond just a a sort of a a a consumer mindset, if you like.

Richard Medcalf
Yeah. Yeah. I love that. the, yeah, at some point, the money isn't gonna make so much of a difference, right, and and the legacy becomes what's sort of about, I think. I guess, Kevin, the question I have ready for you at this point is is what I call the stretch. Right? So how do you what might you need to shift in in how you lead, right, how you show up? What's going on for you? in order to speed them off by your impact because, obviously, you know, you've got a great, I'm gonna call it a great default future. Right? It's looking good. Things are going well. And so there's you could just kind of continue to do what you do, and things are probably gonna incrementally grow. What fascinates me is the exponential, right, or the breakthrough. and I always believe that that comes from a personal level. Right? So there's pass a shift that we might need to make in inside of us that's gonna release new things in our business and in our world. So I'm wondering what comes to mind for you, you know, how might you, what might you need to kind of stretch on, what muscles might you need to build if you wanna modify your impact even more.

Kevin Chin
I'm I'm a I'm I'm a big fan of, Selimmy Smyle and Pete Diamond is who espouse, you know, abundance and you know, that this age forwards people with tools to tenants themselves and tenants their businesses and you know, ever shorter time frames and with with less and less resources. so I I think for me, It would be two things that I I need to constantly improve on and remind myself on is a I'm naturally a person that has extremely high attention to detail, perhaps borderline OCD. So what he would say definitely OCD. And sometimes, conscious that that can be a, you know, limiting factor if if I if I'm just completely over the top on something and and it slows things down and or, you know, it effectively disempowers, you know, someone by virtue of that. So it's it's finding that balance of having quality, you know, and I'm always a fan of, you know, having 1st class outputs, in everything we we do, but conscious that there has to be enough rope for team members to, you know, to do what they do well. And and, and we've got great team members and they they need to have that capacity capability, to to to to execute. So that that would be one. And then secondly, I'm in I'm in an age now where I'm conscious that it it's easy to slide into dogma that, you know, you've been around the world, blown enough. You've seen many things, you've experienced many things, and nothing's new, per se, or you or I, you know, I slip into this mindset that nothing's new. So that I'm a very conscious of that, you know, staying mentally agile and flexible is is important. So I, you know, I've I've nominated a couple of people in our team, you know, but the 20 something year old's to be my next generation coaches for lack better term, to stay, you know, to stay mentally agile and not sort of slip into this, you know, that won't work because, you know, because you you just get to an age where you've experienced so much that, you think, okay, I've seen it all.

Richard Medcalf
Yeah. Thank you for sharing that. I think it's great. It's been a really interesting conversation, Kevin, because, here, we'll just be talking about on the business side. We'll key areas to focus on, the the geography, the the sectors, the leadership development, and then we've also, you know, just just now gone deep in terms of, yeah, it's easy when you're when it seems that people are admiring you. You know, you you built something great. investing in all these companies, you're getting all these inbound interest. It could be easy to be satisfied with that and say, you know what I'm gonna settle, which is okay. We can just keep doing what we're doing. But I'm hearing in you that sense of, well, no, let's still challenge myself, make sure I don't become that kind of unassailable, especially in my ways kind of leader who feels he knows it all. So I think that kind of willingness to reinvent, is perhaps something which is actually I mean, it's already present in you, right, is, you know, well, actually, you're not saying, oh, I I don't. I'm in dogma. It's just that you realize that that could be a trap. and I think that's really a a genius move. So thank you for this conversation. I think what I've really enjoyed about it is as well as this part we've just talked about Are you being clear that that transition from a very financially focused business to a purpose driven business, a triple bottom line business, you know, is doable. it requires a lot of explanation and and change management and selling of the idea and explaining it But even in the financial sector, which you would imagine is some sector that might even be more resistant, yeah, it has to be impossible when you're looking back, he's you said it was the best thing that could have happened. and it's increased your return. So I think it's just a great, positive reminder to people who are perhaps, not yet in haven't yet fully gone in or in on impact. That actually, it's possible. And you can run it as a project, and you can lead your stakeholders, and you can sell it to your shareholders and and everything else and make it happen. So thank you for the case study. It's been great, listening to that. No problem. last question, really. last question, Kevin. So if you wanna find out about more about you and about about the business, you know, where do they go to do that?

Kevin Chin
So probably the, you know, our website, so it would be would be the the fastest and easiest. So let's arowanaco.com. that's a r o w a n a c o dot com. There's also a book I've written called Hyper Turnaround, which kind of was the, the journey of a software business. this is going back almost 20 years ago now. that we I was part of the team that, you know, turned that around, from 6 weeks of cash to survive to become a global leader in its field, and and then it was acquired by by Oracle. interestingly, that that business is in natural language inferencing, which is all the rage now with generative AI. and, I think worth infinitely more if we kept kept on to it. but, yeah, that's the those are probably the 22 main sources.

Richard Medcalf
Yeah. Perfect. Well, Kevin, thanks so much for the conversation. I've really enjoyed it. I look forward to following your journey as, Aruana continues to modify its impact.

Kevin Chin
Pleasure, Richard. Thanks for having me on and, keep up the great work on on your podcast too.

Richard Medcalf
Thank you. Well, that's a wrap.

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