What I find most rewarding about our strategy is that no one succeeds unless the entire pie grows and everyone gets their fair share.  When we first meet, many business owners have sacrificed both time and financial security.  Seeing the impact of success on our entrepreneurs is very satisfying.



Pete Chung is Head of the Morgan Stanley Expansion Platform and a Managing Director of Morgan Stanley based in San Francisco. Mr. Chung joined Morgan Stanley in 1993 in the Technology Corporate Finance Department and helped open Morgan Stanley’s first Silicon Valley office in Menlo Park in 1994. In addition, Mr. Chung previously co-founded Morgan Stanley Technology Ventures, the technology focused investment effort of Morgan Stanley Princes Gate, and has invested in technology opportunities on behalf of MSPI, the proprietary investment arm of Morgan Stanley. Over his 27-year career at Morgan Stanley, Mr. Chung has invested in over 30 private companies. Mr. Chung is a graduate of Dartmouth College and the Stanford Graduate School of Business.

Q&A with Pete

As head of Morgan Stanley Expansion Capital, what is your investment focus?

We are interested in later stage, private growth businesses, and look to provide between $10-$25 million in either equity or credit financing. We mostly invest in technology and healthcare companies, but we investigate all growth sectors. While the appropriate “stage” of business is highly bespoke to the business model and industry, the companies we’ve invested in recently have median trailing 12-months’ revenue of just under $30 million.

Does a company need to be profitable before you will consider it?

No. However, we typically look for situations where we expect to be the last required private financing prior to either profitability or an exit. Our investment is often the capital that helps companies scale through to consistent cash flow generation.  

What are you looking for the first time you meet with a management team regarding a potential investment?

Every situation is unique and we try very hard not to pre-judge. I go into an initial meeting hoping to find answers to three broad questions. Why do these individuals know more than others about a specific problem? Which customers will find the most value in their solution? What is their “secret sauce", in other words, what method of business or technical edge do they have that is critical to success but not necessarily obvious?

Executives need a cogent strategy. I look for breaks in the logic. Strategic inconsistencies should be impossible to uncover in a one-hour meeting. While there are countless other markers to track, the key is to keep an open mind. Most entrepreneurs I meet have advanced degrees and have spent much more time thinking about their businesses. It’s always humbling to remember that fact prior to a meeting.

In your view, what are the behaviors that define a high-quality management team?

Over the years, we have increasingly emphasized capital efficiency as an indication of investment fit.  We find that limited access to capital often spurs innovation.  Entrepreneurs and managers that prevail despite tight finances often find ways to succeed that might not be obvious to those with ample access to cash. 

Since we’re minority partners, our relationship with management must be grounded in trust. We also like managers who look for truth in data and modify tactics based upon data. Good data is the essential ingredient to good strategy. Without it, everyone is basically guessing what might work and even worse, guessing why something failed. You can build some very strong businesses with a management team grounded in trust and data.  

What do you think is the most valuable asset Morgan Stanley brings to the table, besides capital?

Every Expansion Capital senior investor has spent a full career at Morgan Stanley, so we understand how the broader franchise can benefit even the smallest of our private companies. Also, since many of our companies are too young to have developed much brand equity with customers, business partners, or prospective employees, we consistently hear that an investment from Morgan Stanley Expansion Capital provides a globally recognized stamp of quality and professionalism.   

What is it about your job that you find most rewarding, and why?

What I find rewarding about our strategy is that no one succeeds unless the entire pie grows and everyone gets their fair share. When your investment strategy targets two- to five-year holding periods, you get the chance to build incredibly close relationships with entrepreneurial teams. The vast majority of business owners that we work with have sacrificed both time and financial security and have a broad spectrum of professional and personal concerns. Seeing the impact and benefit that success has on our entrepreneurs is very gratifying. 

Pete is a member of the Morgan Stanley Expansion Capital

As of 9/30/2017.

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