Michael Chu: Cross-Sector Skills

Social Enterprise Newsletter, Spring 2002

Many people draw distinct lines between the management skills needed in for-profit businesses and those required in the nonprofit sector. Michael Chu (MBA '76) isn't one of them. Chu has successfully navigated both arenas—as a partner in a Wall Street private equity firm and as a CEO of a pioneering nonprofit in the area of microfinance. "The ability to understand a problem, to think of ways to address it, to inspire a team to tackle it, and to make sure you have the proper resources is crucial in any management position," says the affable Chu. "The approach is absolutely the same whether you are doing a billion dollar leveraged buyout in New York or loaning five hundred dollars to an entrepreneur in Latin America."

Chu never would have predicted the unusual path that brought him to where he is today—a founding partner of Pegasus Venture Capital, a start-up that invests in high-growth enterprises in Latin America. When Chu graduated from Dartmouth in 1968, the last thing he wanted to do was go into business. In a turbulent year—the Vietnam War was raging, Martin Luther King, Jr., had recently been assassinated—Chu decided to work for social and political change in Uruguay, the country where he'd grown up after his parents left their native China.

At a book party organized by the American embassy in Montevideo, Chu met John Scott, an American businessman who was also interested in social justice. When Scott, the country manager for a U.S. consumer products multinational, invited Chu to come work for him so that he could "see the beast from the inside," a skeptical Chu accepted. "To my great surprise," he says now with a grin, "I learned that business wasn't evil incarnate: It could be very creative, and it was much more than gray suits and white shirts."

Not only did Chu enjoy the work, he also had a knack for it, and so he applied to HBS. Upon earning an MBA with high distinction as a Baker Scholar in 1976, he set out for a traditional business career—consultant at The Boston Consulting Group, CFO of City Investing International, and CFO of PACE Industries. In 1989, he joined Kohlberg Kravis Roberts & Co., where he became a limited partner and helped manage an investment portfolio of companies with combined annual revenues of over $60 billion.

While his entire career had been in the private sector, Chu had not lost sight of his original motivations. In the early 1990s, his old friend John Scott told him about a nonprofit in the Boston area that was successfully reducing poverty and unemployment by providing small, short-term loans to entrepreneurs in Latin America. Chu immediately understood the potential impact of ACCION International and joined its board. By doling out small loans that averaged $575 to people with the motivation and skills to run small businesses—selling fruit, repairing shoes, for example—ACCION was helping tens of thousands of microenterprises to grow. In 1994, Chu became president and CEO of ACCION. He says simply, "I knew that my skills might really make a difference."

Chu thoroughly enjoyed the challenges and successes he experienced throughout his six years at the helm of ACCION, during which time he expanded programs and firmly inserted microlending into the financial sectors of Latin America. "The people I worked with were first-class professionals," Chu notes. As a successful nonprofit CEO with a business background, Chu was often asked to speak about governance issues in nonprofits, and he frequently advised avoiding entrenchment. "One day," he says, shaking his head, "it dawned on me that I am not exempt from these truths. I knew that if I really cared, I should implement the rhetoric."

In 2000, he resigned from ACCION, staying on as a board member, and formed Pegasus Venture Capital, a VC firm that now has offices in Boston, Buenos Aires, and São Paulo. "There are lots of businesses in Latin America that could grow very fast if they had access to capital and people with business scars," says Chu, who, with Pegasus, provides both. At Pegasus, Chu proudly states, "we are looking for outstanding returns," yet the overarching goal is helping the region develop by linking it to established capital markets.

Chu sees the luxury of choice as the greatest benefit of earning a Harvard MBA. "You can choose a career that is financially rewarding or spiritually satisfying, or you can switch back and forth," he says, adding that the rules are the same in both realms. "You shouldn't take off your MBA head when you go to work for a nonprofit. It's even more important not to tolerate bad organization, waste, and inefficiency in social enterprises. On Wall Street, the stakes are earnings per share, but in nonprofits, lives are at stake."