Startups still new to Vietnam

The community involved in developing startups in Vietnam has been growing significantly over the last few years. At the end of 2018, Vietnam had about 3,000 startups. Now is the time to screen good startups for further investment and development.

Shark Tank Television Series of Vietnam.

Shark Tank Television Series of Vietnam.

Not many high quality startups

At a meeting with young leaders in Ho Chi Minh City, Le Hanh, Production Manager of Shark Tank Television Series of Vietnam, said that the production team receives thousands of profiles of startups during every season. From among these, 500 startups are chosen to go into the next round. But by the end, only 50 startups are selected to present their product on the TV show, which has attendance of several investment sharks for raising capital.

Why is the number of failed profiles so high?

According to Le Hanh, the main reason is most projects are not able to deliver the new products and services or lack a breakthrough in technologies. Also, most business models which won investment funds in first season are repeated in the second and third seasons as well.

“With that mindset, young entrepreneurs find it hard to succeed. The startups should have new methods or new solutions to resolve problems”, said Le Hanh.

So far, besides Shark Tank, there have been several different start-up contests and competitions which attract the attention of many young leaders, one of which is Startup Wheel, a startup competition held by BSSC-Business Startup Support Center.

2019 is the seventh year of this program and each year the competition attracts about 1,000 startups. The repetition of a business idea is normal, however, copying of solutions and methods to resolve the same social issues is not a good practice in the startup community.

Five years ago, when startups were quite new to the market, new ideas were easily accepted. Now, it is different. The idea is not everything. The solution to implement that idea to meet a demand of consumers or to resolve an issue of society is much more important.

A big proportion of attendees in most forums or conferences have a question, “I have an idea, but I do not have capital and experience to implement it. Should I register to protect my idea now?” or “I have an idea, but I do not know where to start, or where to find investors to implement my idea”. These questions show that many young people are not serious or do not deeply understand about startups.

Investors need careful consideration

The development of startups in Vietnam as well as the growth of potential startups has attracted many domestic and foreign venture funds. The investment amount which flows into startups has increased significantly over the last three years.

In 2018, startups received an investment of USD 889mn which was triple of the 2017 amount and five folds of the 2016 investment flow.

Furthermore, in the Startup Forum held in June 2019, many startups received some investment commitments from investors.

The startup business is being encouraged to develop but it is not a trend for anyone with a sudden flash idea. Some surveys show that 90% of startups have failed. Although the number of startups which join the competition is very high, the number of high-quality and successful startups are limited.
DT&H, an investment fund of Korea decided to invest in Propzy the amount of USD 1.4mn in Q2/2019, or VinaCapital committed to coordinate with two other Korean funds to invest USD 100mn in Vietnamese startups in next three years.

The Ministry of Planning and Investment and Golden Gate Ventures also signed a memo for cooperation to develop the community of startups in Vietnam. The Vietnam Representative of EuroCham also informed that an EU fund has been planned to invest EUR 3bn in startups.

This is good news for Vietnamese startups. However, as the number of high-quality startups are very small, most investors have to consider seriously and carefully before making investment decisions.

According to Dzung Nguyen, Investment Director of Cyber Agent Vietnam-Thailand, the investment source now is much more difficult than in the past. For example, if his fund decides to invest in a startup today, tomorrow another investor could be willing to invest in that particular startup with an amount which is 1.5 times of his investment fund. This requires Dzung Nguyen to consider more carefully to decide whether they should continue to invest.

However, not only investors need to consider more, the startups themselves also have to think twice. If the startups are good enough and have potential, there will be huge investment offers.

According to some experts, the startups should be careful when choosing long term partners. Startups should not just look into the pockets of the investors, they should care more about real support from investors for the operation and development of the startup.

In Vietnam, there have been many startups which were successful in raising capital from investors, but soon after that they had to leave their startup. There are also other startups which won the required capital in the first round but failed in the next rounds, hence, these startups have struggled to develop their business further.

Thanh Lam

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