Vietnamese startups struggle to seek capital

Thach Le Anh, the co-founder of the Vietnam Innovative Startup Accelerator (VIISA), said one of the reasons is the modest number of venture funds in Vietnam.

According to TechInAsia, in 2016, startups in South East Asia attracted total investment capital of US$2.6 billion.

While the Vietnamese startup community called for less than US$100 million, the figures were US$1.4 billion for Singapore and US$967 million for Indonesia.

Meanwhile, the Ministry of Science & Technology (MST) gave a brighter picture, reporting that the number of startups and the investment scale are on the rise.

There were only 50 capital calls in 2016 which raised US$205 million worth of funds, while the figures rose to 92 and US$291 million, respectively, in 2017. By 2017, Vietnam had 3,000 startups.

In HCM City, a report showed that 760 businesses started up and developed products in the last two years, mostly operating in the fields of ICT, agriculture and education.

Most of the startups are under one year old and they are still in the early development stage. Sixty percent of startups have initial investment capital of less than VND1 billion, a modest amount of capital.

According to the HCM City Science & Technology Department, many startups have to seek foreign capital. An unofficial survey by some investors found that the number of startups receiving foreign money accounts for 60%.

Accessing investment capital is the biggest problem for startups. It is nearly impossible for them to get bank loans. Many startups left the market with big debts just after short time of operation.

A member of the organization board of the Vietnam Silicon Valley (VSV) Demo Day 2016 commented that nearly all the startups participating in the event did not succeed. 

This means that having good business ideas are not enough to develop a business, and that the State needs to build up an ecosystem strong enough to support businesses.

Regarding capital sources for startups, consultants named venture funds, angel investors and private investors. 

According to the representative of Big Basin Capital, in general, venture funds choose startups with relatively large scale and want to get involved in the businesses’ operation.

Therefore, while calling for capital from these sources, startups have to prove the potential of their businesses.

In fact, there are many examples of startups gaining big successes overseas though they could not call for big capital. Some startups used capital borrowed from family members to conduct research and development.