In the startup ecosystem, I contributed with an article 4 years ago about why Vietnamese startups aren't going global, you can take a look at it by clicking here.

In a nutshell, I gave 3 reasons that are more or less valid today. Funding has improved with Vietnam receiving more capital in the past years, that's a good thing but there's another thing which isn't so good. The mindset.

Today, I'm giving out my personal reflection on 3 aspects of VC funding I think is wrong in Vietnam.

Expectations

When a fund is set up, they come with the expectations to make a large return by investing several checks hoping each startup to have the potential to provide a great return, I won't dare to write the word unicorn ( oops... )

There's nothing wrong about it. Each startup will try to solve a problem with a large market size and hopefully execute things properly. The founder can be charismatic or not as long as he has some integrity and move forward with it.

The problem is Vietnam doesn't have the appropriate market size yet to generate 1 unicorn every week. Yet news funds are set up to reach such targets. Recently you can see that Do Ventures and Touchstone and certainly more to come with that capital. I believe it will be really tough for them.

Bottom line, the model is flawed and reducing the expectations to generate an average 5 to 10 times return over a period of time under 8 years would be better.

Market

In South East Asia or Vietnam, exits happen most of the time through acquisitions. There's no IPO by Vietnamese startups on the NASDAQ ( things might change though ).

The recent acquisition of Base by the company FPT in Vietnam shows that the market is not like in the US where more money flows. With an investment of 1.7M$US from AlphaJWC, 500 Startups, Beenext and VIISA in 2017, Base was acquired at an undisclosed amount by FPT.

From several discussions I could have about this acquisition, VCs haven't made a 100x return. It's mostly the founder cashing out after years of hard work ( kudos to the founder ) and the VCs ends up now with little visibility on an exit.

Applying a VC model from the US is fundamentally wrong. The potential is not the same. Most Vietnamese startups today still don't have the ability to go global and miss the management skills to hire the best minds to materialize their vision.

Bottom line, there's no need to talk about unicorns and it would be better to focus on building a great tech ecosystem by producing a large volume of successful exits through acquisitions domestically or regionally with a valuation ranging from 10 to 100 million dollars.

Burn rate

In the past 4 years, when I was running around the region, investors keep repeating about focusing on the top line and worry less about the bottom line. Capital is abundant and great startups with great traction with a potential to be regional is scarce.

That's actually true. There are many funds and many more are coming. The problem is more about the actual access to capital. WisePass grew 100 times from 2016 to 2018 and many investors have passed on us. Personally I think that Softbank has made many funds believe in the power of burning a lot to succeed and it has become a mantra. It had dire consequences for many startups backed by Softbank, the most notable one is WeWork.

What I regret the most during that time is my lack of financial discipline as the company could have turned profitable and cash flow positive in 2018 already. I kept investing more of my time and energy to push further to see how bigger revenue could be.

Like many startups, we tend to rely on VC funding and closing a round is not a guarantee. They can decide anytime to back out for any reason. That's ok. That also means that a founder needs to simply think that such VC financing is unreliable and therefore jeopardize the startup trajectory. Some up and coming startups in Vietnam last year went to dust because they couldn't keep raising like LeFlair, an e-commerce platform that copied Veepee.

Bottom line, I personally decided to set WisePass towards a path to profitability before taking any financing from any VC. The risk is lower, the growth can be more sustainable and I don't have the stress of looking at the runway.

Raising more capital is great to secure the growth and financial viability of the company. Personally, I focus first on getting customers and improving the product first. Financially, when the EBITDA is positive and over 5 digits, that's when it would be a great time to talk about VC funding again and discuss about going global.