Dear Vietnamese startups: stop asking for money, learn to solve problems

I meet a lot of startups in Vietnam. Without fail, if the startup is younger than one year old, the founder will seek investors. Some startups that I’ve talked to have a tiny user-base and little traction but they’re still begging for money. Ironically, traction is usually the first thing investors – Vietnamese or foreign – ask about when they’re looking at whether to invest in a startup.

Unfortunately, founders are much more focused on getting the funding to survive instead of building the user-base and making sure they’ve created real value that leads to traction. One startup I’ve met didn’t even have a product yet and wanted funding. Is it because all of these founders are reading TechCrunch too much and dreaming about Silicon Valley where money seems to grow on trees? Reality check: investors don’t fund ideas. They fund good teams that can build products and companies.

I introduced one startup, which was in its very early beta stage, to a local mentor. It was clear the startup needed advice on its business model and product, but all the founder wanted was the mentor to introduce him to some investors.

In a related point, at a recent event, Philip Mai, a mentor and contestant at DEMO ASEAN and the mLab hackathons, made the point that even when startups are given free advice, they don’t take it. “I offer all these free classes and workshops, but only a select few people ever attend.”

All this seems to lead to one overarching theme: Vietnamese founders are more obsessed with money than product. They’re more obsessed with investment than users.

Even when the money comes, it’s difficult

But the problem doesn’t stop there. Founders often don’t know how to view and use equity. This is a common complaint I hear from the three big investors in Vietnam: IDG, CyberAgent Ventures, and DFJ VinaCapital. So even though startups want funding, when it comes down to the moment to sign the paperwork, the founders don’t understand equity. This chart from Funders and Founders says it well: “100 percent of nothing is a lot less than 17 percent of a big company.” In other words, since founders in Vietnam don’t understand equity, they’re missing out on huge opportunities to take their company to the next level.

On top of this, getting foreign investment into the country is difficult. When Guy Kawasaki, tech author and investor from Silicon Valley, came to Vietnam a few months ago, one entrepreneur asked him, “Would you invest in startups in Vietnam?” Guy just said no, citing that the main reason is that it is too legally complicated. Singaporean investors in this past year have had a renewed interest in Vietnam but getting that money to startups is difficult. Foreign entities have to jump over too many legal hurdles and even local investors face considerable legal fees to invest in startups.

Altogether, this makes for a particularly insulated and walled-off market for investors. Not only do founders need to become more realistic about funding, but the system needs to make funding top-class startups easier. Until this happens, the money just won’t flow as it should into Vietnam’s startup scene.

(Editing by Terence Lee, Steven Millward)

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