Vietnamese startups face various hindrances during their operation, particularly those calling for a large amount of fund. (Illustrative image)

In recent years, thousands of startups have been founded nationwide while roughly 50 business incubators and societies have been set up to help in their operation and development.

Indeed, Vietnamese startups face a string of hindrances during their operation, particularly those seeking for a large amount of fund. Fund mobilization has grown into the biggest challenge for startups to overcome as they must persuade investors that they are likely to gain profits after several years of investment, without guaranteed terms.

Addressing the Vietnam Private Sector Economic Forum 2019 held in Hanoi last week, Pham Khanh Linh, CEO of the Hanoi-based van services operator LOGIVAN, noted that local startups primarily operate on available capital, while the capital for startups normally comes from “three F sources” - friends, family, and fools.

Linh deemed a poor level of English as a major barrier that hamper the flow of foreign capital into local startups. She stressed the significance of adopting English as the second language in Vietnam since English language proficiency could help entrepreneurs get a smooth path for their regional reach.

Although some Vietnamese startups have received investment worth several millions of USD, a major problem remains over the possibility of luring the first capital inflows from angel investors as many are in fear of pumping money into emerging technologies.

To enlarge the source of capital, banks must provide credit policies dedicated to startup development, aiming to help startup companies to grow up prior to receiving capital from angel investors, Linh declared.

Developing billion USD firms remains a lofty ambition

Tran Ngoc Thai Son, CEO of the e-commerce developer Tiki, said that many Vietnamese startups are improving while their founders also embrace sharper and more ambitious thoughts.

Son further said that a long-term solution coupled by the sufficient provision of sources is needed to develop startups, of which capital is a major part.

The Tiki CEO added that the attraction of capital inflows worth millions and even billions of USD seems to be out of reach towards local startups as investors always give priority to ensuring payback from their investment. For startups, the payback becomes far less feasible as it is often extremely difficult to list startups on stock exchanges.

Market size attached by the future profitability of startups is another factor to be scrutinized by investors, said Son, noting that Vietnam is likely to be viewed as an attractive market and offers plenty of room for startups, but the market size still remains modest to build up unicorn startup companies.

He underscored the need to encourage companies to go regional as the Southeast Asian market scales up to US$2.4 trillion and can develop further amidst fast growing cross-border services.

Meanwhile, Jerry Lim, CEO of the Grab Vietnam, asserted that increasing cooperation between the private economy, meaning private firms, and the Government is a good way to “debottleneck” capital inflows into startups.

Lim also called for more favorable conditions for the development of technology companies through the execution of a pilot model, thereby verifying its impact on society and making adjustments to the market. Even if tech firms are proved to be profitable, it would take time for the Government to make verifications and issue relevant policies. VOV