Ample Opportunities for Start-ups

2016 witnessed a boom in business start-ups. This was a very good opportunity for future entrepreneurs to succeed in the future, when Government leaders really focus on this area. Vietnam Business Forum interviewed Ms Thach Le Anh, Founder and CEO of Vietnam Silicon Valley (VSV), on start-up prospects.

Could you please introduce the outcome of VSV after three years of operation?
VSV was approved by the Minister of Science & Technology in June 2013 with the aim of making direct impacts on start-up ecosystem development, comprising start-up, venture capital and business incubation.

Only six months after being approved, VSV collaborated with angel investors to deploy Business Accelerator (BA), first Vietnam Silicon Valley Accelerator in Vietnam. After three years of implementation, VSVA received 600 registration dossiers and 24 start-ups were chosen. VSV also cooperated with partners to build and put into operation two co-working spaces in Hanoi and Ho Chi Minh City. VSVA raised more than VND8 billion for BA start-ups. Among 24 teams admitted to BA, six succeed in calling investment capital in the next round, estimated at VND27.3 billion. Start-ups created a total of 350 new jobs.

In addition to focusing on developing and perfecting BA models, the project organised many start-up community activities. Specifically, it organised 70 training entrepreneurship programmes for 1,500 people, including start-up leaders, investors and advisers. It completed 15 consultancy reports and various researches on start-up ecosystem development in Vietnam. With those very specific numbers, VSV had positive impacts on the start-up community and venture capitalists in countries in the region in general and in Vietnam in particular.

The project aimed to create an innovation-driven ecosystem and commercialise technologies by combining entrepreneurial spirit and creativity of younger generations in Vietnam. Could you please talk about the policy impacts of and responses of enterprises to VSV?
During its deployment process, VSV is very fortunate to have maximum support from the Ministry of Science and Technology. But, we still faced numerous difficulties because of policy matters ranging from basic regulations like enterprise establishment to regulations on venture investment. In foreign countries, the venture investment sector has developed very strongly. They founded venture capital associations such as National Venture Capital Association (NVCA) in the United States where all necessary documents to support venture investors are found easily. The project must study foreign policies and seek to bring them into Vietnam’s context. A simple task such as investment contract drafting is a big challenge. However, in my opinion, the main cause is insufficient understanding of start-ups. In 2013 - 2014, such concepts as start-up and venture capital were novel to authorities in particular and the public at large. All this would have been done if they had right knowledge of the above matters. VSV successfully collaborated with the Ministry of Science and Technology to this effect. Indeed, VSVA has still grown in the past years.

Capital channel is a “hot” matter for young entrepreneurs. So, how did VSV Project tackle this matter? How did start-up entrepreneurs seek domestic and foreign investors?
Start-up capital is a 2-dimensional issue: Start-up and investors/investment funds. In fact, the quality of start-ups in Vietnam is not good relative to other countries in the region. Start-up focused excessively on fundraising while they seemed to forget that whether their products were good enough. Hedge funds have very strict requirements when they pick up start-ups for investment. Thus, it did not come as a surprise when a very few start-ups got investment each year. In contrast, venture capital funds in Vietnam are mainly foreign-owned and they tend to make huge investment. Their single start-up deal usually gets US$500,000 - US$1 million, much bigger than the value of Vietnamese start-ups. At the same time, the concept of venture capital is still relatively new and the number of angel investors in Vietnam is very small.

Currently, what VSV is doing is narrowing the gap between start-up capacity and requirements of venture capital funds in order to increase the probability of success of calling for capital for start-ups. Furthermore, VSV has stepped up communications, disseminated the knowledge of venture capital to individual investors, and built a network of angel investors in Vietnam. As a small start-up investment fund and a representative for the Ministry of Science and Technology, VSV fosters cooperation with countries with developed venture capital industry such as Singapore and the United States in order to attract capital there to Vietnam. Some VSV start-ups are successful, for example, Lozi social networking app received funds from Golden Gate Venture and Design One. At present, Lozi is expanding its operation to other areas such as fashion and electronics. Schoolbus - a teaching platform based on online TV technology - is providing classes for more than 50,000 students on this platform. This start-up also successfully called for new investment funds after graduating from VSVA.

The Government targeted to have 1 million enterprises by 2020, and 2016 witnessed a boom in business start-ups. As a top-notch start-up specialist, what do you think about these figures and where is the deserving position for technology-powered start-up entrepreneurs?
From the active support and action from the Government, I believe that Vietnam will have 1 million enterprises as scheduled. But, it is not easy to have 1 million start-ups because we still lack so many things in an innovation-driven start-up ecosystem, particularly when we lack angel investors, professional venture capital funds and advisors for start-ups, while we seem to have more advisers for SMEs than necessary.