In an interview with Sài Gòn Đầu tư Tài chính—a respected Sài Gòn Giải Phóng publication for entrepreneurs and investors—I shared specific views on startup investment, as well as views on “Startup Competitions.” I would like to share more here for your convenience.
CAPITAL IS MORE THAN MONEY
(ĐTTCO) – Ho Chi Minh City's launch of a startup investment fund is expected to provide additional momentum, helping young people feel more confident in choosing entrepreneurship. On this subject, ĐTTC spoke with TẠ MINH TUẤN (pictured), founder of YUP Institute, a pioneering institute for entrepreneurship training and support in Vietnam.
REPORTER: – This coming month 5, Ho Chi Minh City will launch a startup investment fund with initial capital of 30 billion VND, increasing to 100 billion VND by 2020. Would you consider this encouraging news for young people deciding to start businesses?
Tạ Minh Tuấn: – The human body needs blood. For businesses, money is blood. Startups especially need initial investment because their product may not yet exist or be ready to launch, so they have no customers generating cash flow to cover their expenses. Sometimes, having a product is one thing; testing and adjusting it to achieve a fit with market demand (market/product fit) is even more “painful” and costly. For many startups, launching the product is when the “battle” truly begins. So, alongside improving their ability to use money, startups also need more money: every bit helps, and the more sources of investment they have, the better. Ho Chi Minh City is now paying attention and has a dedicated fund, which is an encouraging sign. However, the city should not invest by itself; it should leave this to people who truly understand venture capital. In my view, the State need only ensure that costs related to procedures, paperwork, administration… that previously amounted to 2 dong now amount to 1 dong. That alone would be very valuable. It is also a way for the State to “invest” in startups.
– Quite a few young founders prefer raising capital from foreign investment funds rather than domestic organizations or businesses. Why do you think that is?
– I do not think that is quite the story. More accurately, many young people now prefer incorporating their companies abroad to receive investment from foreign funds more easily, because the procedures for foreign funds to invest in domestic companies are… too complicated. Entrepreneurship is attracting increasing attention, and for some technology companies it is a global game. Finding a suitable domestic fund that can offer special support alongside financial investment would be even better. Otherwise, startups are also ready to contact foreign funds. Some companies approach 30 funds without anyone agreeing to invest. Some domestic funds may at that point have disbursed all their money and not yet received their next round of capital, temporarily pausing investment in Vietnam. Others still have money but are not a good fit for that startup. Startups therefore need to seek additional choices, at home or abroad. Fundraising can sometimes resemble finding a spouse: you must get acquainted with and learn about many prospects before choosing someone with whom you “click.”
– Entrepreneurship has been talked about a great deal recently, and many ideas are taking shape. But what limitations do young people face in raising capital?
– The biggest limitation lies in… the young person themselves. Many think a good idea is enough to raise capital. They do not understand that investors do not invest in ideas; they invest in people. Many founders cannot demonstrate why they and their team can implement this idea much better than other teams. What is their distinctive, sustainable competitive advantage? That is why we founded a center to train and develop startup entrepreneurs (YUP School of Entrepreneurs). The entrepreneurial spirit is good. Starting a business is good too. But founders should be equipped with the essentials before entering the game.
– Many competitions have been created to encourage entrepreneurship, yet many ideas are never realized after winning prizes. What do you think causes this?
– Success in a competition does not equal success in life. Many young people enter only to win an award and embellish their profiles. I have seen many competitions where those who ranked 1st later gave up, while those who won no prize persevered and succeeded. Moreover, I am not much of a supporter of startup competitions. To me, there is no such thing as a “startup judging panel.” Some ideas have to be put into practice before you can know whether they will succeed or fail. How can you know on paper, or know whether an idea can work before it has been tested in reality? Even Bill Gates once rejected Google, one of his biggest mistakes. It is also difficult to assess a founding team's abilities through a few figures on paper and a few presentations.
However, to be fair, I still support some startup competitions because I want to help make them more effective. Competitions also stimulate a more vibrant entrepreneurial spirit in society. For some young people, participating gives better access to support afterward (impressing investors, for example) and a chance to “try out” their project before doing it “for real.” Hearing critiques increases their probability of success. Most importantly, they must recognize that real success comes only through action outside the competition.
– Besides capital, what factors help startup projects succeed?
– There are many types of capital; financial capital is only one. There is also knowledge capital, human capital, relationship capital, brand capital… Startup entrepreneurs should learn to pay attention to these forms of capital, master them and use them as leverage for their entrepreneurial journey.
– Thank you.
Thanh Dung (interviewer)
Original link: http://www.saigondautu.com.vn/…/…/Von-khong-chi-la-tien.aspx
