Last year, I wrote a piece about 10 things
that the startup community in Vietnam needs to save the startup scene and since
that time, the ecosystem has changed considerably. Mentors have come out of the
woodwork, startups are more serious, investors are more careful, and even some
previously smaller startups have risen to a mid-sized level. New battles are
also being pitched in areas from ecommerce to mobile to booking services. In
other words, Vietnam’s ecosystem is showing signs of maturity. At the same time,
we’ve been growing our Vietnam editorial team. We’ve been sifting through
events, emails, and coffee chats through a whole new generation of startups.
And although the ecosystem has seen some new robustness, there’s still some
serious problems with Vietnamese startups that founders, employees, and leaders
in Vietnam’s ecosystem will need to address before Vietnam can really get to
the next level.
What does the next level mean?
Currently, Vietnam’s ecosystem
is dominated by the shadow of VNG, whose valuation in some cases is rumored to
be as high as $1 billion. This is followed slowly by two other giants: Vat Gia
and VC Corp, who both hover around the $100 million valuation level. Behind
them are a handful of startups that range in valuation from $10 to $30 million
like Tiki.vn, Appota, mWork, Topica, Hotdeal, Vietnamworks, and others. But
below them is a host of startups that are struggling to even crack the $1
million ceiling. Getting to the next level means getting to where VNG is. Can
Vietnamese startups do it? As I’ve talked to investors, founders, and young
startups, I’ve noticed some themes that many of these young startups embody. I
think Vietnamese startups today, although more mature and vibrant than ever
before, are still naive. When I ask a startup why they’ve entered into
ecommerce, and their response is “because it’s a trend these days,” I know
there’s something wrong. When I meet a new startup that has a product they’ve
worked on for six months, but has no idea of how to make money, I worry. As Le
Hong Minh, CEO of VNG, is oft to say, “getting to understand exactly why you
are an entrepreneur and who you are in the midst of that are very hard and
profound questions. They are not easy to answer.” Clearly, young Vietnamese
startups need more depth. So, for your reading pleasure, I’ve condensed all the
criticisms and insights I’ve heard over the last few years concerning what
Vietnamese startups need to take seriously. Many of these things will impact
all startups, some will only impact a few.
1. Experience
Of course, Vietnam’s
new wave of startup founders are young (many only recently graduating from
university). But that has a retroactive effect on the startup output. In one
metric, it was determined that the most successful startups are started by
people around the average age of 28.5 years old. That means that it takes a few
years in the corporate world before you have the experience, mettle, and
tactical mind to build a successful startup. This lack of experience affects
everything. Younger folks, although energetic and spirited, will not be able to
see their blind spots and will likely not be able to see their own startup from
a broader view. And the most important aspect of experience is failure.
Founders that have failed know better how to deal with failure. If they’re
good, they know when not to give up. The younger you are, the easier it is to
give up too soon.
2. Relationships
Relationships are the tip often not written
about but softly spoken of behind closed doors and amongst colleagues. But this
is one of the number one thing that startups needs, and especially what young
startups lack. Vietnam is a minefield. It’s not clear how the legal system
might punish you, and it’s not clear where you may do wrong. A relationship
with the right person, be it political or business, may be the difference
between survival or bankruptcy. If your relationship consists of professional
business people who have successful businesses before in Vietnam, you can be
sure that they will be able to guide you through moves that make sense for
Vietnam. It’s even better than having an MBA. A relationship can make or break
your business. Some of Vietnam’s top startups have been able to make it because
of relationships. Never underestimate it, and cultivate your relationships
carefully and thoughtfully. Relationships will help you get funding, help you
navigate legal issues and policy, will help you make deals, and get
partnerships. Relationships will protect you.
3. Understanding exits and what
investors really want
The majority of startups that I meet want funding. The
ones that do outsourcing, client work, and have passive income, don’t need
investors as much. But if you’re a startup that wants to be really big (with a
multi-million dollar valuation), you’re going to need investment. And if you
want an investor to invest in you to get to that level, you’re going to need to
understand what it takes to exit and what an investor wants. When you’re
building your product, it needs to make sense in the larger market. You need to
know which existing companies need you and where you fit vitally in the market.
Without this, you’re never going to get the funding, and one of the keys to
this is… Photo: thegulfrecruitmentgroup.com
4. Making sure you have a big
market
I see two types of startups in Vietnam lately. One is the startup with a
market so small that no investor will ever want to invest in them. And the
other type of startup wants to hit the entire global market, planning to take
on the likes of Facebook, Google, and others. In the former case, the market is
so small that investors don’t care and the customer base isn’t large enough to
be a significant player. With the latter, there’s no path to marketing or
finding a core population of users. If you’re playing for the global track, you
need a really strong team that has a global mindset with design sense, a great
product, business, and a five-star team. And that kind of thing is profoundly
rare in Vietnam. Basically, the middle way is either a niche but big market,
like mobile games and content in the case of Appota or desktop published games
in the case of VNG. As Paul Graham often makes the point, you need to find a
small market that can easily convert into a big market. But behind all of this,
you still need a core business model that can scale and grow along with the
cash you hope to spend on your big market.
5. An awesome business model
At the
end of the day, you have to make money to feed your family and yourself. That’s
why an excellent business model is essential to success in Vietnam. Some of the
business models I’ve seen lately project very small revenues. If you’re only
going to make $1 million a year to feed your team, and you’re only going to
stay there, that’s cool. But it’s likely just a lifestyle business. It’s not
really a startup. Startups are built to grow huge and fast. They’re built to
create massive value and enter new markets with innovative new business models
that Wall Street has never seen before. Google is a great example of this. Who
would have thought that placing small relevant ads near what people are looking
for would become such a massive cash cow? Are startups in Vietnam able to come
up with clever models like this?
6. Execution
On the topic of copying,
Vietnamese startups (and Asian startups in general) are scared of being copied.
And although the climate in the ecosystem is changing (it seems startups are
becoming more open), the reason for fear of copying is still there. People
misunderstand the value of execution. It’s the people that can out-execute that
win, not the ones who can copy. And interestingly enough, it’s the
out-executors that can copy better than anyone else. They know how to
synthesize the best from their competitors and make them a part of their core
business. But behind every successful copy, or in this case, steal, there’s an
excellent executor. More often than not, a startup will fail because of its own
inability to execute than its protection from being copied. As Do Tuan Anh, CEO
of Appota says, “one cup of beer is equal to ten ideas.”
7. A dark story with
passive income
Behind almost every successful startup, especially with ones
leaning towards the domestic market, there’s a dark story. Many of the most
successful startups in Vietnam have some hidden reason for how they made their
money in the early days. It could be from cloning games, it could be from
spamming tech, it could be from gambling technology, it could be from viruses,
it could be from third-party app stores, it could be from anything. This early
period, where the startups are hustling and finding every possible way to make
money on the edge of legality and technology, is essential to creating a
forward thinking and clever Vietnamese entrepreneur. If you want to be able to
navigate the minefield that is Vietnam, you’ve got to get your feet wet. And
the truth is, this is the first chunk of passive income that these
entrepreneurs make. It allows them the freedom to work on even bigger visions.
8. Deeply understanding the customer
The story of Vietnam’s 5giay.vn comes to
mind when talking about understanding customers. The founder initially started
5giay to create a forum so that he could sell his computer screen. After
successfully selling it, his friends asked him if they could post their goods,
too. Thus, a site was born. Phuong never set out to make a business. He just
knew what he needed and he stumbled into a business that others also needed:
selling their used stuff. Startups these days are not so close to customers.
They’re closer to their technology. It’s essential today for young startups to
get out of their offices and go talk to customers and potential clients and
just listen to what people’s needs are. That’s where the real business begins.
9. Design sense
When people talk about design, usually they talk about how
things look. But those in the design profession know that design isn’t just
about how things look. As Steve Jobs said “Design is not just what it looks
like and feels like. Design is how it works.” When you look at the horrible
payments market in Vietnam, you will immediately know what I’m talking about.
Every single payment platform is ridiculously complicated to use even for a
tech blogger who has to play with new technologies every day. There are just
too many steps. As Dieter Rams says “Good design is as little design as
possible.” Indeed, we’re seeing a new movement of great visual designs from
Vietnam: Triip.me, Not A Basement Studio, Tappy, and even Flappy Bird. But the
entire ecosystem is going to need to take design much more seriously, and for
it to become a deeper part of every product. Photo: Medium.com
10. Culture
At
our recent Startup Arena event Kuo-Yi Lim, of Monk’s Hill Ventures, said Asian
startups have trouble creating open cultures in their startups because of the
pervasive top-down Asian culture. He thinks that essentially, open cultures are
what startups need to encourage new ideas, accelerate teamwork, and scale. As
the adage from Peter Theil, cofounder of Paypal, goes, “Don’t fuck up the
culture.” Startups need to create new company cultures that produces
individuals and teams that excel much better than other teams. And this is not
a simple thing. It’s very subtle. It takes leadership, processes, recruitment,
environment, and more. Is it any wonder why Apple, Facebook, and Google have
spent so much on their offices? They want to create physical environments that
produce great teamwork. Vietnamese companies are also doing this. These guys
realize that you cannot innovate without great culture. Essentially, culture is
a set of core values, attitudes, and behaviors that unite a team and can scale.
Arguably, it’s one of the most important things that fuse together to create
great innovation.
11. Clear direction
In Vietnam, there are essentially three
tracks: the domestic market, the regional market, and the global market.
Vietnam has seen success mostly in the domestic and global categories. In the
domestic market, it’s VNG. In the global market, it’s Flappy Bird. In between,
there are emerging successes like Misfit Wearables, Not A Basement Studio, VC
Corp, Vat Gia, and more. We have yet to see a significant player at the
regional level, although many domestic players are leaning towards competing
across Southeast Asia, like Appota. But these three tracks require very
different resources, teams, relationships, and direction. In the global track,
founders need to get to international conferences, they need to study abroad,
they need to cultivate international contacts, they need a team with a global
mindset, and build a product that can compete at an international level. In
Vietnam, you need strong local relationships and partners, you need an intimate
understanding of Vietnamese culture, you need to know how to navigate Vietnam’s
volatile market, and you need to understand how to make real money. And within
each track, a startup has to be very clear about what its path is, from month
to month and year to year.
12. Market research
In order to have a clear path,
you need a deep understanding of your market. You need to be good at math that
you can estimate the size, threshold, growth, and range of the market you are
targeting. Startups I meet these days always give very dreamy numbers of what
they believe their market is and almost always overestimate the size. For
example, if I’m targeting the tourism market, I’ll estimate that it’s a
trillion dollar market just because that’s what the papers say. But in reality,
my market is much smaller because I am only playing in one niche of that
market, and I’m only playing in the Vietnamese part of that trillion dollar
market. Given the above, my estimates have shrunk exponentially. Startups in
Vietnam need to get much more realistic about their numbers.
13. Vision
Although startups need to be more realistic about their numbers, they also need
vision. With all due respect, the lifestyle startups of Vietnam, which sit far
below the $10 million valuation level, have little vision. We need startups who
can dream beyond $100 million valuations. We need startups that dare to dream
and plan seriously for a $1 billion valuation. That is the only way that
investors will pay attention to Vietnam at all, and that’s the only way that
startups can create massive impactful value for Vietnam’s economy and society.
The interesting caveat to this is, if you’re looking for a massive valuation of
this scale, you’ll need to create so much value that you’re able to generate
profits. It’s therefore not as simple as just being a social enterprise. VNG
impacts millions of lives of Vietnamese people while also generating more than
enough revenue to pay its team of 2,000 people.
14. Luck
Everybody needs luck.
And it has to be said that many of the innovations and companies that we see
today had some element of luck to them. The man that created the application
dock that all Mac users use today was rejected by Apple recruitment staff, but
was picked up by Steve Jobs because he liked it. Almost every startup has a
lucky story like this. Like the moment when Bill Gates sold DOS to IBM or Xerox
allowed Apple to see its graphical user interface. If you talk to the most
successful founders, you’ll always hear them talking about how lucky they feel.
This doesn’t mean you should go out and pray for luck (I’m not superstitious
like most Vietnamese people), but it does mean you need to recognize and be
prepared it when it comes.
15. Lean startup (or some reliable startup
methodology and philosophy)
If you haven’t read Lean Startup by Eric Ries, you
probably should. Although not everyone will agree with it, it does present one
compelling and successful model of innovation and startup. Every startup needs
a methodology to run their business and battle test in the market. Otherwise,
it’s like walking in a dark forest without a light. There is no clear formula
for doing a startup, and you have to find your own way, but having a philosophy
can mean the difference between success and failure. Learn from what other
people have done, battle test your ideas, and continue.
16. A real problem
This
one’s partly influenced by Vietnam’s education system. When the entire populace
is engineered to learn by rote memorization and geared toward national exams,
where is there space for critical thinking? Critical thinking is core to
identifying problems and executing on them. Luckily, Vietnamese people learn to
solve problems by osmosis. But the foundation is still weak. For young
startups, this has profound implications. As Paul Graham notes, “by far the
most common mistake startups make is to solve problems no one has.” Vietnamese
startups need to look critically at what problems they assume they are solving
and make sure that they are real. Don’t make a solution and apply it to a
problem that doesn’t exist.
17. Undying passion
How much do you really love
your problem? How much do you really love your industry? How much do you really
love going to work for no pay for weeks and months for an idea you’re not sure
will work? How much do you love motivating a team that you barely got together
in the last few months? How much do you love innovation? How much do you love risk?
These are questions that time will answer for you as you grow your startup.
Startup is hard, it’s one of the hardest things you will ever do. And it’s not
like learning an instrument, which can take a few months, a little bit of
talent, and a good teacher. It’s going to take years, it’s going to test every
fiber of your being. It’s going to be physically taxing. It’s going to be
mentally exhausting. You’re going to be emotional. You’re going to want to
quit. You’re going to go to the highest highs and the lowest lows. Are you
really ready for it?
18. Partnerships and leveraging other brands
Although Ticketbox.vn, an event ticketing service, is still a young startup
that has to prove itself on the market in the long-term, its steady rise of late
is due in part to the partnerships that the founder has been able to secure
(through relationships). Never underestimate the power of brands. Especially if
you are a small startup with no name. Vietnamese people are especially brand
sensitive, preferring foreign brands to local brands. If you can secure
partnerships where you can piggyback on other brands, a domino effect will
ensue. When people go to your website, they’ll see who your partners are. And
in the process, you’ll learn much more about what bigger and bigger businesses
want and need. Although this is especially true for B2B, it results in profound
effects in the B2C market, too. Why do you think the Rocket Internet companies
are so eager to develop partnerships with neighboring companies?
19. Innovation
+ Research and Development
One investor I’ve spoken to recently said one of the
biggest problems with Vietnamese startups is that they copy ideas from the
Silicon Valley. This copying allows for their ideas to be easily stolen by
other startups. Thus, it has bred an entire ecosystem of cheap ideas. Cheap
ideas are easy to steal and don’t last without great execution. The problem
here is that startups are not spending enough serious time on research and
development. They’re not developing technology and ideas that are hard to copy
and bring innovative new value to the market.
20. People
Finally, one of the
most important things a startup needs is great people. As Steve Jobs said, “A
small team of A+ players can run circles around a giant team of B and C
players.” And to be honest, great people are scarce in Vietnam. Many are too
inexperienced to grow a great business and others are just not well educated
and professional enough to make a great business happen. Vietnam is crawling
with career ladder climbers and people who just want the title of “manager”
without the strength and resolve to really make a startup happen. More often
than not, a Vietnamese startup will see its “best people” quit. Arguably,
finding and keeping the best people is one of the hardest things. But without
them, you can’t build anything.
21. Investment (Bonus)
I guess I can’t finish
this post without mentioning money. Of course, every startup needs money to
thrive, keep its books, pay its staff, and invest in resources. But money is
what every early stage ecosystem complains about. The truth is, if your team
and ideas are really great, the money will come. Peter Thiel, founder of PayPal
and de facto head of the PayPal Mafia, said that “the lower the CEO salary, the
more likely it is to succeed.” Thiel believes that a team that is more willing
to sacrifice itself for the mission of the company is more able to succeed. So
stop fretting about the money and put the company first. That’s the kind of
company that goes for the gold. Startups in Vietnam these days are so eager to
go to the next event with investors and learn how to entice investors to fund
them. But the real problem is not how to get money. The real problem is
building a great team, identifying a real problem, and developing a great
product. I got 20 problems but a startup ain’t one Now, of course, I’m
generalizing. That’s how us bloggers can get to a list as huge as 20 items. But
like I said, I’ve come to this list over the last year and a half of meeting
with young startups and with more mature tech companies that have shared with
me their opinions and insights on where the ecosystem is headed. So take it
with your own grain of salt. You cannot excel in just one of these things and
expect to succeed, and you also can’t excel in all of these and expect to
succeed. Startup is a wild roller coaster whose fate is decided by
well-thought-out strategy and nuanced luck. And as bloggers, there’s only so
much we can distill. Good luck on your course.
Editing by Paul Bischoff
