Saturday, 11 January 2020 08:53

Vietnamese Investors More Cautious with Tech Startups

Vietnamese startups are heading into the new year looking to avoid the mistakes of such companies as Uber and WeWork, which disappointed investors in 2019 for failing to turn a profit after so much buildup.

Investors and entrepreneurs in the communist nation are taking a more critical look at their businesses after seeing others get burned overseas. WeWork, which rents out shared workspaces, was seen as a cautionary tale of a startup that did not live up to expectations and was not profitable.

For years, investors were willing to back losing businesses to gain market share. But now, there is more scrutiny of new investments.

Benchmarks set

The Vietnam Innovative Startup Accelerator (VIISA) requires its technology startups to meet a list of benchmarks throughout their time in the program.

“Apart from very intuitive selection criteria that all applying startups have to go through, the program has introduced a new development measurement method, which helps us to capture the progress of startups that are accepted into VIISA,” Hieu Vo, a board member and chief financial officer at VIISA, said. “I think this process will bring out the best in each person for the particular business they have founded and committed to.”

Vo said his colleagues sit down with startups when they join the accelerator to discuss key performance indicators, or KPI, that will be set as goals. VIISA also does training for the young businesses so they have quantifiable skills, such as how to structure a business deal, or how to set up their accounting system.

Having metrics and ratings, Vo said, supports “both business performance, as well as personal transformation of founders.”

Founder scrutiny

The founder as an individual has become a point of scrutiny for investors, who used to be more forgiving of an eccentric or aggressive founder, seen as part of the package to have a tech genius head an innovative business. But there has been a backlash among those who think too much permissiveness can damage a business, from the sexual misconduct amid the workplace culture of Uber, to the conflicts of interest in business decisions at WeWork.

It helps to not just think short term and to have an outside perspective, according to Pham Manh Ha, founder and chief executive officer of Beekrowd, an investment platform in Ho Chi Minh City.

“As a first-time founder, it seems impossible for us to look beyond the first six months to a year of our business,” he said, adding that experienced third parties can help businesses take the long view. “They stand outside the trees that are blocking us from seeing the forest.”

To see the forest, Vietnamese businesses like his are taking a more measured approach. Vietnam has seen an escalation of tech startups, as investors have rushed to put their money to work and take advantage of the economy’s fast growth.

They also remember the dot-com bubble in the United States, and the more recent global tech bubble, two reminders for caution.

(VOA)

Read 48 times