Coming to the right investors – that might be a tough question that a lot of Vietnamese entrepreneurs have asked but not yet found a proper answer.
Not all of the investments into Vietnamese startup companies spur that concern though. If you look at historical deals, the majority of them went through smoothly with venture capital funding, exits and the growth stage where the companies continue to thrive, find an IPO or enter a win-win M&A.
Preeminent investors that have spent years-long time in the country, like IDG Ventures and Cyberagent Ventures, despite some failure deals, have helped many companies follow that path. With local people who are deeply engaged in the local ecosystem, major conflicts with invested companies are not the trouble they would want.
However, the story about how founders deal with investors when they come on board is becoming the hottest topic these days, after a case about the woman founder and investors of fusion food chain The KAfe arose as Dao Chi Anh said she departed from her own venture, which has grabbed a new CEO.
This is not, actually, the first time digital ink is spilt over such an issue. I earlier broke a news on DEALSTREETASIA about Coc Coc, the “made-in-Vietnam” search engine that dared to take on Google (read the article here), before e-commerce player Lingo unhesitantly revealed their management scandal.
Victor Lavrenko, who invested in Coc Coc and then was said to take over the company
Loss-making Lingo shut down its business as investors stopped pouring money in. What is more tragedy is that the termination caused hundreds of people working for the company lose their jobs all of a sudden. In a letter signed by Lingo employees, they claimed the investor, MAJ Investment, did not keep the promise it had made when it first funded the e-commerce site.
For Chi Anh, she has never said a word about the relationship with New Asia Partners and Cassia Investments since she announced to leave The KAfe. But it has been understood there was something shady.
In a recent open discussion with local founders, Chi Anh hinted the conflicts by telling her fellows to fully prepare, mentally, for giving up the control over the business if they want to get in some investment. She also said the journey after the funding was not a bed of roses, which is multiple times harder than the fundraising itself.
These cases have not only, again, pictured the cruelty in doing consumer business in Vietnam, but also uncurtained the hurtful fact to startups about working with external investors.
One common characteristic of the three cases of Coc Coc, Lingo and The KAfe, as I see, is that the foreign investors are not connected to Vietnam. The closest one to Vietnam was Dennis Nguyen, a Vietnamese origin but American immigrant. Nguyen’s New Asia Partners, a Hong Kong-based private equity fund, was the maiden backer of The KAfe. It is unclear whether the clash in The KAfe came from NAP or Cassia Investments, the one that later on invested $5.5 million in the food chain.
Investment is a venture game, I guess, not only for investors.
A lot of startups are still coming to pitching competitions to show their pitch decks to investors (winning the grants is probably among the less important reasons). But securing an investment, well hopefully, does not mean you will secure the growth that you expect, while having more people on board would be a headache.
As you already have the headache of dealing with customer acquisition, there is an urge that Vietnamese startups focus their energy in doing real business.
Long story short, as there are more people in Vietnam choosing to start up a business, there should be more people to choose to bootstrap at first.
“Customers’ money is the best investment,” as it was said.
When the companies gain some traction and create value, it might be time for the founders to consider to sell.