Vietnam lacking good startup ecosystem to attract capital

Though Vietnam is considered to offer a strong potential for investments in startups, domestic investors are inexperienced in startup evaluation and foreign investors are discouraged by the complex legal environment, according to an expert.

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Minh Quyen (R), founder of Startup Talk Café100% English, shakes hand with his investor in a TV show program called Shark Tank, which is designed for young startups calling capital. Vietnam is lacking good startup ecosystem to attract capital
On the sidelines of a recent workshop on financial support for startups, Jouko Ahvenainen, founder and executive chairman of Grow Vc Group, said that one of the problems concerning the attraction of capital for Vietnamese startups is that domestic investors have money, but are not experienced enough to identify good startups, to understand how they are operating and how to assist these businesses.

Ahvenainen added that only experienced investors are capable of seeking out startups.

Meanwhile, foreign investors view Vietnam as a potential market with high profitability.

To attract foreign investors, there needs to be a transparent environment and an open startup ecosystem, which is to facilitate investments, as well as capital withdrawals.

According to Ahvenainen, many investors are interested in the Vietnamese startup market, but shy away from complex regulations.

As a result, instead of directly investing in startups, the Government should build a complete startup ecosystem and clear regulations to attract private sources of capital.

Ahvenainen told The Saigon Times that Vietnam’s ecosystem is still in its infancy, but is heading in the right direction.

An ecosystem needs the involvement of many parties, including outstanding individuals who are capable and have the desire to build their businesses and expand globally.

Besides improving the legal framework and the startup ecosystem, according to Ahvenainen, it is essential to build a startup database, which foreign investors can depend upon to make investment decisions.

As of the end of last year, there were approximately 3,000 startups in Vietnam. While some 50 agreements were made in 2016, worth US$205 million, 92 deals which attracted US$291 million were recorded last year.

However, it is undeniable that the value of investments in Vietnamese startups is much lower than that in other countries in the region.

The number of Vietnamese startups acquired and merged remains modest, and there have been almost no firms involved in initial public offerings. Meanwhile, startups in ASEAN countries attracted US$7.86 billion last year.

A major difficulty faced by innovative startups is access to capital. Thus, startups have had to use their own money or borrow from relatives, as it is not easy to receive bank loans.

Saigon Times

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