HÀ NỘI — Despite facing uncertain circumstances due to the COVID-19 pandemic, start-up excitement abounds in Việt Nam.
Start-ups have faced incredible difficulties as the pandemic has had a strong impact on business performance, causing losses or even bankruptcy. The reality is that only companies with the ability to make money and hard work can survive in this period.
Having success in securing millions of US dollars in investment, Fitness app WeFit’s developed by Onaclover Jsc, which connects users with fitness centres and beauty services, announced in May it had filed for bankruptcy.
WeFit left considerable debts to suppliers after previously burning money to attract customers to increase market share and scale-up. However, the firm's model had many flaws such as allowing many guests to share an account and using a virtual calendar but having to pay real money to the gym, making WeFit run out of money instead of making money.
The organic soybean chain Soya Garden, a food and beverage start-up, closed a series of stores to restructure its finances and increase efficiency to survive COVID-19.
Nguyễn Hòa Bình, chairman of NextTech Group and known as Shark Bình, said many start-ups entering 2020 were very confident that they had enough cash to operate for 12-18 months. But the arrival of COVID-19 meant many ran out quicker of money than anticipated.
In fact, even before the pandemic happened, many start-ups, especially in the technology sector, had suffered losses. Start-ups had to cut salary, rental and advertising costs to survive. However, revenue still fell sharply, up to 50 per cent, even start-ups operating in the travel industry reduced their revenues by 90 per cent, leading to huge losses.
Bình said the pandemic was a nightmare for all start-ups, especially as investors did not dare to pour more money into the firms.
However, the disease has not extinguished the start-up spirit. Many start-ups even still received large investments to speed up development in the future.
Statistics from venture capital firm Do Ventures Việt Nam showed last year was a success for Vietnamese start-ups when they received 123 investment deals with a total value of nearly US$900 million. Despite the pandemic, in the first half of this year, start-ups received investments of $222 million.
For example, Tiki raised $100 million during the pandemic. Most recently, a series of start-ups in the fields of agriculture, education and technology such as Edu Pro Max, ECO LIFE, Sen Vang Vinh Phuc and Shark Uma received hundreds of consultancy and investment support from Shark Liên.
Bình acknowledged this year would be difficult for capital raising. Furthermore, unprofitable start-ups have to use their funding to build markets or customer databases. Therefore, money-burning start-ups would face many difficulties.
In particular, amid the pandemic, start-ups wishing to raise foreign capital struggle as investors require at least a few face-to-face meetings to decide whether to invest or not. Therefore, start-ups should rely on technology corporations with good cash funds and domestic investors.
Nguyễn Văn Việt, CEO and Co-Founder of Computer Vision Vietnam (CVS eKYC), a start-up that received a $500,000 investment in August, told Việt Nam News that COVID-19 had both opportunities and challenges for start-ups. When the pandemic happened, businesses would think of cutting costs. Investments in technologies could be considered.
This would be a big opportunity for start-ups as with a limited budget for technology development, firms would find suppliers with more reasonable costs.
“Start-ups should learn capital usage and management from big groups or sharks when receiving investments. Start-ups are used to managing a small team with a simple financial flow. This is why start-ups should study new knowledge to better manage their business at a bigger scale to avoid waste and losses,” Việt said.
He added start-ups should take advantages of their investors’ ecosystem of products for further development.
“Information and technology have seen strong development in Việt Nam. Investors and sharks, therefore, have big dreams and expected to participate in the country’s digital transformation. They always seek suitable opportunities to invest in start-ups. Sharks pay attention to start-ups with good technologies and strong potential for development instead of growth figures, users and revenue after some recent failed start-ups,” he added. — VNS
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