Vietnam startup funding sources: grants, angels and funds

Vietnam startup funding sources fall into four groups: your own money, angel investors, venture funds and government support. Most founders use more than one, in that order. Start with the cheapest money and move up only when the business needs it.

Start with your own money and your circle

The first money almost always comes from the founders. Savings, a small loan from family, or early customers who pay up front all count. This money is slow, but you keep full control of the company.

Investors like to see this stage. It shows that you will risk your own funds. It also gives you a working product to show, which makes every later talk easier.

Keep clean records from day one. Write down who put in what, and on what terms. A family loan with no paper trail can cause trouble when a larger investor arrives.

Angel investors: early money from individuals

An angel investor is a person who puts their own money into a young business. Angels usually take equity or a convertible note. They often back a company at the stage when most other investors will not.

Angels do more than write a cheque. Many give advice and open doors to customers and later investors. Some join groups that share deals and split the checking work.

The sums are small compared with a fund. They can range from a few thousand dollars to a few million. Do not expect the same speed or the same terms from every angel. Ask each one what they have backed before and how they behave when things go wrong.

Sources: Wikipedia, "Angel investor", for the definition, the early stage role and the range of sums.

Venture funds: larger rounds with a clock

A venture fund pools money from outside investors and invests it in young companies with high growth potential. The fund takes equity. Because many startups fail, the fund needs a few big winners to pay for the rest.

Funding comes in stages. Pre-seed and seed rounds test the idea and build a first product. A Series A is usually the first round from an institutional fund. Later rounds pay for scale.

A typical fund lasts about ten to twelve years. Its managers are paid a yearly fee and a share of the profits. That structure explains their behaviour. They want fast growth and a clear way to sell their stake later, so be ready to talk about both.

Sources: Wikipedia, "Venture capital", for stages, fund life and how fund managers are paid.

Venture funds that work in Vietnam

Funds with a Vietnam focus have been around for years. VinaCapital, a Ho Chi Minh City investment manager founded in 2003, launched DFJ VinaCapital in 2006 with the US firm Draper Fisher Jurvetson to invest in technology companies. In August 2018 it launched VinaCapital Ventures, a technology investment platform.

Regional and foreign funds also look at Vietnamese founders. Check each fund's own site for the stage and size of deal it prefers. A fund that invests only in later rounds will not answer a seed pitch, so match your stage to theirs before you send anything.

Sources: Wikipedia, "VinaCapital", for the 2003 founding, the 2006 DFJ VinaCapital fund and the August 2018 launch of VinaCapital Ventures.

Government support: ask, then read the rules

Public programs are a fourth path. Vietnamese authorities have shown interest in helping small firms and startups, and some offer training, advice or co-funding. These programs change often, and each has its own rules on who can apply.

Ask the relevant ministry or a local business support office what is open now. Read the current text of each rule and program before you rely on it. Treat public support as a bonus, not a plan. It can be slow, and the paperwork takes time.

How to choose and what to do next

Match the money to the stage. If you have no product yet, use your own funds, a small angel round or a public program. If you have users and clear growth, talk to funds.

• Write a one page summary of the problem, the product and the numbers so far.
• List ten angels or funds that back your stage, and read what they have funded.
• Ask founders they backed how the relationship worked.
• Have a lawyer read every term sheet before you sign.

Take only the money you need for the next twelve to eighteen months. Taking more than that gives up equity you may regret.

Sources: Wikipedia, "Venture capital" and "Angel investor", for the stage by stage logic.