Reporting from: Ho Chi Minh City, Vietnam
Like most entrepreneurs, I still remember exiting my first business. I got what was, at the time, a lot of money for me. While I realized the amount wasn’t life-changing nor was I going to retire to a villa at the Four Seasons, I felt good about it.
And back then, that amount of money set the standard for what I considered “a decent amount”. I felt good about myself.
Looking back, I realize it wasn’t a lot of money. Going from a bootstrapping entrepreneur in the second bedroom of my apartment to a young twenty-something with some cash made me feel a bit more accomplished than I probably should have.
Here in Vietnam, that same sentiment is playing out across the investment space. Wealthy Americans are coming to Vietnam with one or two million dollars to invest and acting like they should own the place.
But as my friend Dan Andrews told me, “$3 Million Is Nothing Here. They Don’t Need Another Few Million Dollars.”
He’s right. In fact, the capital community here needs a few million more dollars like they need a hole in the head.
The reality is, there’s plenty of money here. Large firms like Vinacapital and IDG have plenty. One gentleman I met with, who considers himself a smaller player in the market, is running a multi-hundred million dollar fund buying stakes in established companies.
There seems to be an idea among people from California and other venture capital money centers that a developing country like Vietnam should be hard up for cash. But it’s not.
What Vietnam needs is talent.
It’s not that Vietnamese workers aren’t dedicated and willing to see the job through. Everyone I talk to, including CEOs, says they are very hard workers. The issue that will need to be resolved in coming years is education and international experience.
That means all the capital available for investment in Vietnam can’t be easily deployed because Vietnamese companies don’t have efficient systems in place to put it to good use. Investors often have to bring management expertise and their own systems if they want their investments to succeed.
Consider that the average age in Vietnam is under 30. That explains the dearth of middle and senior managers to lead projects to a successful completion.
That limits the best venture capital returns to 30x the original investment. Not bad, but not exactly stellar considering the sectors of investment, and the infinitely higher prospective returns in Silicon Valley.
What Vietnam does offer, however, is a young and vibrant consumer culture. Consumerism has become desirable in Vietnam, as it has in many other rapidly developing Asian markets. Young people want to spend money on western-style luxuries, from cinema tickets to higher-end fast food joints that understand their taste.
I’m not a tech guy and personally don’t understand the huge buzz around many of today’s hot web companies. Perhaps I’m shortsighted, but I don’t see how a website that makes photos taken on your iPhone look like they were taken by Thomas Edison is worth $1 billion.
What I do understand, however, is consumer goods. Stuff that bleeds cash. Everyday stuff that people in an emerging market are clamoring to have.
For example, just imagine how many more calories will be consumed when more Vietnamese people can afford the much-desired Australian beef.
The bottom line is that whether you’re in tech or in consumer goods, Vietnam can be a very good place to be an entrepreneur. Expat entrepreneurs can get their business started on the cheap, with inexpensive hires and a culture that doesn’t entirely frown on employees working out of cafes.
Firms here and in the region are looking for smart places to put their money. The guy from California with $3 million doesn’t matter much because plenty of other guys in the same or bigger boats don’t have enough places to deploy their own venture capital in Vietnam.
I don’t want to make it sound like you could throw a dart and strike gold here – because that’s certainly not the case – but I would argue starting a successful business here isn’t as difficult in the west.
Expat entrepreneurs can use some geoarbitrage by stretching their cash further here, paying developing world prices and selling to developed markets online.
But even in the realm of offline businesses, Vietnam’s “replication market” means that the business owner who can best replicate good business ideas from the rest of the world can really add market share.
Vietnam isn’t so much an innovation market as it is one that looks at what’s worked somewhere else, and copies it. Name on famous global Vietnamese brand. You can’t, because they rely on other global brands here.
Just look at market statistics and you’ll see the greatest efficiencies and greatest growth is occurring among foreign firms. In one metric, foreign companies outpaced their Vietnamese counterparts 40-to-1.
Many businesses here have serious efficiency problems that stem from a difficult lending environment and other issues.
Bottom line: you can bring a great business from overseas, plant it here, nurture it, and build market share. And if you can do that, you might be able to help yourself to the vast sums of money aimlessly swirling around this region, looking for a home.
This is a place where you invest in yourself. Young Vietnamese people are rather optimistic about their future considering how far the country has come since the 1980s baby boom. There are plenty of businesses to be bullish about here.
Just don’t think you can drop in with a few bucks and come back a couple years later to huge returns. It’s not realistic, and they don’t need you.