Vietnam’s impressive economic growth and a sizable market full of untapped potential has attracted countless investors who are searching for a new land of growth. A young generation of Vietnamese entrepreneurs, most of them being Millennials or Gen-Z, have made the start-up scene even more exciting. They build companies with state-of-the-art technologies and new business mindsets to solve existing problems in society.
Many of these entrepreneurs dream of one day turning their venture into a unicorn — a startup with a valuation of over $1 billion. Yet, a majority of start-ups have failed. Especially in Vietnam, where the start-up ecosystem is still in a nascent stage, many founders are walking their path alone with little experience, training, and funding.
I spent a few months chatting with founders and investors mostly based in Vietnam to understand the challenges start-ups face. Here are a few myths that can cost new founders a substantial amount of time and effort or even the survival of their ventures.
Myth 1: A great idea is all I need
Mai, a founder of a fashion brand in Hanoi, wanted to create tailor-made and uniquely-designed clothes for young female professionals. She started with her first collection, attracting lots of attention and having good sales for her debut.
However, over time, she realized that a good design is not enough to sustain her business. Bringing elegant designs on paper to life requires a comprehensive process. Unexpected issues such as garment supply disruptions, bad reviews by customers due to the return policy, and misalignments among team members have depleted her time and money considerably. She also recognized that she spent most of her time dealing with operational tasks that appeared messy and trivial but were decisive to the survival of her business.
Of course, ideas are the start of any venture, but good ideas do not guarantee success. The job of start-ups is to build the bridge between ideas and reality. It means execution is the backbone of a business.
Execution challenges are particularly stark for founders who are new to an industry. One investor told me, she often looks at the founding members to see if they have related industry experience or how they plan to close the gap if they are doing business in a new field.
Notably, in a less standardized market like Vietnam, there are many nuances to understand if a business wants to operate effectively in a particular segment. That is why one should do her/his homework thoroughly about key business issues in a field, especially if she/he is a newbie.
Myth 2: The faster I grow the business, the better
Start-ups are often obsessed with growth. Founders look at the number of employees, shops, and customers as signals for their success. However, when a business expands, it consumes more resources and requires more complex systems to manage workflows. Apparently, running a company with 10 employees is different from operating a business with hundreds of employees. Scaling fast can be a business killer if your skills and resources are not ready for it.
I talked to a business owner of a Singapore-based food chain. His shops offer healthy food menus to office professionals. As a chef who has worked in the food and beverage market for many years, he is passionate about creating the most delicious and healthy options for his clients. When the business started to scale, he could no longer be directly involved in the preparation process. Besides, he needed to find various sources of supply rather than counting on one supplier that he knows very well. That led to inconsistent quality across shops, causing unfavorable reviews by customers. After opening the third restaurant, he paused, fearing that the whole business will become unstable when it grows further.
It is also not rare to see a business in Vietnam, especially in the retail sector, that grew at a rocket pace and attracted several-million-dollar funding from venture capitals initially. Soon, the business was in a downward spiral due to unsustainable growth.
Thus, instead of growing as fast as possible, growing sustainably should be the priority. Finding the right size and a suitable scaling space for your business is essential. Otherwise, you might find yourself burning money faster than you can earn it.
Myth 3: My passion and persistence will lead me to success
Passion is a powerful fuel to propel one’s energy to act. With the high uncertainty of start-ups, a founder will need such forces to sustain.
That said, Bryan, a venture capitalist based in Vietnam, told me: be careful with the word ‘passion’. Passion can sometimes lead a founder down the rabbit hole. If your passion does not fit market needs, and persistence means you have married to your ideas, they will backfire. He observed that most initial business ideas are not fully viable. Primary business plans require constant reiterations over time.
In Silicon Valley, two concepts are well-known: minimum viable product (MVP) and product-market fit. MVP is a simple product with basic features to be launched to test your hypothesis of market needs based on your initial research. The final goal is to achieve product-market fit, which requires a repeating process of taking customer feedback, modifying products or services, and launching them again until you find the product-market fit.
Bryan believes clarity and flexibility are essential qualities of a business starter. Instead of letting passion cloud your thinking, be clear and truthful to yourself about whether your ideas are indeed working. A founding team might need to rewrite business plans repeatedly before the venture becomes truly viable. Thus, flexibility and acceptance of the fact that they still have a lot to learn will help founders adjust to reality quickly.
Myth 4: Start-ups will bring me freedom
Several business owners I talked to started their own companies out of boredom with their 9-to-5 corporate jobs.
Minh, a founder of a software company in Ho Chi Minh City, told me he was naïve when thinking that a start-up would bring him more freedom. It turned out he faced different sets of constraints and responsibilities. He spent his late-nights pondering how to acquire new clients, coach a capable team to deliver quality products and review the company’s financials. While founders cannot do all of these tasks alone without a team, they remain the ultimate source of their ventures and are responsible for the success of a business. Therefore, some business problems might constantly keep them awake at night.
Running a start-up is hard, but it can be a rewarding journey. Although failure rates are high, no other jobs will offer founders such an opportunity for learning and growth. More importantly, in a developing country like Vietnam with prevailing social issues such as poverty, pollution or education gaps, we need more innovative market-based solutions from enterprises in general and start-ups in particular.
Yet, with all opportunities for learning, growing and contributing, they do not make failures for start-ups less devastating. Therefore, carefully researching the targeted industry, avoiding naïve thinking about running a business and preparing yourself psychologically for the journey as a founder are vital to circumvent certain types of failure. Even with setbacks, there’s one thing to remember: many ventures only take off after their owners have failed, learned, and grown.