Whenever a startup in Vietnam announces successful funding round, the society amplifies its achievement, regardless of company size or familiarity. From edtech to fintech, to agritech and SaaS firms, Vietnamese startups continue to blaze the digital trail and push Vietnam toward a more innovative digital economy.
Global startup ecosystem and research center StartupBlink released a list of the ‘Best Countries for Startups in 2022’ in the Southeast Asian region, and it ranked Vietnam in 5th place (up by one spot from the last period), 54th in the world (up by 5). It surely was an achievement, considering the country just reopened its borders towards the end of Q1.
But in one episode of Shark Tank US, American billionaire and shark Mark Cuban said, “When you raise money, it’s not an accomplishment, it’s an obligation.” Another shark also pitched in, saying, “media shouldn’t celebrate funding announcements as if that’s profitability.”
To provide an idea of how founders and VCs handle funding rounds, we reached out to Sohun Bae, an investment manager at Ascend Vietnam Ventures (AVV), to ask about his thoughts on the statement made on Shark Tank.
Sohun “agreed and disagreed” with what Mark Cuban said. Seeking funding requires dedication and a lot of effort. “Overall, I agree with Mark Cuban’s statement, but it’s important to recognize that founders and teams work hard to raise funds and their efforts shouldn’t be discounted. It’s an important milestone in a startup’s journey and should be celebrated.”
The investment manager added that it’s crucial for founders to understand that “the hard work starts now, the problems have not been solved, and it’s just the beginning.” Just because you’ve got funding doesn’t mean you’ve already built a successful and sustainable business. “The investment comes with strings, new stakeholders, and new expectations.”
Regarding the part “media shouldn’t celebrate funding announcements as if that’s profitability,” Sohun sees a different effect and believes media exposure is “quite helpful,” especially for early-stage founders that could help in hiring key positions.
“Media provides a platform for recently funded startups to amplify their brand and what problem they’re tackling through technology,” he said. “Additionally, some founders hope to use media announcements to build a pipeline of potential future investors and attract high-quality candidates to join their mission.”
According to Sohun, even the most experienced founders who have gone through the journey before still feel anxious on the day of the funding announcement “because they know this is just the beginning of another chapter in their journeys.” The check is not just a free check, it comes with a whole new level of responsibility to more people. “You have more obligations now, you have additional stakeholders, and thus the pressure is greater than before.”
As Mark Cuban, the other sharks, and Sohun can attest, the heavy lifting starts immediately after the funding goes through. Sohun also pointed out a few best practices and tips on what founders should do after they bag a new funding.
Go back to work
It varies for every founder, but in general, the immediate first step is basic: get back to work. It could be refining the product to deliver better experiences, growing your user or customer base, refining your unit economics, etc. Whatever it is, know that it’s not a time to rest on your laurels.
In addition, founders should avoid adopting a mindset that money solves all problems. It’s true that having capital helps, but it should be allocated carefully. It’s not a time to go on a reckless spending spree.
Hire key people, but don’t go on a hiring spree
Even if you bagged millions of dollars from investors, don’t hire many people immediately. Founders should fight the urge to go on a hiring spree, hire only the best, and get as much accomplished with the smallest organization possible.
While it looks impressive from the outside, building up your headcount can create all sorts of organizational challenges that first time founders or first time people managers will struggle with. Managing at scale requires intention in how you design your organization as well as making sure people managers and leaders are able to help their people thrive. Done in haste, it can lead to devastating outcomes and likely create unnecessary barriers to key outcomes for startups at this stage.
As to which positions founders should prioritize, this depends on each organization. For those with non-technical founders, it would behoove them to invest in solid technical leadership, likely a key role like CTO. It’s worthwhile to take a look at your organization’s hiring needs and identify critical hires at this time, cutting out nice-to-have hires.
According to Ascend Vietnam Ventures’ investment manager, it’s not a great sign if a founder is solving problems by “throwing more hands at it”. The rest of your leadership team and even non-people managers follow your lead, so it’s important to set the right example. The default approach should always be to figure out how you can solve the problem in an innovative and resourceful way, without hiring more people. Hiring shouldn’t be your solution for every problem. You need to be innovative with who you have. There are some exceptions of course, where an operational business requires more people to achieve greater outcomes.
Think of a capital journey
Like Erik Matlick said in his LinkedIn article, “Every time an entrepreneur raises money, they make a decision that impacts their future options for additional financing or an exit. An angel round keeps every option open for the future, including selling the company, going public, or eventually doing a venture round.”
Sohun agrees. Throughout the investment journey, founders should think of how this round sets them up, for better or for worse, for the next round. Having a solid investor to help you think through these scenarios is immensely valuable.
Find new investors
How many investors are too many? Again, it depends on the startup. At early stages for the highest potential startups, it’s likely an investor will want to invest in the entire round by themselves. That said, startups may take on additional investors who can bring unique value - perhaps their networks can help you connect to partners or aid you in expanding to new markets.
How much money is too much? It feels great to get a lot of love and be the most popular person at the party when you have investors lining up to your oversubscribed round. However, if you take too much money, founders need to understand that this can have serious consequences in the next round; it may actually make it harder for you to raise the next time around.
Having a trusted investor to help think through these scenarios and staying disciplined will set you up for future success.
The story was produced in partnership with the Initiative for Startup Ecosystem in Vietnam.
This story program “Initiative for Startup Ecosystem in Vietnam until 2025” (also known as National Program 844) was approved by the Prime Minister on May 18, 2016, and assigned to the Ministry of Science and Technology of Vietnam in charge of implementation. The program aims to create a favorable environment to promote and support the formation and development of fast-growing businesses based on the exploitation of intellectual property, technology, and new business models.