Survival 101 is a new Vietcetera series focused on giving expert and relevant tips on coping with different challenges - in our personal lives, in business, and all that's in between.
Let’s say you have this brilliant business idea you know would profit and grow eventually. Your passion is just on fire, and there’s no stopping you from establishing your own startup. After all, what you need to start a business is just a solid idea that can go far. Right?
What many young entrepreneurs do not know until they’re officially in it is that the startup ecosystem (or the business world for that matter) is a very competitive environment. Everyone has ideas they want to fight for, and there are investors who won’t have second thoughts dismissing your work as “no big deal”. Even the greatest of ideas or business models could crash and burn even right before they could take off. Because here’s the hard truth: raising capital often means the difference between success and failure.
Having the right amount of capital from the right investors is vital for giving your business idea the chance to live to its full potential. But of course, it’s not going to be a smooth road to travel through. You’re not going to get a surprise call from angel investors or venture capitalists if that’s what you are waiting for. It takes hard work and patience, creativity and resourcefulness, and an indestructible strong will.
Here are some of the most practical and useful tips from successful founders of Vietnam-based startups that can help you find the right people who will help you lift those ideas off the ground, and how you can eventually get that most coveted “yes” from investors.
Start communication with investors even before you actually need to raise capital.
Due diligence process takes much longer than the founder thought normally which makes it hard for founders to make sure run-way of the company. To make due diligence smooth, you need to build connections and keep a solid communication with investors long before you actually raise capital or ask them to invest in your business. Through conversation with investors, you will know what you need to improve, what is the gap between your thought and investor expectations. Investors are also people.
So, you need to build that mutual trust as founders and investors, which can help you have a fruitful long-term relationship after investment. It takes time to build trust. So, I suggest starting conversations with investors early on. While you update your progress with them, they can see how you overcome difficulties, what Kaizen method you apply for your business, and how you build a strong team and culture. Those are difficult to show via only one meeting or call with investors. In one word, "Building relationships is important".
Structure your pitch like a Hollywood movie.
Think like a Hollywood movie. Intro. Development (Climax!). Conclusion. Every deck should have the following items:
Act 1: Problem, Solution
Act 2: Business Model, Competition
Act 3: Founding Team, Fundraising
First, capture your audience's attention by defining the status quo or problem within your chosen industry. Where are the pain points? Is it a supply problem? A demand problem? Is it an execution or operations problem?
Then drop your solution like a bombshell. It could be operational excellence. We hire, train, and retain top-notch real estate agents. Operational excellence. We have a CRM that tracks historical transactions and prices. Tech excellence. Which leads to superior contribution margins. Boom. Profit.
Your story should be developed to build excitement about the business opportunity, by providing numbers that are almost too good to be true, but actually are. What's the market validation? Why now? What's the market size? Who are your competitors and where do you fit? What’s your business model? What are economics?
The third act is where you make your point about why investing in you is such an incredible opportunity. Who are the founding team members? How much experience or talent do they have relative to the industry you’ve attacking? How much are you looking to raise for how much equity in the company? Are you asking for too much or too little?
If you’ve put together a great pitch and rehearsed it to perfection, you can get rejected 15 times before one lead investor says yes. You guessed it. Raising funding for your start-up is like being at the hottest nightclub in town. It’s a numbers game. And you have to bring your A-game!
Don’t oversell. It’s gonna boomerang.
Don’t oversell your ideas because they may be worthless to investors. Instead, present one validated idea that you can actually support. You would have to do a lot of readings to understand the process of idea valuation (the book ‘The Four Steps to the Epiphany’ can be a good starting point’). An idea with good traction is much more attractive to investors, traction can start small and early. At the end of the day, you will need to narrow it to a smaller idea that is validated.
As I learned from the founder of Airbnb, having 100 customers who love your product/solution is way better than the thousands that think your product is okay. Find customers who are on fire, who you know would love what you’re offering. Your product should be ten times better than anything else customers want, something that they’d want so bad to get or experience at midnight.
Next in the pitch, you should nail the product-market fit. It needs to prove that it could scale with technology. Bear in mind that when VCs come to startups, the earlier it is, the more multiple X times they’d be looking for. They don’t invest in high-potential businesses, they invest in high growth-potential businesses. So if you could prove that it could sell and grow, then money should be no problem.
Be honest. And be ready for rejections.
The first round of funding is all about the team. Raising with just an idea is going to be hard. We raised our first idea with a product and a few months of cohort data. Since then, we've raised multiple rounds of funds and a different approach was taken each time. The first time was a targeted and time-compressed approach where I talked to only investors who had exposure to models like Kilo. The second time, we spoke to hundreds of investors of every shape and size across the globe. While both approaches had their pros and cons, what we realized is that fundraising is a mix of art and science. There is no single playbook.
Generally speaking, have the following items ready - (a) 1 paragraph email with the vision and quick highlights of the team and traction, (b) a short version of the pitch deck with no more than 8-10 slides (c) a long version of the deck with 25+ slides, and (d) a bottom-up financial forecast with 24-36 months of financial projections. Send out materials judiciously and put pressure on VCs to act fast. Leverage tools like Carta to maintain good governance.
And be honest with everything you’re presenting. Founder-investor chemistry is rare. Don't be afraid to talk about failures because failures don't matter. Only success matters.
But when you get rejected, accept it. You will experience rejection more times than you could imagine. Don't let your ego get in the way and seek out why the VC decided to pass. It is important to keep in mind that VCs are there to deploy capital and are under pressure to do so.
Bear in mind that startup founders in Vietnam should be prepared to deal with two primary challenges - (a) they are competing with Indonesian and Indian founders, and (b) building conviction over Zoom will take extra effort and time so plan for this.