Opening up capital flows for local blockchain startups

July 11, 2022 | 09:00
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A more transparent system and speedy investment attraction are making blockchain-related ventures a fertile ground for startups in Vietnam.
Opening up capital flows for local blockchain startups
Opening up capital flows for local blockchain startups

For the first time, the Global Blockchain Congress is being held outside Dubai this week when it takes place in Hanoi, offering the chance for entrepreneurs and developers to get together and exchange views and ideas.

At a talk show on VIR last week on innovative funding for blockchain startups, Hadi Malaeb, co-founder and CEO of Agora Group, explained why his company was moving hosting duties from the UAE to Vietnam.

“Vietnam ranks third in Southeast Asia in terms of attracting investment flows to startup projects, especially blockchain-related projects,” Malaeb said.

According to Malaeb, Vietnam currently has 3,800 blockchain-related projects, 200 venture capital funds, and 100 project incubation funds to support the country's startups.

Agora Group is highly impressed with Vietnam’s achievements in digital transformation and development, and it has a strong belief in the breakthrough strategies and visions of the Vietnamese government on digital transformation, he added.

“The launch of a series of quality projects by Vietnamese startups is also one of the key reasons why we consider Vietnam the most suitable and ideal location for the Global Blockchain Congress,” he said.

At the talk show, from the perspective of an investor who has successfully raised capital, William Do, CEO of HOBBIT Investment, shared that blockchain projects are fertile ground in gloomy economic years because profits multiply and develop rapidly, and the ability to get capital returns is high if investors are cautious.

“This is true not only for venture investors and specialised service providers, but also for projects that use blockchain technology as a foundation for development,” Do said.

He added that while 2020-2021 was somewhat of a golden time for blockchain-related projects, with many ventures raising large amounts of capital from overseas individual investors in a short time, the situation has been altered so far this year.

“Investors have become more careful and strict in approving projects because many startups previously used capital inefficiently or for the wrong purpose. Confidence can be lost due to some projects showing signs of fraud, causing serious losses for investors,” he said.

Blockchain research firm Chainalysis estimates that such scams have cost investors a total of nearly $3 billion globally last year.

Do recommended that startup projects in Vietnam in particular need to focus on ideas and their people if they want to raise capital efficiently.

“In the midst of a market prone to unforeseen fluctuations, founders must be extremely resilient and flexible to overcome challenges and make appropriate decisions for projects. In addition, the support from quality relationships such as strategic partners and project consultants also plays an essential role,” he said.

Meanwhile, Jennie Hoang Phuong, CEO of D.Lion Media & Solutions, explained that it is also important to focus on training and perfecting skills for startups before reaching out. “Lacking basic skills such as management thinking, and basic knowledge of marketing and financial management, means it is not easy to convince a knowledgeable investor, no matter how great your project is,” said Phuong.

Vietnam is considered a top destination for blockchain startups. Figures from the National Innovation Centre show that the total venture capital investment for startups in Vietnam last year reached a record $1.5 billion. This number is three times higher than in 2020 and it is forecasted that the investment capital of Vietnamese startups for this year in total may reach $2 billion.

Another organiser of the Global Blockchain Congress, V2B Labs CEO Tony Tran added, “I hope this will be a good chance for potential blockchain projects to share, connect, and find investment opportunities from the most quality investment funds, bringing the Vietnamese blockchain market to prosper and thrive.”

Jennie Hoang Phuong - CEO, D.Lion Media & Solutions

Opening up capital flows for local blockchain startups

From my experience, business owners should think about how to establish a good rapport and maintain healthy relationships within the team. The key message for any successful business is to build an effective, holistic team.

Furthermore, commitment and clear communication among relevant stakeholders need to be updated on a daily basis, which will help to bridge the gap between businesses, the whole community, and its investors. Investors are very diligent to know what is happening with the projects, so commitment and clear communication will help the project not only become a very successful startup, but they will have them move into a sustainable path on a long-term scale.

Besides this, startups need to conduct thorough insights into the market because their product can only be acceptable if it can address emerging issues.

Your products will be deployed and used by the market, so please try to understand what they actually need. It always comes down to your core values – you keep your core values but you can change your strategy, which is based on the current situation of the market.

William Do - CEO, HOBBIT Investment

Opening up capital flows for local blockchain startups

You need to collect all the ingredients and it has to be under certain conditions. Then, at the right moment, you introduce them to the market and the market will welcome the project. If not, then it is hard for them to even look at your projects.

If the economy is bad, everyone is cautious about their money. If you want money out of their pockets, you need to give them a stronger push than you normally would do. If you do that, people will look at your project with more intense feelings. If you don’t create intense feelings for them to look at your project, you already fail from the first moment that you present your project to the market. In addition, you need to know two types of audience to convince them to jump on board. First, they are your community supporters who are using your products.

The project should have a solid product to convince the community to support it. It can be your friends, family members, and a circle of people around you who have to trust and believe in your products. From then, you will build a larger community.

The second type of audience you need to focus on to build is the support from investors. It doesn’t have to be financial investors – it could be any kind of investor who assists in your project in terms of time, effort, equipment, facilities, and more.

They will help you build slowly and supply the things you lack when you raise funds. Investors will look at different aspects of the project including the chance of acquiring users and the solidity of the product, as well as the community supporters.

Hadi Malaeb - CEO, Agora Group

Opening up capital flows for local blockchain startups

Vietnam has established itself as an innovation hub in Southeast Asia. There is a clear government policy on digitalisation and on improving innovation and the startup ecosystem. These policies have yielded some strong results for the startup ecosystem in general and for the blockchain in particular. All the ingredients are there to sustain the drive towards digitisation and increasing funding for startups.

VCs will evaluate the business case of the startup, the team leader, previous experience, the capacity to execute their business plans, and the valuation of the equity they have invested. Nearly one-third of the deals come from colleagues and ex-employees of the VC firm, one-fifth from other investors who have gone through the projects, and 8 per cent come directly from existing portfolio companies. Only 10 per cent of the projects come from startups approaching VCs. Startups need to connect to the right social and professional circles in order to seek capital directly from VCs. The fundamental question commonly posed by investors yet challenge the majority of blockchain startups is their go-to-market and listing approaches.

All relevant stakeholders in the startup ecosystem need to understand the essence of blockchain. Blockchain will soon be integrated into everything to make our lives easier without us having to understand the technology behind it.

As a startup, the earlier you can talk to investors, the better it is. Investors are not only there to put their money in but also to provide their expertise and guidance. Early interaction with investors helps startups steer their ship and save up time for research.

By Tra My

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