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Risks when startups have too much money

When suddenly there is too much money from fundraising or IPOs, startups can drift away from their core values ​​and pay dearly.

During the Scale-Up Forum event organized by Endeavor Vietnam last weekend, Mr Hoang Nam TienChairperson FPT Telecom.

“Nearly 20 years working at FPT, I confirm the company has never needed money. But in 2006, we decided to IPO because we realized that in order to be more successful, to compete with big names, we had to To raise capital, it had to be listed on the stock exchange. On December 13, 2006, FPT went public. After one night, the company had more than 150 million USD millionaires,” said Mr. Tien. Right after that, the whole company suffered from a disease that many Vietnamese startups now also face, which is “punctured needles” – suddenly having too much money and not knowing what to use it for.

Speakers at the Scale-Up Forum event taking place in Ho Chi Minh City on April 14.  Photo: Endeavor Vietnam

Speakers at the Scale-Up Forum event taking place in Ho Chi Minh City on April 14. Image: Endeavor Vietnam

Mr. Tien believes that this makes the startup can face two big risks. The first is to think that you are very rich and good, invest your money everywhere, and then fail. The second is that because suddenly there is a lot of money, some people in the organization decide to take a break, not to work anymore.

“FPT then met both of these cases. We invested in all fields from banking to real estate but failed. We succeeded in returning to technology. Out of more than 150 million USD millionaires, nearly 100 people were close to 100. decided to quit because just receiving annual dividends is higher than salary, no need to go to work anymore. This is very dangerous for startups when raising capital and going to the stock exchange, “he noted.

According to Luong Duy Hoai, CEO of Scommerce, fundraising is a magical journey for startups, but it has two sides. The positive side is that the business has money, is more famous, expands operations… On the contrary, they do not know what to focus on, how to use the money. Many employees were misplaced and many lessons learned from successful fundraising.

From the perspective of a startup that does not follow the path of capital raising, Mr. Phan The Dung, CEO Rikkeisoftsaid that one reason the company grew from 100 people to 1,000 in four years but still didn’t get outside funding was because investment funds didn’t really understand and share its vision.

“Technology has too many new things, for example, I want to invest in blockchain, but maybe the investment fund doesn’t like it, preventing me from doing it. Not all investors are knowledgeable about the industry. Moreover, we also I haven’t thought about what I need such a large amount of money for. The company’s annual profit is not much, but it is still enough to operate and develop as planned,” said Mr. Dung.

However, he also admitted that not raising capital from outside also caused the organization to face many difficulties. “When the company grows large enough, the number of employees is large, the revenue per capita may be lower. Resources are not enough to bear all, businesses then have to choose. There was a period when we had to pause. product team to focus on outsourcing,” said CEO Rikkeisoift.

According to Mr. Luong Duy Hoai, the lesson learned with startups is not to raise capital when you don’t know how to use the money. “Just calling for capital, having money and then counting is the wrong mindset right from the start. Startup must carefully consider what money is needed for, what to use it for, otherwise it will face many consequences from suddenly having too much money. a lot of money,” he insisted.

Khuong Nha

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