Startups in agriculture struggle to seek capital

Startup funds only reserve 10 percent of their capital in agriculture, a field which bears high risks.

It's difficult for agriculture startups to call for capital

Nguyen Minh Nhan, director of Vuong Tron Trade Company, has borrowed VND600 million without collateral from a business supporting fund at preferential interest rates.

When starting up, Nhan ran his company with his family’s capital and could access preferential loans in the third year of operation to scale up production. 

While startups in IT and service sectors can easily raise funds with only a business idea, startups in agriculture can raise funds only when they enter a stable production stage after successful commercialization and need capital to expand production.

In the first phase of operation, some startups do not take invoices when buying machines and equipment so as to avoid tax. However, because of this, startups will find it difficult to prove the value of their assets before investors.

To be able to borrow money without having to mortgage assets, startups have to prove their debt payment capability, assets and cash flow. 

In the first phase of operation, some startups do not take invoices when buying machines and equipment so as to avoid tax. However, because of this, startups will find it difficult to prove the value of their assets before investors.

A startup in Dong Thap province complained that it is difficult to call for capital because investors have high requirements for products, market scale and the competitive edge of founders.

Tran Bang Viet, CEO of Dong A Solutions, said proving their capability is a must for startups. 

“Even if you start up with capital from relatives and friends, you will have to prove the feasibility of the projects to persuade relatives and friends that the money they pour into your business won’t be lost,” he said.

According to Huynh Kim Tuoc from Saigon Innovation Hub, he has considered 500 startup projects over the last year, 30 percent of which are in fields related to agriculture.

“Founders don’t have the skill of analysing the market. They just want to start up because they feel their ideas are okay,” he commented.

The investor said that there are several projects related to lotus, but the products are not attractive. Many investors want to see the passion and strong determination of founders and hear interesting stories about products.

He said that startups in agriculture can call for capital despite the high risks, because Vietnam has an advantage in global integration.

The advantage mostly comes from native resources that only Vietnam has. For example, Vietnam has many precious medicinal herbs. If the herbs can be developed into products with high technologies, startups will succeed.