Company expansion in HCM

Phi Long

It all depends on the size of investment you are talking about, the kind of return you are offering and security/safety of the investment.

Since you are exporting, your revenue should be safe from inflation.
Banks are ok with lower return but they require a lot of security (e.g., you have to secure the loan with all of the company's asset).

Banks are also to get loan than the investment companies who do not do deal smaller than say 1MUSD and also require higher return and take longer to do due diligence.

If you are quite confidence about the opportunity and the investment size is not large, your best bet may be the so-called 'angel investors' i.e., wealthy individuals, friends-of-friends here or the Vietnamese community in the US. They also are happy with lower return.

What types of products do you manufacture?

These are difficult times. VN bank loans are being restricted by the State Bank of VietNam; private venture capitalists want a large chunk of your business,

Exporters to Europe are having problems and the US economic outlook isn't the greatest.

You should be moving with great caution until things improve, even a little.

Thank you Anatta and Jaitch for the replies. For the past few months, the business has already received the 'angel investors' funds (as you would say) to help grow the business to where it can progress. But this is only a short-term solution as the company is looking to expand in additional new markets and requires more funds for a larger factory, additional labor, raw materials, equipment, etc.

Jaitch, the business involves with custom made jewelry at the top tier in the industry. It's interesting to see a company turning down business unable to meet the orders in the world we currently live in.
VN banks are not an ideal option to us with all volatility that comes with it from what I have researched. If anyone tends to disagree, I would gladly listen.

Anatta, the companies assets are not where they need to be right now. Within a year it could change. The current option right now is slowly but surely build up the business but prolong our other opportunities in new markets.

Thanks again for the comments. Hopefully I will come up with an alternative solution in the coming weeks.

Well. If you are so sought by your customers, how'bout asking them to finance your growth with you giving them preferential treatments in return:
quicker turnaround time, longterm contract and lower prices. It is not unusual for companies to invest in their strategic suppliers if supply is tight to ensure stable supply or if they believe in the long-term growth of them.
They are also the ones best able to judge your potential.
You can even ask your customers to do 100% advance payment, thus also help your working capital.

Another thing which entrepreneurs are not aware of when they ask external professional funds are the amount of control they must give, not only the ownership share but also control over their business.

They are used to be able to 'turn on a dime'. Now they have to get external approval to run their business. Not always healthy for their ego.

Also they also must have much more transparency (and formality) in running their business. Not all are prepared to do so, especially in the Vietnamese environment.

Didn't mean to take this long to reply back.

Anatta, we have everything covered insurance, shares of the company, access to real time orders taken place online, etc. Just the assets aren't there.

I found my answer to my original question yesterday to another option. If it works out, great!

Hello Guys,

It has been quite awhile since I last read or responded to any of your posts.  How have you all been?

Anatta (How are you, man?) and Jaitch, are right about the venture capitalists:  they only get involved with big projects, they nitpick you business plan, they want at least 25% of your business, they demand transparency (very hard to do in Vietnam) and, when the time is up (usually in 5-7 years) and you had achieved your goals, you will have to buy them out at 2 to 3 times the amount they put in.

The one good thing about the venture capitalists is that you won't fail.  They will not let you.  At anytime that they see your business is slipping, they will intervene, take over the management if necessary.  Think about it Phi Long.

One good source for working capital that I see is via the Vietnamese elites.  Many of these guys have more cash than what they know what to do with.  In the current financial situation, many of them are just leaving that money in their bank accounts to collect interests.  They are not as nitpicky as the venture capitalists.  However, they are difficult to get to know and gain the trust needed. 

Another thing that you might want to consider, Phi Long, is that the interest rates in Vietnam are not fixed.  It varies monthly or quarterly, depending on how you negotiate with the banks.  Shorterm, yes it is terrible to borrow now.  But, longterm...  especially if you are confident about your business plan, it might not be all that bad.  You retain controll of your business.

Good luck,
Howie

Howie.
Welcome back. It has been a bit quiet from your front lately. Hope that you are doing OK. I'm doing relatively well. Just bought the ticket to get home in Chinese New Year, so it is going to be good to see them again.
The VC's, as we call them, want very high return. They actual aim for the 10x, i.e., 10 times return. A 2x,3x return while sound high is not something they are interested in. A 3x return over 7 years yield an annual return of 17%, lower than current bank loan rate.
Their business model is a few home runs will make up for a lot of thuds which is to be expected in a high risk, startup environment. Believe it or not, approx 3-4 out 5 VC-backed companies failed or at last only yield miserable returns, despite their efforts. That is why they are very selective in investing.
The PE(Private Equity) guys can except lower return (20% annual) but they only invest in mid size companies with lower risk. They then ‘gear up' by leveraging, i.e., loading up with debts to maximize their returns, just like the real estate guys borrowing up to the tilt to get max return.

Anatta,

I have been shuttling back and forth Can Tho and Ha Noi, looking for more opportunities.  Therefore, I haven't had much time to mingle.  But it is great to be back on here and read some of your posts.

Going back to the States for Tet?  Aren't you heading in the wrong direction?  Why not Christmas?  Tet is more fun here, no?

Back to the topic...  You are absolutely right on the mind sets and practices of the Vietnamese elites.  But, there are some very knowlegable guys among them, with very realistic understanding of the nature of international business.  They appreciate the western approach and admire the long-term thinking.  In short, they are well-versed in that win-win strategy.  But, more often than most, these guys are educated and influential thus, they are pretty well-guarded.  Usually, they approach you, not the other way around.  If not, then one of their confidants must introduce you to them.

Anyhow, that is a group that I thought you guys might want to know and keep an eye out for.  Unlike their hardline cadres, they get things done with little fanfare.  They can make business much much easier for you here.

Howie