Most Vietnamese e-commerce providers have been leaning on foreign investment to meet the huge capital funding required at the start-up stage.
The two leading e-commerce websites in Vietnam www.vatgia.com and www.chodientu.vn gained their success with financial support of their foreign partners.
Vat Gia director Nguyen Ngoc Diep said at the entry market stage, an e-commerce website developer must attract foreign backers for financial support. Each website would need around $2 million to $3 million to successfully pass the start-up stage.
Diep said that without funding from partner IDG Ventures, his website would not be able to weather the market entry stage.
The company had reportedly an expenditure of $3 million during 2007-2010, most of this funding came from IDG Ventures. The company has made no profit, as all gained revenue just covered all expenditures.
Nguyen Hoa Binh, director of Peacesoft – the company behind chodientu – shares the same opinion. There are three foreign investors in Peacesoft comprising IDG, Soft Bank (Japan) and eBay (the US).
Vietnamese players are leaning on foreign investors due to a difficulty seeking domestic funding.
“One of the most concern is the government seems not to create incentives for e-commerce website company developers to mobile capital from domestic resources. Meanwhile, those companies do not have enough valuable mortgages to reach banks’ loans,” said Diep.
Those companies also feel hard to mobilize capital from the public through listing because they can not satisfy the requirement of having two consecutive years of getting profit.
“What we want most is the government enables to pave the way for us to attract domestic capital for expanding operations,” said Diep.