Part I: https://medium.com/@longpham91/vietnam-fintech-in-a-flash-part-i-comprehending-vietnams-financial-technology-landscape-f5203cdb455a

Part II: https://medium.com/@longpham91/vietnam-fintech-in-a-flash-part-ii-digital-payment-1a49bd155add

A true digital bank is built on the value proposition that most products and services are delivered digitally. Its customers expect to use digital channels for their day-to-day banking activities. The digital bank’s infrastructure is optimized for real-time digital interactions and its culture embraces the rapid change of digital technologies. — “Designing a sustainable digital bank — Learning from the digital pioneers,” IBM

Banking is one of the oldest professions in human history. The root of modern banking that is still used today originated from Italy during medieval times, with the first bank established in Venice in ca. 1157.

In Vietnam, the banking system began with the French colonization. The Banque de l’Indochine served as the central bank for the entire French-ruled Indochina, including modern-day Vietnam, Laos, and Cambodia. In 1951, the Vietnam National Bank was established to develop an independent and autonomous monetary and credit system for Vietnam. Following the reunification in 1975, between 1975–85, the banking sector’s primary function was to serve as a budgetary mechanism to create a single banknote for a unified Vietnam. Only until the 1990s, along with the Reformation movement by the government, that the creation of the two-tier banking system was complete. The State Bank of Vietnam (SBV) would function as a central bank, while the commercial banks and credit institutions carry out currency trading, credit, payment, foreign exchange, and banking services in line with the law.

Today, the commercial banking system in Vietnam comprises of 100 banks, the majority of which are local banks and representative offices of foreign banks and financial institutions.

Foreign banks’ presence in Vietnam also rose to new heights. After two consecutive years of scaling down in 2016–2017, mostly through divestments from local private banks, Vietnam’s banking sector witnessed the approval for banking licenses by the State Bank of Vietnam (SBV) for several foreign banks, such as United Overseas Bank (Singapore) and Woori Bank (South Korea). Public Bank (Malaysia) and Shinhan Bank (South Korea) also expanded their networks of transaction offices and branches. Shinhan, with over 30 branches and auto-banking locations (called “Shinhan Digital Hub”), is the largest foreign bank in Vietnam.

Current Scenario

As mentioned in Part I of this series, the level of banking penetration in Vietnam only reached 59%. This level pales even in comparison with local ASEAN peers, such as Thailand (86%) and Malaysia (92%). Furthermore, according to World Bank data, the number of ATMs and bank branches per 100 thousand adults in Vietnam are at 24.3 and 3.4, respectively, indicating a lower level of penetration of traditional banking services in comparison with peers.

Meanwhile, per the Digital 2019 report by WeAreSocial, the number of Internet users in Vietnam has reached 64 million at the end of 2018; the mobile penetration rate has also reached 97% of the adult population for any mobile devices and 72% for smartphones only. This heightened adoption creates more opportunities for digital banking growth in Vietnam.

Finally, the rise of fintechs, especially in digital payment, in recent years has posed significant threats to traditional banking in Vietnam. In response to this challenge, these traditional banks must quickly adapt their strategy and products, gearing toward the Digital Banking mechanisms to serve the market better.

From Digital Transformation…

In Vietnam, Digital Banking has become a cornerstone of the financial development agenda. As claimed by Vietcombank, 94 percent of banks in Vietnam are investing in digitization, and 42 percent of them consider digital baking a top priority. Banks are stepping up their digital transformation to better serve their customers and improve overall banking experiences.

In online banking, the growth has been remarkable. Ninety-five percent of banks offering Internet & mobile banking services, according to Dr. Nguyen Thi Thanh Van from the Vietnam Banking Academy’s International Business Faculty. In terms of transaction volumes, Internet banking in Q3–2019 reached 226 million transactions, valuing at 10.9 trillion VND; mobile banking reached 202 million transactions, equivalent to 2.09 trillion VND in gross value, at 155,3% year-over-year growth. (SBV announced these statistics on Oct 1st, 2019 in Hanoi.)

However, traditional banks are not start-ups, in the sense that they are not in a position to embrace the lean, fast-moving advantage that nascent startups often enjoy. Customarily, they come with legacy infrastructure, back-office systems, and existing distribution channels (such as branches, ATMs, employees) that are programmed in the traditional way of banking. These resources have been built over the past few decades, and it would be a waste to not leverage them. Most use cases of digital banking in Vietnam, consequently, fall into Model A or B.

Model A: Digital Bank Brand

Most commonly, the traditional banks would launch a new Digital Bank, with its own banking products and dedicated sale and marketing channels. This new Digital Bank would still share some of the old brand’s features and leverage the available resources from their legacy infrastructure, back-office, and distribution channels. This was the case for OCB OMNI, TPBank LiveBank, and VIB.

Model B: Digital Bank Channel

For certain use cases, traditional banks develop an entirely new Digital Bank, which is entirely different from their current branding, creating a new distribution channel for its banking products. The most prominent pioneering bank in this model is VPBank with its digital banks YOLO and Timo. Viettel, the country’s №1 telecom giant, has also ventured into digital banking with its mobile-based service ViettelPay, which links with Military Bank (MB) to offer banking services.

These two models are most preferred for traditional banks because it doesn’t require intensive capital and human resource investments. Digital Transformation is hard to achieve with limited capital and budget, as well as significant investment and application of new solutions and technologies. Only a few banks have made significant investments in this field, whereas the rest is still exploring.

…to New Operating Models for Banking

In both models, Digital Banks often attempt to reach beyond their parent bank’s existing products and services. Most often, they would become a distribution hub for other financial services, such as insurance, investment, bill payment, etc. They can do this by leveraging APIs (Application Programming Interface), which are sets of definitions and protocols for building and integrating with other application software, without having to know how they’re implemented internally. This can simplify application development, saving time and money, which is suitable for Digital Banking development and experimentation. As stated by VNUHCM-IBT, most commercial banks have already developed API connections with fintechs. The leading banks in this trend are Vietcombank (APIs with 30 companies), VietinBank, MB (26 companies), VIB, Sacombank, VPBank (25 companies).

Other traditional banks who decide to bypass these models and digitize themselves also take a similar approach. They would develop their own APIs to work with third-party providers, effectively opening up their infrastructure and resources for other companies. Asia Commercial Bank (ACB) is one of the first banks in Vietnam that has developed a functional set of APIs, which can be found on their Developer Portal. In doing so, not only can they enrich their product/service offerings to their users, but they also become infrastructure powerhouse for other fintechs or financial institutions.

…heading towards a fully Digital-only Bank

A digital-only bank provides banking facilities exclusively through digital platforms, such as mobile, tablets, and the Internet. It offers basic services in the most simplified manner, with the help of electronic documentation, real-time data, and automated processes. — Infosys, “Digital-Only Banking — A Soaring Wave in Consumer Banking”

The journey towards a Digital-only Bank, or Digital Native Bank as IBM put it, still have some distances to cover. There are a number of obstacles, including cybersecurity, consumer preference towards cash usage, and lack of infrastructure and regulatory framework.

Cybersecurity

Cybersecurity risk remains a top challenge for digital banking. As Le Anh Dung, deputy head of Payment at the SBV, succinctly said, “In Viet Nam, security risks such as fraud, customer fraud, network attacks on bank infrastructure, and user data leakage are rising.” Ernst & Young Vietnam reported that in 2018, 8,319 cybersecurity attacks targeted banks and 560,000 computers were affected by malware capable of stealing bank account information.

Do Anh Tuan, deputy director of Vietnam’s Department of Cyber Security and Hi-Tech Crime Prevention, also shared at the Security World 2019 conference that stealing card information and counterfeiting cards (skimming) are becoming more serious in Vietnam, given the number of 70 million domestic cards vulnerable to cybercriminals. The criminals would “use fake cards to conduct fraudulent transactions and pay bills/services via point-of-sale (POS) machines, stealing hundreds of millions of dollars,” said Tuan.

Vietnam’s Government Cipher Commission also reported that in the near future, the cybersecurity situation in Vietnam will become even more complicated since cyber attacks will use AI technology and focus more on banks to steal users’ confidential information.

Cash-usage consumption behavior

In Vietnam, the use of cash in the consumer market, especially in daily spending, remains high. A recent report by Standard Chartered points out that cash transactions remain highly popular in Vietnam compared to other ASEAN countries. For instance, in 2017, Vietnam posted the highest rate of cash on delivery for internet purchase at 90.17%, significantly higher than the second-ranked Indonesia of 65.30%. Also according to this report, the high level of cash use is mainly due to a lack of understanding of how digital payment methods work and how to start using them.

Inadequate Infrastructure and Regulatory Frameworks

The lack of digital infrastructure poses another challenge for the growth of Digital Banking. In order to have a Digital Native bank, there have to be sufficient e-KYC (Know Your Customer) processes and opening of Application Programming Interfaces (APIs) that work seamlessly with the core banking system.

Insufficient legal regulations are also a big challenge. In the past few years, the digital banking segment has grown rapidly with technology advances, but domestic legal regulations are lagging behind, making banks reluctant to apply new technologies and services. For example, Vietnam does not have a legal framework for sharing, exploiting and storing data, so banks have not been able to apply cloud computing or blockchain widely in their operations.

Current Solutions

Realizing these hurdles standing in the way of Digital Banking growth, the responsible parties, namely the government and private banks, have both taken actionable steps towards amending the lackluster areas as well as creating new frameworks.

The creation of the National Payment Corporation of Vietnam (NAPAS) was such a pioneering initiative. A state-owned company (with its largest shareholder being the State Bank of Vietnam), NAPAS have developed and completed the national retail payment infrastructure since 2014, in order to provide financial switching services and electronic clearing services in Vietnam. Beyond that, NAPAS has also worked with traditional banks to improve the digital banking infrastructure and security.

The government itself has also been very active in the growth of fintechs in general and especially Digital Banking. In 2017, the government established a steering committee to improve the ecosystem for the fintech sector. In 2019, the SBV was also the first authority to propose the government to set up a sandbox for regulatory testing. Nghiem Thanh Son, director of the Payment Department of SBV, shared about how this sandbox will function, “We set the requirements and scope to meet certain criteria, the management agency will monitor the profile of businesses that apply to control risks as well as avoid impacts to the last users.”

The commercial banks have also taken active steps to edge closer towards a fully Digital-only Bank. Vietcombank, the country’s largest bank with the market capitalization of $13 billion as of September 2019, launched its first two Digital Labs in Hanoi and Ho Chi Minh City in 2016, as part of the larger Digital Transformation scheme. Sharing with Forbes Vietnam, Mr. Nghiem Xuan Thanh, Chairman of Vietcombank, disclosed that they will be investing heavily in its Mobile Ecosystem by working with fintechs in the near future.

Key players

NAPAS

NAPAS, short for the National Payment Corporation of Vietnam, was established in 2004. Originally named Banknet, the company merged with Smartlink in 2016 to create “a unified card switching center under the direction of the Prime Minister and the State Bank of Vietnam.”

NAPAS administers and operates a switching system connecting more than 18,600 ATMs, 261,000 POS machines, and 300 electronic payment companies, serving over 100 million cardholders in Vietnam, as stated on its website.

Aside from this mission, NAPAS also commits to strengthening the national banking infrastructure. In May 2019, NAPAS has partnered with the Vietnam Bank Card Association (VBCA) to launch the first local debit card with a built-in security chip, with 7 pilot banks. NAPAS has also been coordinating with banks, partners, and international switching organizations, such as Discover Financial Services (DFS), Network for Electronic Transfers (NETS), to provide payment products and services applying the most advanced digital technology like Blockchain, QR Code solutions.

Timo

Founded in 2015 as a joint venture between VinaCapital and other partners, including VPBank, Timo is the first Digital Bank experiment in Vietnam. Timo claimed that it has over 250,000 customers and four branches, which it brands “Hangouts,” across Vietnam.

Timo operates by leveraging the official banking license from VPBank. Through its web and mobile applications, Timo provides a wide range of financial products and services to its users, from a basic checking/saving account to bill payments, life insurance, mutual fund investment, hotel/flight booking. The bank also offers a free NAPAS debit card that comes with every checking account, as well as a Mastercard credit card for regular Timo users with minimal requirements for credit approval.

ViettelPay

ViettelPay is the mobile banking arm of Viettel, Vietnam’s largest telecommunication network. Aside from providing certain functions similar to an e-wallet, it also allows users to access banking products and services through its partnership with Military Bank (MB) (also partly owned by Viettel). ViettelPay users can request a free MB debit card within the ViettelPay mobile application, use their ViettelPay account as a checking account (receive/send/deposit money, request bank statements, etc). The physical KYC process for new users can be completed at any Viettel transaction point nearby with a national ID card or passport.

After 1 year since its launch in 2018, ViettelPay already has 6 million users, grossing 50 trillion VND (~US$2.2 billion) in monthly transaction volume, per its PR data. Aiming forward, ViettelPay targets the mass consumer markets, especially in rural areas where mobile and digital adoption is still low. By leverage Mobile Money framework (money-related services distributed via telco networks), ViettelPay can target the entire network of mobile service users, regardless of their device or carrier.

The Mobile Money model has become increasingly promising, given the fact that there are 143.3 million mobile subscriptions in Vietnam, but only 72% of mobile users are using smartphones, according to WeAreSocial. This model has also been proven globally, with about 90 countries in the world, providing access to banking and financial services for 866 million registered accounts and grossing USD 1.3 billion in transactions every day, as claimed by GSMA Ecosystem. With the launch of Mobile Money in Vietnam, the country might soon witness its financial inclusion flourish, replicating the success of Sub-Saharan Africa. Also according to GSMA, more than 60% of this region’s adult population has a mobile money account.

TPBank — LiveBank

TPBank, formerly Tien Phong Bank, was founded in 2008 by FPT Corporation, MobiFone and Vietnam National Reinsurance Corporation (VINARE). After 5 years of inefficient operations, in 2012, Tien Phong Bank received investment from DOJI Gold & Gems Group by Mr. Do Minh Phu and rebranded to TPBank. Followed by this change of leadership was a period of restructuring and digital transformation, marked by the launch of its LiveBank service in 2017.

LiveBank is a 24/7 banking facility that provides all basic services that a bank office would offer, including opening a checking account, register an ATM card, deposit/withdraw money, etc. The KYC process for registering a new banking account can be completed via Video Calling with an online bank teller via the LED screen installed into the LiveBank. LiveBank also allows biometric verification (voice and fingerprint recognition) for transactions.

TPBank’s statistics showed that after 3 years since launch, in November 2019, the number of LiveBanks nationwide has reached 150 locations and served 2 million customers. Thanks to its after-hours accessibility, about 60% of the transactions occurred outside of normal banking hours.

This fast growth was credited to the low investment costs and ease of opening procedure for LiveBanks versus for traditional bank branches: TPBank Digital’s CEO, Tran Hoai Nam, analyzed that on average, a traditional bank can only open 4–6 new branches with certain operational hours, whereas LiveBank has no such limitation. LiveBank also results in better unit economics for TPBank: For a traditional bank branch, the cost per transaction is roughly 23.000 VND, but for LiveBank, this number is only 11.000 VND, equivalent to 50% cost saving.

The Future in a Flash

In November 2019, the SBV has released the new regulatory draft for a new decree on non-cash payment. In this document, Mobile Money, for the first time, has been defined by legal language, creating a pathway to its wider usage. Digital Transformation will help traditional banks become part of this initiative, instead of getting sidelined by it.

Fintechs will continuously become more impactful towards the growth of Digital Banking, by offering an opportunity for traditional banks to look at their operations and reevaluate where they stand. Based on that, banks can decide what to do with fintechs: co-develop with it, depend on it or acquire it. In any case, the growth of Vietnamese fintechs will change the banking experience in Vietnam for the better.

Up next: Part IV: Alternative Lending as New Frontiers (coming soon)

NOTE: If you haven’t read Part I, please read it up here: Part I: Grasping Vietnam’s Financial Technology Landscape.

Currently, the level of fintech penetration in daily use remains low. A survey by World Bank reviewed that the number of non-cash transactions over population was merely 4.9%, comparing to 59.7% in Thailand and 89% in Malaysia. Dao Minh Tuan, vice chairman of Vietcombank and Chairman of the Vietnam Bankcard Association, stated that roughly 90% of Vietnamese daily spendings are cash-based. Consequently, the payment landscape in Vietnam attracts a lot of fintechs, with 47% of local fintechs serving this segment, per the EY’s ASEAN Fintech Census 2018.

Current Scenario

The growth in Vietnam’s digital payment sector has been remarkable. According to Statista, the total transaction value in this segment amounts to US$6,4M in 2018, grossing 22.1% year-over-year growth rate, of which roughly 97.6% come from e-Commerce (US$6,2M). This number is expected to grow to US$11,1M by 2022, at the annual growth rate of 14.9% between 2018–2022.

Electronic wallet services also flourish. Per statistics from the State Bank of Vietnam, the value of e-wallet transactions in 2017 reached more than VND53.1 trillion, increasing 64% year-over-year. Out of the 29 licensed payment services in Vietnam, 20 of them offer digital wallets. These e-wallets allow electronic payment of bills such as electricity, water, Internet and TV, purchases of lifestyle services such as movie tickets, airfares, hotel booking, etc, as well as money transfer and remittance via QR code and connection with bank accounts for cash withdrawals or recharge.

Banks also quickly catch up with this rising trend of digital payment. In October 2018, the SBV approved requests from VIB, HDBank, ACB, and PVComBank to operate in the e-wallet business. Other banks, especially the foreign-owned ones, opt to collaborate with local e-wallet services to expand into this segment. For example, Standard Chartered Bank has partnered with MoMo to allow corporate clients to make payments directly into their beneficiaries’ MoMo mobile wallet. (Standard Chartered also led in MoMo’s Series B fundraising round of $28M alongside Goldman Sachs.)

Corporates are also jumping into the payment industry. VinID, the membership subsidiary of Vingroup, Vietnam’s largest private conglomerate, announced its acquisition of MonPay e-wallet in May 2019. The state-owned enterprise Viettel also launched its ViettelPay service, advertised as an e-banking provider, in 2018; after a year, in June 2019, it boasted 5.7 million users, reaching roughly 30 million transactions and 50 trillion VND in cash flow. VNG, a local digital media/content corporation as well as Vietnam’s arguably 1st unicorn, also launched ZaloPay, the e-wallet service of its social messaging platform Zalo, with the ambition of leveraging Zalo’s 100 million user base.

With the increasing competitions in this sector, smaller digital payment services need to start looking for ways to remain relevant and competitive. Vimo, one of the earlier-day e-wallet services that failed to take off, announced its merger with mPOS. The new entity, named NextPay, will seek to raise US$30 million to expand to Myanmar and Indonesia in 2020. Explaining the merger, Nguyen Huu Tuat, NextPay’s new CEO, said, “MPOS’s business model is quite similar to Square in the U.S., in that any merchant can accept payments easily, and Vimo is a mobile wallet similar to Alipay. By merging these two businesses, we provide a one-stop payment solution for merchants.”

Key players

Among the current players in Digital Payment segment, there are a number of leaders, including:

MoMo

Founded in 2007, MoMo is a fintech startup that offers a mobile, electronic wallet and payment application for mobile devices. Its products help customers in Vietnam make nationwide cash transfers and remittances, pay bills, settle personal loans, and purchase services such as software license, hotel booking, airfares, movie tickets, and the likes. MoMo has over 10,000 vendors on the system and partners with 24 local banks and credit card providers.

MoMo was the sole Vietnamese fintech featured in both the Fintech 100 report by H2 Ventures & KPMG and the 100 Leading Fintech Companies listing in a report by the International Finance Corporation (IFC), CreditEase and Stanford University. According to the Fintech 100 report, MoMo grosses over 8 million customers and a growth rate of 15% in monthly transaction volume and user base.

In January 2019, Momo announced its Series C funding round, led by Warburg Pincus. This funding round, according to its CEO, Pham Thanh Duc, has been “game-changing”, whereas Nguyen Manh Tuong, the company’s Executive Vice Chairman, lauded Vietnam’s progress into the fintech era, and will require “a robust and inclusive financial services ecosystem” to realize that vision.

Payoo

Payoo, owned by VietUnion, an intermediary payment service provider under the license of the SBV, is an e-wallet solution for online transactions providing services to both personal and business customers. Payoo provides different channels of payment and re-charge for customer’s accounts, including online (web/mobile) and physical (at the shops/stores…). This one-stop-for-all model also enables Payoo to readily connect and provide payment services for real estate developers and manager, said Nishikawa Shinichiro, vice chairman of Viet Union (Payoo’s parent company).

Currently, it is partnered with over 37 domestic and foreign licensed banks, 35 Vietnamese service providers and over 180 e-commerce websites across the nation. According to Forbes Vietnam, at the end of Q3–2018, Payoo has over 8,000 payment devices at 10,000 vendors, providing 200 different services. Payoo grossed approximately 4,000 billion VND of gross merchandising volume (GMV) in 2017 and is estimated to reach 5,000 billion VND of GMV this year.

ZaloPay

ZaloPay, owned and developed by VNG, is an e-wallet application associated with Zalo, Vietnam’s largest social messaging platform with over 100 million users. This link also enables ZaloPay to tap into a vast network of active users and address their payment needs. Aside from providing the similar services that other e-wallets also offer, ZaloPay also allows in-app payment for Zalo app as well as “lucky money” remittance service that drew over 1.3 million transactions within one month of Lunar New Year holiday.

In the near future, ZaloPay sets out its goal to replace POS technology via its QR-based payment system. Thong Pham, ZaloPay’s marketing director, said at an event in February 2018 that the payment platform aims to replace POS system completely, by leveraging the convenience of QR technology over other more limited methods such as SMS payment, POS, or near-field contact (NFC).

Moca/GrabPay

Moca is another Vietnamese e-wallet service that provides a number of services without having to use your physical card. GrabPay is the payment platform by Grab, Southeast Asia’s top ride-sharing service with over 36 million users in 8 countries.

In September 2018, Grab announced that it had made a strategic investment in Moca and would be launching a new version of GrabPay for Vietnam. On October 1st, 2018, GrabPay relaunched in Vietnam under the new brand “GrabPay by Moca”. This partnership, according to Grab, would allow GrabPay users to access Moca’s services such as bill payment, money transfers, and retail purchasing.

Looking at the future, Grab wants to bring GrabPay by Moca beyond current use cases. At a meeting with Vietnam’s Deputy Prime Minister Vuong Dinh Hue on October 2nd, 2018, Grab’s co-founder and CEO Anthony Tan suggested new changes to current e-wallet regulations that include bank-independent e-wallet service, e-KYC, and public sector digital payment. Grab also announced that it will start providing overseas remittance on GrabPay in early 2019.

The Future in a Flash

In March 2018, Prime Minister Nguyen Xuan Phuc approved a government plan that looks to boost up non-cash public service payments. By 2020, 80% of tax payment transactions in central-level and provincial-level cities will be implemented via banks, while all State treasuries will have cashless payment devices. Non-cash payments will be accepted by 70% of power companies, 70% of water companies, 100% of universities and colleges and 50% of hospitals in major cities.

This initiative will create increasing demands for digital payment solutions. On the other hand, banks and financial services are quickly catching up to the trend, posing fiercer competitions to existing players in the sector. Market-wise, the local cash-based payment preference will not change quickly, and e-wallet companies need to continuously improve its products and services to keep up with market demands.

Up next: Part III: Innovated Banking

NOTE: This article series was inspired by the book Fintech in a Flash: Financial Technology Made Easy by Agustin Rubini. A great read for anyone who looks to explore the potential of the fintech industry and its current state!

NOTE 2: Thank you Huy Nghiem of Hello from Finhay for advising me on this series! For those who don’t know them yet, Finhay is a robo-advisory service for Vietnamese millennials to easily invest in financial products, starting with mutual funds. They’ve been invested by Australia-based H2 Ventures.

“In its broadest sense, we define fintechs as high-growth organisations combining innovative business models and technology to enable, enhance and disrupt FS. This definition is not restricted to start-ups or new entrants, but includes scale-ups, maturing companies and even non-FS companies, such as telecommunication providers and e-retailers.” EY: UK FinTech — On The Cutting Edge — February 2016

Historically, the development of fintechs has begun since the 1950s. In personal finance, the creations of credit cards, ATMs, electronic stock trading, banking databases, Internet and e-commerce business services, etc were all part of this evolutionary process. Between the 1950s and the 1990s, one should also notice that alongside the infrastructural growth of this sophisticated system that we now benefit from, there was also the rise of enterprise-level tools for banks and financial institutions, such as risk management platforms, data analysis software, and treasury management frameworks, that facilitated this drastic metamorphosis. Companies that provided these data-driven, enterprise-focused platforms, such as Bloomberg Terminal and Thomson Reuters Eikon, played an important part in building out this initial fintech infrastructure. The evolution in corporate finance, in turn, generated further growth for the retail/personal sector.

The digital age, however, poses new problems and, consequently, opportunities for a new wave of fintech solutions. Retail financial services, for example, now become open to new, more consumer-friendly players, in a variety of sub-verticals, such as mobile wallets, e-payment services, robo-advisors, and peer-to-peer (P2P) lending. In certain cases, fintechs have completely replaced traditional banks in financing consumers, such as PayPal. In corporate finance, the introduction of new terminologies, such as Big Data, Blockchain, and the Internet of Things (IoT), has open new doors for data collection and analysis, risk management, as well as treasury management. This drives corporates to invest in either internal R&D or into startups that focus on these fields, in order to to get caught up with the new technologies.

Making the case of Vietnam’s fintech industry

The development of fintechs in Vietnam, nevertheless, is quite different, as it remains largely focused on the personal/retail finance sector. As in many regions and countries in Asia and Africa, where there exists a large unbanked and under-banked population, people often don’t use banking services, but rather prefer going through cash-based channels for retail needs. Recent research by Solidiance pointed out that the level of banking sector penetration in Vietnam only reached 59%, as compared to 86% in Thailand and 92% in Malaysia. This means a staggering 41% of Vietnam’s population is unbanked, creating a huge window for fintech companies to jump in and compete with traditional banking; consequently, it also put pressure on banks and financial institutions to innovate internally to adapt and explore this potential customer audience.

This opening of opportunities for fintech has been powered also by the growth of mobile penetration and the Internet economy in Vietnam. Per a report by WeAreSocial, Vietnam grossed 64 million Internet users and 70 million unique mobile users, with 72% of which converted into smartphone users. This level of penetration has helped Vietnam’s Internet economy almost triple between 2015–2018, reaching $9 billion in 2018, according to a recent Google/Temasek report on Southeast Asia’s Internet economy. With this fast pace of mobile and Internet adoption, consumer behaviors are changing quickly. Mobile- and Internet-based transaction processing has become the new norm in banking and payment, especially among the younger population.

Another key differentiation for Vietnam is the rising number of small-and-medium enterprises (SMEs). The ASEAN SME Transformation Study conducted by United Overseas Bank (UOB), EY and Dun & Bradstreet earlier this year stated that SMEs in Vietnam account for nearly 99% of all enterprises and employ over 70% of the workforce. The study also showed that Vietnamese SMEs are highly tech-savvy and open to investments into digitalization: 58% surveyed SMEs would invest in technology, of which 71% indicated they would invest in software such as mobile applications or digital marketing as they believe these will create better customer experiences and increase customer loyalty. Fintech solutions, such as point-of-sale (POS) technologies, gifting platforms, and digital marketing tools, will empower SMEs and open new customer onboarding channels for them. Other segments like digital lending and crowdfunding open new channels of fundraising for SMEs to grow their businesses.

In terms of frontier technology, blockchain is leading the way in Vietnam’s fintech landscape, with its main applications in cryptocurrencies. The skyrocketing rise of Bitcoin and Ethereum in the past two years also draw a lot of attention from local businesses and individuals alike. According to the Global Cryptocurrency Benchmarking Study, the Vietnamese Dong was used by 15% of surveyed cryptocurrency payment companies worldwide in 2017, comparing to 6% use by the Singapore Dollar and 10% by the Indonesian Rupiah. Businesses, especially early-stage startups, have also found useful applications of cryptocurrency in fundraising through initial coin offerings (ICOs) or securities token offerings (STOs) based on blockchain technology. According to ICORating’s ICO Market Research Q2 2018, in the 2nd quarter of 2018, ICOs have already raised $11,690,981,663 of investments, which is 10 times bigger than the cumulative sum of investments from ICOs of Q1–2 2017, with Vietnamese ICOs such as Kyber Network or Tomochain participating in this rising trend.

Fintech innovations in corporate finance, however, remain fairly limited. Banks, insurance firms, and securities companies are leading this trend, with the development of internal cloud-based platforms that assist their customer-centric data tracking and collection. There is also a limited number of startups working in this field, mainly focusing on the aggregation and providence of business intelligence data and credit scoring information based on social activities. Nevertheless, the lack of public infrastructure for financial data access remains a challenge for data-driven fintech development.

Finally, one cannot overlook other emerging sectors in the fintech market. These sectors include a wide range of prototype- to early-stage startups and projects that are yet to achieve significant growth but hold plenty of potentials. Robo-advisory, overseas remittance, and eKYC are only a few examples representing this growing segment of fintechs.

Conclusion

As such, one can divide the local fintech landscape into the following segments: Digital Payment, New Banking, Consumer Interfacing, Lending, Blockchain & Cryptocurrencies, Big Data, and Emerging Fintechs.

Up next: Part II: Digital Payment

NOTE: It’s been a while since I wrote on my Medium page. I went through a career switch, going from the startup side to the VC side, through my work at VIISA. While it’s been challenging, the work allowed me to contribute substantially to the Vietnamese startup ecosystem building journey, meet plenty of new friends and like-minded partners/mentors, and pick up a number of great knowledge gems along the way. This article, therefore, will be the first of a series of summaries and sharing that I will be posting moving forward.

NOTE 2: A version of this article was published on e27: https://e27.co/overview-vietnams-venture-capital-industry-20181022/.

“Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions. However, it does not always take just a monetary form; it can be provided in the form of technical or managerial expertise.” — Investopedia

Since opening up again to the global market in the early 1990s, starting with the Reformation movement kickstarted by the government, Vietnam has experienced steady economic growth. Despite certain periods of economic struggles due to global depressions, Vietnam has enjoyed what the World Economic Forum (WEF) recently dubbed “economic miracle”.

This impressive growth, while quickly transforming the economy and society, also comes with sustainability. According to WEF’s Inclusive Development Index, Vietnam has one of the best track records in making growth more inclusive and sustainable towards all segments of the society and population, esp. female business owners. The government also pours plenty of public investments into building infrastructures and human resources. Through hefty improvements in education, especially at primary level, Vietnam has produced a numerous generation of IT and software engineers, enough for international corporations like Intel, Bosch, Samsung, etc to set up R&D centers here while also nurturing the development of local IT companies such as FPT, VNG, CMC, and so on. The capital injection into local infrastructure also exhibits successful returns, with Vietnam becoming one of the most mobile-friendly countries in APAC, with over 70 unique mobile users out of a population of 96 million, according to a recent WeAreSocial report.

What Criteria Do Venture Capitalists Consider When Seeding a Startup? | Data Driven Investor

These conditions, combined together, have created a favorable environment for the outspringing of startup companies. Per research by Dezan Shira & Associates, between 2010 and 2017, the number of invested startups had increased from 10 to 92, with 61 percent of the projects receiving investments of less than US$1 million. The local investors have also become more VC-friendly: Out of the 92 deals in 2017, foreign investors engaged in only 28 deals, while local investors accounted for a surprising number of 64 deals.

This article, then, will attempt to account for the development of the Venture Capital industry in Vietnam over the years, comprehend the current blossoming of VCs in Vietnam both in fund and deal sizes, and offer a prediction of the near-future growth.

The Early Starters

By definition, the Venture Capital industry in Vietnam has been developing since 2004, with the establishment of IDG Ventures Vietnam (IDGVV), founded by Patrick McGovern, Founder and Chairman of International Data Group (IDG). Between 2004 and 2013, IDGVV invested in 42 portfolio companies, spread across a wide variety of industries, both tech and non-tech. Some of the most noteworthy investments made by IDGVV include VNG (#1 Internet/Gaming enterprise in Vietnam and arguably Vietnam’s 1st unicorn), Webtretho (Project Lana) (recently invested by LINE Ventures), and VietnamWorks (acquired by En-Japan).

Another early riser in this industry is CyberAgent Ventures (CAV), a Japan-based VC fund that entered Vietnam in 2008. They have invested in over 25 companies in Vietnam, including some of the best Internet- and mobile-based services in Vietnam. Three of their most high-profile investments include Foody (reportedly acquired by SEA Group), Tiki (#1 local e-commerce platform, which was invested by JD.com, China’s largest e-commerce platform), and Batdongsan.com (acquired by PropertyGuru, Asia’s largest online property platform).

Finally, one cannot miss DFJ VinaCapital, a joint venture between VinaCapital, one of Vietnam’s largest Private Equity funds, and Draper Fisher Jurvetson (DFJ), an American venture capital firm focused on early- and growth-stage investments. Founded in 2006, DFJ VinaCapital had invested close to 50 million USD in a range of businesses, with the most successful exit being Yeah1 Group (YEG), a listed company on HOSE valued at roughly US$400M valuation.

The Current State

2017–2018 has been an exciting time for Venture Capital investors in Vietnam. Not only because of the new Decree №38/2018/ND-CP, in which the detailed pathway for incorporating and operating a Venture Capital fund is clearly defined by regulatory bodies, but also because of the recent successful fundraises of several existing funds as well as the establishment of new funds.

500 Startups Vietnam is such a case of existing funds successful raising. Founded in 2016 with an intended thesis of a US$10M fund focusing on Vietnam, they finally completed their fundraising in mid-2018, over-reaching their original goal. 500 Startups Vietnam currently has over 30 companies in their portfolio, covering a wide range of industries, such as AdTech, E-commerce, and Fintech. Their first successful exit also happened in 2018, with WifiChua being acquired by Appota.

The newcomers, however, are not to be underestimated. Vietnam Innovative Startups Accelerator (VIISA), a US$6M accelerator and seed-stage fund co-founded by FPT and Dragon Capital, was debuted in September 2016, in order to not only provide startups with the initial capital needed for growth but also the know-how and skillsets needed for successful fundraising. After 2 years in operations, VIISA has invested in 23 companies, which are connecting with 1500 business clients, serving 15000 monthly active users, and operating in 5 different countries, according to VIISA’s statistics. VIISA has also made three seed investments along with other investors: WisePass, WeFit, and Base.vn. In 2018, VIISA sets out the target of helping its portfolio companies raise another US$5M from external investors, as well as becoming Vietnam’s №1 accelerator.

Another newcomer entering the stage is VinaCapital Ventures. Announced in August 2018, VinaCapital Ventures looks to invest US$100M into tech companies in Vietnam, starting with two deals: Logivan and FastGo. Logivan provides B2B truck hailing and logistics network solutions to address the industry’s inefficiencies, while FastGo is a Vietnamese-made ride-hailing mobile app that offers advantages to both drivers and passengers. This new fund indicates the continuing interest of VinaCapital into Vietnam’s technology ventures, despite the dissolution of DFJ-VinaCapital partnership.

Future Prospects

Vietnam’s startup investments, especially in tech sectors, have finally gained momentum in the past few years and accelerating fast. However, challenges remain ahead. Among them, the major challenges facing the startup community in Vietnam are the lack of talents, funding, scale, and slow regulatory reforms, according to Dezan Shira and Associates. Funding is especially crucial, as startups still find themselves encountering difficulties in approaching investors and raising from them, especially foreign funds.

Fortunately, there are already promising signs of more capital being put into funding startups and educating the local workforce to become more in-par with the regional standard. VinGroup, the country’s largest real estate developer, has announced plans to set up VinTech, its new technology arm, that will create two research institutes to develop big data and high-tech applications. This is not to mention its already maturing investments into VinFast, Vietnam’s 1st domestic carmaker, which just debuted its two latest models at Paris Motor Show 2018 and successfully secured a US$950M credit line led by Credit Suisse and HSBC to develop its car-making facilities and technology.

Fintech is another key vertical that attracts massive interests from regional investors. According to research by Solidiance, Vietnam’s fintech market hit US$4.4 billion in 2017 and will reach US$7.8B by 2020. This change, per Solidiance’s analyses, will most likely occur thanks to the progressive policies from the government (pushing for non-cash transactions, establishing a FinTech Steering Committee under the State Bank of Vietnam, and improving the mobile infrastructures and coverage through massive telecommunication projects), as well as the growing needs for fintech solutions from both personal and corporate finance sectors, which will grow by 31.2% and 35.9%, respectively, by 2025.

Finally, there are plenty of other potential areas that require serious innovation and entrepreneurship to tackle. B2B (business-to-business) technology sector is such a case. According to Tran Huu Duc, Head of FPT Ventures and CEO of VIISA, the rise of B2B technologies is imminent worldwide, with companies like Salesforce, Atlassian, Palantir Technologies,… powering the next Industrial Revolution all over the globe. In Vietnam and Southeast Asia, however, B2B companies and services often face the obstacle of user behavior attaching to the traditional, manual working methods. Therefore, these B2B startups will require major investments, both in terms of capital and expertise, from VC funds to help them not only educate the market but also scale fast and substantially.

Conclusion

The Venture Capital industry in Vietnam has gone through 15 years of development. In this period, as the market grew, so have the VC funds. From only a handful of funds, there are now more newcomers than ever, actively investing and nurturing startups all over the country. Despite certain challenges, the future remains bright and prospective for Vietnam’s VC industry to continue blossoming.

• The author does not guarantee the authenticity of third-party sources quoted in this article.

An Overview of the Venture Capital Industry in Vietnam was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.

CONTEXT: I’m a Vietnamese who lived in America for almost eight years, first for school, then for professional career. Last year, I returned home. This is my recollection of that journey.

Read Part I here: https://medium.com/@longpham91/one-year-in-vietnam-part-i-the-lost-soul-f9efde20ad2a

Read Part II here: https://medium.com/@longpham91/one-year-in-vietnam-part-ii-picking-up-the-pieces-e5a63c0b3ca5

“You go away for a long time and return a different person — you never come all the way back.” — Paul Theroux

Last night, I went to see a movie with an old friend from Boston and my girlfriend. Here’s the movie poster:

This fictional movie took place in two Saigons: 1968 and 2017. It depicted the cultural and lifestyle aspects of this city and its people, especially women, with the trademarked Ao Dai, the national fashion pride of our country. The protagonist was a Western-fashion loving teenager in the 1960s Saigon, who refused to adopt her family tradition of Ao Dai making. As it turned out, she was then magically transferred from 1968 to 2017, when she met her alternate self in the future and relearned her love for the traditional Ao Dai and her family heirloom over the Western fashion and culture values.

As much as it was a decent movie, what inspired me to start this blog article with this movie, is the resemblance between my journey and the protagonist’s. 8 years ago, I left Vietnam, running away from my homeland and my family in looking for a better future, only to relearn my love for my cultural and familial heritages.

So, what does it mean to be Vietnamese once again?

For once, it is to learn to love the traditions and cultural customs that I once considered old-schooled, boring or superstitious. Worshipping the ancestors and paying respect to the altar on a common basis, for example, now become a routine of mine, everytime I go back to my hometown.

Another thing is to enjoy the daily conversations with my Vietnamese friends and loved ones. I have come to realize the beauty in the casually loud, foreignly obnoxious voices, the placidity in the smallish midnight conversations over messaging platforms, the warmth and proximity in the chattily overwhelming talks in the coffee shops.

I also need to mention the void of pressure in daily life. Whether it’s at work or in my personal life, I never feel compelled to prove myself to anybody or showing anything. Unlike in the States, where I was under constant pressure to move upward or do great things to even make a smallish impact, here I don’t have to do anything big. Any small gesture can create a butterfly effect that affects lives of many.

Finally, it is to cherish the love and care for loved ones. I have slowly come to savor the moments with my girlfriend, for instance. Whether it’s at a food vendor, or in a movie, or just lying side-by-side cuddling without saying a word, it’s always happy time for me (and hopefully her!). Other times, I would be relishing joyous moments with the family, over a good meal or even just a cup of tea.

How was I able to get here?

During that journey, the last year has been the most crucial part. I have a lot of people to thank for walking with me and helping me along the way.

The first individual is my girlfriend. In the past 11 months that we’ve been dating, she has taught me a great deal about being Vietnamese. From even the smallest things like daily etiquettes at work, at home… to expectations and goals in life; from a wider taste of arts, music, theaters… to a broader appreciation of Vietnamese daily life and social values; from the bike rides on Saigon streets, to the boat tour in Inle Lake (Myanmar), to the night-walks around Singapore alleys; she showed me how to be a Vietnamese youth.

Then, there’s my work friends and colleagues at VIISA and CirCO. They inspire me with their energy, passion, and vision; they empower me with their hopes, dreams, and actions; they carry me onward with their dedication, care, and proactiveness. The past 10 months I’ve worked at these places has been the most galvanizing time I have experienced.

Last and most crucially, I have my parents and my family to thank for. They gave me the space and support I much needed to re-discover myself; they showered me with love and pride despite my many mistakes and mishaps in my first days back and along my journey; they taught me how to respect family traditions and heritages. I owe them many lives over for simply being who they are.

“It will be harder to summarize what sort of life connects a boy to a man.” — Richard Rodriguez, Hunger of Memory

That’s the end of 3-article One Year in Vietnam series. It was fun and challenging to experience that journey, and even more so to put it into words. Now, I look forward to moving on with my life here as a Vietnamese, in every sense of the word, and capture it in my future blog articles.

Over and out.

Long/Leo
Saigon, 11/11/2017

Read Part I here: https://medium.com/@longpham91/one-year-in-vietnam-part-i-the-lost-soul-f9efde20ad2a

“How easy it was to lie to strangers, to create with strangers the versions of our lives we imagined.” — Chimamanda Ngozi Adichie, ‘Americanah’

Utterly lost, I reached back into my American identity looking for refuge and solace.

I held on to my subscription memberships (Spotify, Netflix…), to my American address, driving license, bank accounts, and so on. I flashed that fancy Chase Sapphire card everywhere I went. I used my US driving license instead of my Vietnamese national ID to get into places. I sought out American expats to hang out with, positioning myself among them, as one of the American folks living far away from home.

I bragged about my time in America a lot, about things I’ve achieved, people I’ve met, places I’ve been, girls I’ve dated, and so on. I boasted about that startup that I had left America and come back to build. I exaggerated constantly about my achievements, my capabilities, and pretty much my American-ness. I wore that American badge with sincere sense of pride and prejudice.

Then time passed. As weeks flew by, the bubble began to crack, and reality kicked in, hard. I was dipping into my savings, that I had intended to use for something more meaningful. I moved into the family house with my sister and my aunt, squadding a 15-meter-squared bedroom, with nothing more than a bed, a desk, and a wardrobe. I started relying on my family’s money and support nest.

I wandered the cities for days, rotting in coffee shops doing God-knows-what. I started using Tinder again, looking for girls eager to be flashed by the whole American thing. I went out all the time, looking to score all sorts of deals with people that I normally wouldn’t even come close to, left alone hanging out with as buddies. I was losing myself, worse than ever.

“Live, travel, adventure, bless, and don’t be sorry.” — Jack Kerouac

Then, as fate would have it, I went to Japan. I stayed there for three weeks, wandering around the country: Tokyo, Osaka, Kyoto, etc. I met a lot of new friends, those who were also lost and trying to find themselves again. There was the Californian fresh college graduate who was running away from an abusive family; the Australian sous-chef who fled Melbourne wanting to become the next Gordon Ramsey; the English couple lamenting Brexit as they made their way through Asia, vowing not to return to the UK; the Canadian mountie escaping his own obsession after almost fatally injuring a teenager. There I was, the Vietnamese returnee from America, completely void of an identity, and I fell right in place.

As my Japan journey drew near its end, though, the cloud began to lift. All those people I met, those places I went, those experiences I had, made me realize one thing: Maybe, just maybe, it doesn’t matter whether I can find my identity or not. I can be American and Vietnamese, all in one. I began to reclaim my sanity and dignity. Once again, traveling saved me.

I returned to Vietnam, my mind clearer than ever.

“Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.” — Isaac Newton

On the personal level, I stopped going to expat meetups, hanging out with the wrong crowds, and pushing myself back into the right path. I started training again, eating healthier, and picking up community events that I could volunteer and meet more Vietnamese people, like teaching English for children and adults.

I also made peace with my family. When I left many years ago, I was madly infuriated with everyone and everything at home. I cursed the limitations of the family life, blaming it for hindering my full potential and desire to conquer the world. Yet, when I came back, they still greeted me with such love and compassion. My family provided me with a nest much needed for me to slowly put myself together. They supported me emotionally and financially during my lost phase, without a single word of lamentation. For that, I owed them.

I started hanging out with my family more, over dinners, talks, drinks (or “nhau” as we Vietnamese would call it). My family was just as nosy and poky as ever, especially when it came to my personal life. However, this time, I already knew that everything they did and talked about resulted from love, and it became so much easier to swallow and get along with.

On the professional level, I proactively threw myself out there, hosting and moderating events within the startup community. Through those events, I reconnected with a whole lot of old friends, as well as making plenty of remarkable new friends. Afterwards, I frequently joined my Vietnamese friends, old and new, in their hangouts, lunches, dinners, drinks; listened to their life stories, their daily struggles, and their hopes and dreams for a better future. I shared their frustrations, their aspirations, their optimisms for our country, our society, and our generation.

Before I could fully grasp the reality, I already slowly learned to embrace my Vietnamese-ness again.

Coming Up: Part III: Moving On.

CONTEXT: I’m a Vietnamese who lived in America for almost eight years, first for school, then for professional career. Last year, I returned home. This is my recollection of that journey.

“To want to understand is an attempt to recapture something we have lost.”
― Peter Høeg, Smilla’s Sense of Snow

In June 2016, I left America for Vietnam. It was the unavoidable outcome of a relentless inner-battle between ambition and contentment, hopes and realities, success and wellness, and so much more.

For a long time, the only thing I could remember was how desperate I wanted to become American, in every facet of the word. I wanted to be proud of America’s achievements, of its political and military prowess, of its rich cultural slices of music, arts, theater, etc. I found myself looking at contemporary business and technology heroes, i.e. Elon Musk, Mark Zuckerberg, Bill Gates; admiring how they single-handedly changed their industry and, with those, the world; aspiring to become one of them someday. America was practically THE place to be.

At the same time, there was another calling, from far away. Vietnam was calling. Saigon was calling. Before returning home, I only visited Vietnam four times. FOUR times in almost EIGHT years. Yet, it was enough to make me long for the bike-ridden, honking noise-filled streets of Saigon, the hazy summer rains that come and go in eye blinks, the street vendors whose calls echo the alleys of Ban Co market. I found myself, from time to time, walking down Massachusetts Avenue, all the same while dreaming of a cup of Vietnamese-grown Arabica-bean cappuccino, sitting by the windows of the coffee place at the corner of Han Thuyen and Pasteur, spectating the streams of people walking and riding through the crossroads; walking along the beaches of Cape Cod, all the same while thinking about my bike ride past Thu Thiem bridge, listening to some folk tunes of the Mekong Delta; wandering the streets of Manhattan hoping from bars to bars, all the same while reliving my late nights going from clubs to clubs in a busy Saigonese Saturday, flinging around the tables chatting up beautiful ladies and joking around with my crew. A calling so primitive, intuitive, yearning, ardent, and pretty any other adjective in the English language that can be used to describe a hunger for the freedom of the soul.

In the end, none of that really mattered, though. The moment when my mind was made up happened not in America, but in Iceland. In February 2016, I took a spontaneous trip to Iceland, out of nowhere. I wasn’t even sure if I wanted to see Iceland. To me, it sounded distant, like a good place to run away for a split second. So I went. There I was, sitting on a ski mobile in the middle of the Langjökull glacier alongside the guide, staring at the skyline that seemed to begin and end with ice, as if the earth was consumed by another Ice Age and ice was all that remained. I stared and stared at all this ice, and right there and then, my mind was made up. I had to go home.

So, in June, I arrived in Vietnam, this time for real and forever. It was not just a homesick visit, or a quickie trip before heading over to Europe; it was real. I recalled standing there staring at the chaotic scene that was Tan Son Nhat Airport: People everywhere screaming for relatives, officials trying hopelessly to drive away the illegally parked cars and taxis, drivers angrily honking at each other to get spots. It was the Third World.

The ride home wasn’t much better. Bikes approached our car from everywhere, their riders yelling at cars and at each other while honking incessantly to try getting through traffic. I’ve been to concerts, protests, and pretty much all sorts of gatherings in the States, but these were brand new to me. Saigon, in my memories, wasn’t that meat-packed.

Meeting friends was weird, too. Months and weeks before I arrived back home, I already made the passages to all my friends in Vietnam, informing them of my returns; nonetheless, when we actually met up, something seemed different. They’ve changed, that much was obvious; I, however, have changed drastically also.

The scenes changed, also. The old coffee places were no longer there. That quiet coffee shop became a StarBucks; those clubs and bars I used to frequent closed down years ago. The sidewalks were full of tourists wandering around, haggling for souvenirs and taking pictures of random objects and people. Saigon has become a touristy spot.

There I was, a lost soul. I often found myself longing for Saigon, for Vietnam, and for everything that was here; yet I arrived and found myself utterly lost and disconnected from what was once my beloved city.

Coming Up: Part II: Picking Up the Pieces.

To start looking for startup jobs, definitely check out this site: https://angel.co/. They offer a great collection of growing startups that are constantly hiring young, ambitious talents.

But that’s not really what I had in mind for this article. For today, I’d like to talk about why you should consider NOT working for a startup after graduation.

— — — — —

I remember when I first started working for FASTPORT full-time. It was so crazy: The working hours seemed endless; new projects hammered us on a weekly basis. Everyday, I learned to build new things, because of the nature of my projects. I learned things so fast that I sometimes had to go back and review what I’d done so I wouldn’t forget. Starting out as a humble Web Developer, I soon trained myself to program mobile applications, backend services, even databases sometime. It was an exciting time. I absorbed so much knowledge about so many different aspects of web/mobile development than any junior dev guys could get their hands on in their first year.

Ironically, that was also my downfall. I learned so many things so fast that I never really had time to tune my programming skills. My code was sloppy, hacky, and most critically, non-disciplinary. I defined parameters that I later never used, wrote hundred lines of functions to do things that could easily be done with one or two lines of jQuery, abused callbacks whenever I had the chance, etc. Basically, I threw all programming good practices and precautions out the window when I coded. I was a fast employee (extremely fast, even), but a terrible programmer. I seriously think that if recruiters looked at my code from a year ago, they’d never hire me.

Fortunately, I ended up moving away from those terrible programming practices and habits. As I started to hang out with other developers in my field, I gradually realized that whatever I was doing was awfully inefficient and unconventional. I spent hours and hours on coding platforms, working my way through even the simplest pieces of codes. I needed a refreshing start for my programming career if I were to avoid crashing out of it for good. I went to many events for programmers, trying to talk to people and learn from those who have been around the industry for years. Those occasions proved fruitful. Before long, my code became cleaner and more elegant; my projects more organized and my applications more performant.

But that wasn’t all. The startup position also affected my personal life. Slowly, I became isolated from real life. During my first year of work, I think I went out maybe three times. Friends would constantly call me up, asking me to go out and have some fun for once. “I have some work to do,” I’d say. I worked fifteen-sixteen hours a day for weeks, up until a point when I had a serious mental breakdown resulting in seeing a psychiatrist. At the time, my mind was already so damned twisted that I constantly thought about hurting myself and started turning against even my own co-workers and friends. For instance, I cursed at my supervisor in front of everyone in the company, skipped works for weeks, and distanced myself from the workplace. I also cut ties with most of my friends and severed my relationship with a friend for good. (Looking back at that incident though, I guess we both played our role in it, but I still regret it happening. She was a nice person and a good friend.)

Luckily for me, I did not get fired or lose more than one friend. My supervisor understood that I was going through a tough time mentally and encouraged me to go see a therapist on a constant basis. Most of my close friends who knew about my condition also supported me through that time. My former roommate, who was a medical researcher at Boston Children’s Hospital, talked to me wholeheartedly about it and pushed me to seek help immediately. Another friend of mine, who I didn’t get to see much but would always be there for me when I needed her most, spent time with me when she was back in Boston from Nevada. She constantly reminded me that my life held more meaning than I thought, and urged me to keep fighting. And there are others who were also there for me, in better or worse days. Today I’m still thankful for having those people during the hardest times of my adult life.

I wouldn’t say that working for a startup is the only reason behind my professional and personal shortcomings. A lot of other professions and career choices could very well lead to the same outcomes: international banking, medicine, finance, etc. for similar reasons: stress, long working hours, lack of socialization and so on. The reason might also lie within ourselves. Mental disorders are not something that just happens out of the blue. Neither is unprofessionalism. Take me, for example. I was a bad coder, partly because I did not try hard enough to be better at what I did. I suffered a mental breakdown partly because I had always been somewhat a troubled mind.

Nevertheless, working for a startup, especially as your first job, has this unique and dangerous edge to it. It gives you so many rushes and thrills, pushing you all the way up to the top, only to make you realize that you’re at the edge of a cliff and can fall down anytime. The excitement you get from your work then turns against you, driving you manic and potentially ends up killing you physically and/or emotionally.

— — — — —

Compared to my previous article, this one is a real downer. I understand that. However, just like most things in life, this career choice has two sides. There’s the amazing side that gives you so many opportunities to do great things and learn from the best, but then there’s the side described in this article: a real creeper that seeks to slowly destroy you professionally and mentally.

There is one thing I would like make clear before I end this note. I never, for a moment, regret this career choice. There have been ups and downs, but I’ve started learning to enjoy this new self and embrace the new changes and people in my life. Also, in reconnecting with my old self, I’ve learned from my past mistakes, to not repeat them again.

To wrap this up, I would like to quote my favorite author, Haruki Murakami:

“To know one’s own state is not a simple matter. One cannot look directly at one’s own face with one’s own eyes, for example. One has no choice but to look at one’s reflection in the mirror. Through experience, we come to believe that the image is correct, but that is all.”

— Haruki Murakami, The Wind-Up Bird Chronicle

Best regards,

Leo

You can probably wonder, how could I have started working for a startup since I was 21? Wasn’t I still in school? The answer is simple: I started working for FASTPORT as an intern, then worked my way up the chain until today. Now, I handle most if not all of the front-end development, manage a team of developers in Vietnam remotely, and pretty much do all the other tech work required to be done.

But enough on the present. Today, let’s reflect the past a little and talk about why you should work for a startup as your first job.

— — — — —

Lots of students these days have such burlesque, pink-painted dreams about their future: Start their own thing, make a ton of money, and basically go into history as some sort of figure. (Thanks a lot, “The Social Network”.) Well, the cold, brutal truth is this: Building your own startup sucks, and most startups fail, sooner or later. In college, I tried multiple times with a series of ideas, some by myself, some with other friends who shared the same ideals. They either never made it pass idea-stage, or failed miserably and ended up with the founders’ fallout. My failures were due to a lot of different reasons, but in the end it all came down to this: I wasn’t ready.

I joined FASTPORT completely out of curiosity. At the time, in the spring of 2013, I already got an internship offer from Apparatus, a Fortune 500 company based in Indianapolis, as well as chances of getting an internship at Spotify’s Manhattan office. Had I wanted to pursue either options, I could have ended up with a cushy internship and had a ton of fun learning the basics of technical marketing and/or software development. But life has its funny way of making you go down the path you never really expected.

It took me some time to make my decision, but finally I replied “Yes” to the offer. Then I finished up my abroad semester in Berlin, Germany. It was an insanely life-changing period too, ending with me getting to watch the all-German Champions League final between Bayern Munich and Borussia Dortmund in the heart of Germany (for all the soccer fans out there). Afterwards, I boarded a flight back to Boston, Massachusetts to start my internship.

I remember Colin, now our Director of Marketing, picking me up at the airport. He had to wait outside for almost an hour and a half, because apparently US Customs thought my passport and visa looked suspicious. (Welcome to the life of a nonimmigrant individual, btw.) As we drove up to Lowell, where the company was based (still is), he explained to me where the company was and how much work it would be to bring this thing to life.

The morning after, we got right to work. I remember being introduced face-to-face for the first time to Jim, my boss and FP’s co-founder, as he made some jokes about my interview with them. Afterwards, there were a sort period of time, like 1–2 weeks, when I was rotated around doing a bunch of different things: visiting truck stops and talking to drivers, being on sale calls, testing with our current system, etc. Soon enough, Jim realized that I sort of had a knack for the web, so I put me on programming full-time. I started experimenting with .NET frameworks, playing with building simple SPAs, messing with backend codes that up till now I still don’t get, writing stored procedures for MSSQL, and so on.

It was a wonderful time. For a kid who learned jack squat during his first 3 years in college when it came to real-life web development and building big-scale applications that makes real money, this was a game changer. For the first time, I knew what it took to conceptualize a product and build the damn thing. I also started catching on to the level of discipline it takes to build something that ambitious: 24/7 work cycle never even seemed enough. I used to take forever in the shower, just enjoying the hot stream of water running through my muscles and my body, but I gave that up as soon as I started working for these guys. No time to be enjoying that. In the words of Pearl S. Buck, “Your mind must know it has got to get down to work.”

The summer went by in a finger snap. By the end of it, I have earned myself a part-time job at the same company, working remotely from my school during senior year while I made my way through the last year of my college life (and perhaps my schooling career). FP flew me out a couple more times during that senior year (Fall Break, Spring Break, you name it), to work on some serious projects that required on-site presence, and I gladly complied. I found my jam with these guys, and at the time, dedicating my best to FP’s success was all I could think about. At the same time, I kept learning more and more about how to build a successful business and a killer product that changes the lives of many.

I ended up taking a full-time job from these guys. The pay was average, and the workload was still insane as ever, but I gladly accepted. I thought I have found my home in this cold, harsh world. I soon realized, however, that perhaps it wasn’t all true.

I moved to Boston and started working full-time. Work was good, and my performance was as solid as ever. Slight fluctuations here and there, but overall I was rock solid, if you’d like to say. The schedule is awesome too. I don’t have a 9-to-5 work schedule; instead, I woke up, jumped to work, crunched until I get bored and/or exhausted, went running or grabbing a drink with friends, went back and hopped on Netflix for some Futurama while keeping working. I also got to go to conferences for free, and got to meet people like Grant from Mythbusters (yes, for real). Life was sweet.

Still, the fire was diminishing. I could feel it. Work became harder and harder to keep up with. Coworkers growingly seemed like strangers. Projects floated by like autumn leaves on a lake. Nothing seemed important any more. Before long, I found myself making new friends and business partners. I got involved in several different startup projects, contributing my skills to those guys.

That’s when I realized that the skills I’ve accumulated over the years working for FP have finally kicked in. I can design and build up the whole project scope, present it to the business people without a glitch, and win them over with sound and convincing engineering arguments that noone can say no to. I have become the technical weapon that everyone wants on their team. Years of working closely with people like Jim and Colin have turned me into a working machine. I crunch out wireframes and use cases faster than you can finish a bowl of Chipotle. I stay alert to opening windows and opportunities, and know exactly when the right moment is to chime in and give my professional opinion on an idea, and sometimes even sketch out how to turn it into a real product with a freaking timeline. I have become a startup machine.

— — — — —

Anyhow, that was my story of growing from a young, naive college kid to become a professional in my field. While it had not been all clear to me at first, what I was doing all this for, it eventually dawned on me that the time, effort and dedication I’ve given to this ambitious startup has finally paid off. I am me today because of everything they have taught me, and damn, they taught me well. Building startups are hard, but when you learn from the right people, you have a better shot of becoming your own boss one day too.

Now, perhaps some of you would ask: Are there bad jujus in all this? Hell yeah. But that is something I will have to write about that in my next article, “Why Should You NOT Work for a Startup in Your First Job?”

That’s all for today. Ciao for now, and hope anyone who stumbles upon this article enjoys my bits of sharing.

Regards,

Leo

P/S: I haven’t written anything this long for a while, so excuse my terrible narrative, and feel free to leave comments if you’d like to criticize my story or my writing. Critique is always critical for growth.

3.5 years later, I finally approach that point when I soon will most likely get my ass shipped out of this country, if I don’t suddenly get super lucky and receive one of those work visas. Life, what can I say?

So, I think it’s about time I start recollecting the experiences and wisdom I’ve accumulated in the past years working as a full-time startup individual. Maybe noone’ll read this blog, or maybe someone will. Either way, just happy to be sharing some thoughts on startup, hard-working, and living life.

That is all for now. First blog coming soon.

Regards,

Leo

An Opening Note was originally published in HackerNoon.com on Medium, where people are continuing the conversation by highlighting and responding to this story.