(PLO)- Access to policy capital and capital from investment funds is not easy, making farmers often take their own capital.
The Startup Innovation Club (SKC), founded and operated by BSA Center, focuses on supporting the agricultural startup ecosystem in Vietnam. In the past 10 years, there have been nearly 1,100 agricultural startups. However, in the statistics of startups with the most investment capital, there are almost no names in the field of agriculture.
It is not easy to raise capital
Sokfarm, a well-known name in the field of organic agriculture, when developing livelihoods for farmers through coconut nectar. Starting a business in 2019, Sokfarm has earned a lot of innovative startup awards and conquered the international market. However, so far Mr. Pham Dinh Ngai, founder of Sokfarm, has not once raised capital.
Previously, a startup only needed an idea to be able to successfully raise capital, but now that idea must be realized by a project with revenue, development roadmap and proven to investors that you are enough. ability and responsibility for the money they pour into your company.
Grandma NGUYEN PHI VAN, Chairman of Southeast Asia Angel Investment Association
Explaining this, Mr. Ngai said that agricultural products are often not very attractive to investors because of their slow growth. Therefore, sustainable agriculture startups will usually not rush to raise capital because the nature of agricultural work is long-term, not every three or five year period like technology products.
Besides, Sokfarm is not in a hurry to raise capital because the business is still small, wait until the plans for market share growth are completed and have enough knowledge about raising capital, then Mr. Ngai will consider that.
Meanwhile, Mr. Nguyen Tien, Chairman of the cooperative (cooperative) Growing chili Buon Don (Dak Lak), owning 5 hectares of chili peppers according to VietGAP standards, said that his cooperative is still operating with fish cash flow. The district’s support package for start-up models and loans at normal interest rates of commercial banks.
Since the establishment of the cooperative, Mr. Tien has been fortunate to have access to local non-refundable support packages and a loan package with an interest rate of 0.5%/month, up to 70 million VND from the policy bank. Although this support only accounts for a small part in maintaining production and expanding scale, it is “better than nothing”. The rest, he has to borrow at the normal interest rate of the bank to cover enough money to maintain the crop and salary for the farmers.
“Access to low-interest loans from policy banks is possible, but it is difficult for startups like us to get a loan because the procedures and appraisal part are quite cumbersome. Especially the property valuation part, the land price here is low, so the loan amount is also much less than when I borrowed from a commercial bank, “- Mr. Tien expressed.
VietGAP chili project farm in Buon Don (Dak Lak). Photo: THU HA
Similarly, Mr. Dang Duong Minh Hoang, Director of Binh Phuoc Digital Agricultural Service Cooperative, shared that embarking on agriculture, especially clean agriculture according to VietGAP standards, requires higher production costs than usual. . Therefore, startups that do not have the backing capital will have to do a lot of self-advocacy.
Fortunately, receiving support from the start-up funds and policies of Binh Phuoc province in developing the local start-up economic model, Mr. Hoang’s cooperative has access to support money with low interest rates. For example, a provincial investment fund has an interest rate of 1% with a maximum cash flow of 300 million dong and 5.13% for 1 billion dong. With this capital, Mr. Hoang has more costs to reinvest, expand production, and develop the Bo Ong Hoang brand into new markets. However, Mr. Hoang said that with clean agriculture, this source of money only accounts for a small amount of the total investment.
“To be honest, accessing resources is not easy. We have access to it thanks to the brand’s reputation, real people, real things,” said Mr. Hoang.
Mr. Hoang assessed that the money source from banks was high, so the startup could not bear it, not to mention problems with procedures and valuation. For investment funds, agricultural startups must have a brand name in the market and must have large profits to be able to access them. Therefore, most startups have to rely on their own cash flow or borrow as individuals, accepting high interest rates.
Startup must determine the right reason to borrow capital
Explaining why it is difficult for agricultural startups to access capital and investment funds, Ms. Nguyen Phi Van, Chairman of the Southeast Asian Angel Investment Association and the “midwife” of many Vietnamese startups, said. that trust between startups and investors is still quite low, so they have not chosen to go together.
Besides, after the pandemic, the problem of raising capital has become much more difficult all over the world, not just agricultural startups. Investors are more careful when choosing, do not invest widely, do not put capital simply for startups, but want to see a clear revenue generation route. Currently, investors are interested in a problem that is a startup capable of self-development and commercialization.
“Here, startups need to understand that we call capital to grow, not to survive. If you call for capital to survive, people will certainly not invest, and if you call for capital to develop, you will attract money if the project has potential. Therefore, agricultural startups need to ask the question: Why are you calling for capital? If you can’t call capital, then you die, no one will spend money, but if you call capital to increase profits 10 times, 30 times, it will be different, “- Ms. Van said.
Products of clean agricultural startups attending the fair. Photo: THU HA
At the same time, another barrier that makes agricultural startups not receive a lot of capital is that agricultural startups are often strong in products and production but lack many other skills such as market development, marketing. , branding, digital transformation, building digital business models. Therefore, the biggest worry of investors when pouring money into agricultural startups is to give you too many resources besides money.
“Therefore, when you go to raise capital, you must understand that you need a financial investor or an investor in resources to determine the right source of money to call. This is also something that startups don’t understand, you want to have it all but where does it come from? Investors only choose one, if you want to develop and succeed, you need to review the development strategy, not the capital raising strategy “- Ms. Van emphasized.
From another angle, Ms. Vu Kim Anh, Deputy Director of the Center for Business Research and Business Support (BSA), said that there are still few agricultural startups to raise capital, because most of the founders are not well-versed in raising capital, they come from technologists, mechanical engineers, etc., not people in the financial field.
Ms. Kim Anh recommended that with the agricultural sector, provinces, cities and NGOs also have many sources of capital support, startups should learn to access these sources.
In addition to capital, startups also need a “midwife”
Starting a business that tinkers with, learns, has to pay very expensive tuition fees. Having the right support will help the project stay on track and soon succeed. Young people starting agricultural businesses are mostly enthusiastic, good at grasping technology and foreign languages, but lack experience and relationships, so they desperately need a “midwife” to lead and support to bring Vietnamese agricultural products out. world.
However, in order to find the “midwife” for the project, the startup project owner must demonstrate his or her ability to have the opportunity to meet with experts and leading businesses in order to find support for the development of the startup project. their business, helping the surrounding farming community.
Grandfather Dang Duong Minh HoangDirector of Agricultural Service Cooperative No. Binh Phuoc