I have been thinking a lot about why Internet startups in Vietnam have such a low rate of success.  Before you ask, no there are no real statistics on this.  It is my gut feeling, but supported by:

• There being only about a dozen major online publishers in Vietnam.
• There being only about five major gaming companies.
• There being a huge glut of skilled technology workers and entrepreneurs.

In my former role as head of Admax Network Vietnam, a lot of small publishers came to me for help monetizing.  The mindset here is very similar to that of the dotcom boom.  We build it big enough to get decent traffic, and then with that traffic we will discover a business model.

And very often, the monetization of that traffic becomes advertising.  The same silver bullet that many many startups strove for in the late 90s.  And those startups quickly run out of cash while waiting for someone to acquire them.  To wit, no internet publisher been acquired by any company looking to enter the market.

But what about the internet startups that provide services to the local market.  In this basket I would lump:

• Software as a Service companies (i.e. Flickr, webmail, etc)
• eCommerce
• Auction websitesrep
• HR websites

It doesn’t take much to start any of the above companies, and you do find dozens of teams of young, smart and hungry engineers and entrepreneurs starting businesses every week.  For example, I just discovered Pha Gia, a Vietnamese clone of GroupOn.

It is no surprise that many Vietnamese startups are ‘inspired’ by successful startups in America.

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So why do so many startups fail?

My fervent belief is that many startups fail here because of a lack of good marketing.  I was listening to this interview with Sean Ellis (marketer for Dropbox.com, among other startups) on Mixergy and realized something key.

The startups here have a lot of talented and smart engineers and entrepreneurs, offering both smart and technical solutions to everyday challenges.  However, they all fail in that they do not know how to market their offering to their target offering.  They all suffer from the illness:

If we build it, they will come.

The Field of Dreams strategy of marketing rarely works, and marketing is where almost all  internet startup fails. Without good marketing, they are unable to:

• Bring customers to their website.
• Educate people on their product offering and their value proposition.
• Most importantly, defend themselves against clones and competitors.

Without the protection that brand equity affords (and yes, good brand equity is good defense), new internet startups when they get successful, face dozens upon dozens of clones, splitting up the growing marketplace and destroying any hope a startup has of getting a good viral or network effect (Metzcalfe’s Law).

This post is getting long, and I am tending to ramble, so to sum up in a couple sentences.

• Business need : Internet Startups need good marketing
• Challenge: Internet Startups have no money
• Solution: Marketers (or agencies) take on business for a stake of the business and cost of marketing.

Not everyone can do it, but I think this can be an attractive proposition for VCs and angel investors, frustrated by the lack of progress in their companies.