XA Podcast 014 | One And Done: Building A Profitable Company On A Single Funding Round W/ Le Hong Minh, Founder Of VNG Corporation

Could you ever imagine your “hobby” landing you in a position to impact millions of people around the globe? Or, better yet, heading down the path to IPO on just a single funding round? Well, that’s the story of Le Hong Minh, whose interest in playing online games led him to venture into the field of technology and founding his own company in 2004. If you’re a keen hobbyist dreaming of making it into something more, check out today’s episode of the XA Podcast.

Discussion Topics: One and Done: Building a Profitable Company on a Single Funding Round

• An idea and identifying its potential to grow
• Dealing with hardships
• Fundraising
• Being present at the right place, at the right time
• Identifying the best model for your business
• Finding your motivators
• Building partnerships
• Going the IPO way.
• Idea, intelligence, and humility go a long way

Transcript: One and Done: Building a Profitable Company on a Single Funding Round

Tony Zameczkowski: All right. Great, Thank you for being with us today. I’m sure we will have fun. So let me start by introducing Le Hong Minh. So, Le Hong Minh is the founder, chairman, and CEO of VNG Corporation. VNG is the leading internet tech company in Vietnam. Some well-known achievements of the VNG include Zalo mobile messenger, which has 17 million registered users, and Zing which is the number one digital media destination in Vietnam, excellent game development and professional business.

Le Hong Minh studied at Monash University in Australia, and work for PWC and Bina Kibiton before founding VNG back in 2004. He is a leading thinker and speaker on technology trends, startups, and entrepreneurs in Vietnam, along with being a regular speaker on global stages, such as the World Economic Forum, Forbes on annual conferences, and the economist conferences. As a firm believer in the VNG slogan of embracing challenges, Minh is also a triathlete and marathon runner who will not stop looking for activities, which will reflect that spirit.

So with that Minh, I’ll start with the first question. So you studied in Australia, and then you became an investment banker. Can you please tell us about the journey that led you to create the VNG I think at that time it was called Vinagame if I’m not wrong.

Le Hong Minh: So thank you, Tony. It’s my pleasure to be here as well. So I think a very short version of the history of VNG is that I was a so-called hardcore gamer back in my university days when I studied in Australia, so when I returned to Vietnam, that still be a big part of my passion, and then it’s happened that I became the captain of the Vina team going to work. So again, back in 2002, in Korea, that was one of the very first e-sport events in the world at that time.

So if something is the highlight of my gaming career, that was the highlight, and then after coming back from Korea and a few of my gaming fans set up one of the internet cafes here in Auckland City, just to have a place to play games why I still work, my main job is investment banking. And then because of that internet cafe, we really saw the growth of so-called PC online games in very early days in Vietnam. So tuning in there is crazy, you know, at 4 am in the morning, our internet cafes do pack up people playing online games. And before we play, I mean, if any of you here is a gamer, we play kind of like FPS or RTS. And we also play RPG, so I’m still waiting expectedly for Diablo 4 to come out.

But we never saw the level of kind of growth with PC online games back into entry. So, that was the whole history of we just say okay, this sounds like a promising area let’s set up a company so we together would again, my gaming fan set up a company two and four. And then that’s it. That’s how the company was formed.

Tony Zameczkowski: That’s super interesting. How did you pick the first game?

Le Hong Minh: So a lot of people ask like, what is the secret of VNG success, and normally what I say is it is extreme luck. But the story is a little bit more interesting than this because back in 2003 everybody in Asia was playing one game, an online game which was called MU online, which is a very popular online game developed by RPG online game developed by Webzen company of Korea.

So everybody in Vietnam plays that game, even though it’s the market is more but like, you know, so the first thing that I tried to do is to go to Korea in September 2004. And trying to license that game to publish in Vietnam. And I got summarily rejected by the company that they didn’t even want to see me so I just called knocking on their door and said I come from Vietnam. I went to the receptionist and said that I came from Vietnam, could I talk to any of your business development managers and I have to wait for 30 minutes. They said, sorry, there’s no one to see you.

So I just came back from Korea empty-handed and then I just read some reports coming out of China and among the top 10 online gaming in China in 2004 is three Chinese Meg games, the rest were Korean-developed games as well.

So I say okay, let’s just try our luck. So I sent three emails to three companies trying to search the email of their Business Development Managers and send them. And then actually, one of them replied, and I just flew to China at the beginning of November 2004, inside the licensing of the game, and from that company, by the way, the CEO of Kingstar signed a deal with Mr. Lei Jun, who later became the CEO of Xiaomi.

I haven’t even seen the game yet. I only know that it is a martial art game, which is quite a popular theme in Vietnam. I also grew up reading a Chinese martial art novel, which may be if some of you are Chinese or Asian born and you understand the popularity of it. It’s kind of like The Lord of the Rings of our generation, in this part of the world.

So that’s the only thing I know about the game. I haven’t even played it yet. So we signed a deal. And it turned out to be the most successful game in Vietnam. So what can I say? Just beginner’s luck. That’s it. That’s the secret of success. You need to have extreme luck.

Tony Zameczkowski: Yeah, for sure luck is important. And a fascinating story. So, I’m curious, how did you raise money back in 2004?

Le Hong Minh: The network like this in the region. So it’s like everything else is, family and friends. And so, I just talked to a bunch of people. I know I’m gonna do this. I put in my own boat, my savings. And, you want to join, actually a few of my friends, a few family members, a few years later, they really regret not putting money into this business.

So, I talked to a lot of people. And the first 200,000 US money the company is that way, and then the only other external money that we raised is 300,000 from IDG venture at a time, that’s kind of like the only venture fund in Vietnam. I don’t remember any other venture fund in the region. I think that compared to today, that’s a very, very different scene obviously, both the industry and then obviously the venture of funding and all the investment networks so that’s very, very different back then.

So that’s it, that’s the 500,000 US dollars we used to develop the business, and we never raised any amount of money. I mean, primary capital after work, I mean, as luck would have it, so we launched the game in June 2005. I remember we signed a deal in November 2004. And at that point in time, we only have like five people, and we absolutely have no idea of what kind of, like how to do business. So we just jump in and do everything and raise money and do preparation, we launched the game in June 2005.

And by August, we really ran out of money, the 5000 US dollars, so we made a decision to commercialise the game, and in August 2005, that’s the first one that we became profitable, and we have been profitable since then. So again, very, very lucky.

Tony Zameczkowski: That’s great. I’m sure the IDG venture must have been very happy to have invested in India. So obviously, VNG is known to be a gaming company, but at some point, you decided to diversify. And now you are in social media, you are in tech, would you mind explaining a little bit about the thought process, and how you typically split your time in between all those activities?

Le Hong Minh: I think there are two things. So it’s internal, and then there’s an external factor as well. So a few years after we launched the game and our gaming business is quite okay and we asked ourselves what we want to do next. So there are two ways of doing it. One is to expand the game business outside of Vietnam and the other is looking at other verticals. And at the same time, we met up with, and because of our gaming business we went to China a lot and then we obviously saw the rise of companies like Tencent and Alibaba as well.

So we say okay, what it seems that the local Internet market will be by promising let’s try to learn from the Chinese counterpart. And, we have Tencent as a model. So a lot of the things that we did is similar to what Tencent has been doing in China extending to different verticals and then attempting to kind of like being on the Internet ecosystem, we obviously not as successful as they do, but, in a way, we tried to capture the growth in a local market here. And that was essentially how we view other non-game kinds of products and services.

Tony Zameczkowski: Is there anything you would have done differently, any regrets?

Le Hong Minh: We have done. I think one of the things that I would do differently is to extend outside of Vietnam earlier. I think in a way when you’re looking at China companies, as well, many of them are very successful in China, but then have a hard time outside of China, I mean, Tencent is one prime example, apart from their investment, in kind of, like, very successful investment strategy.

But when we talk really about the operating business in Tencent not being successful outside of China at all, I think that’s the curse of being in the market too big and too comparative, that they have always put the priority in the local market. And our market is not that big, but we also kind of, like being carried away a little bit about the growth, and then also the competitive inside.

And I think overall, obviously, another comparison is the Sea or Garena and they started a few years after us, but we think that because they are based in Singapore, and obviously Singapore being a regional hub, and it’s a much smaller market in Vietnam, so when you start something in Singapore, you need to think regionally from the very beginning.

So that one. You obviously look on the high side, and it’s very easy for us to have regret, but right now, I’m pushing a lot for our business to go out, learning from that reflection.

Tony Zameczkowski: That’s great. So, VNG Corporation is 17 years old, and still a private company today. What is the plan? Do you have a plan to go public, be listed on the NASDAQ, or merge with the SPAC, what is the next step for VNG Corporation?

Le Hong Minh: So I’ll just share with you maybe a little bit more on the way we track we evolved over the years as well. And actually, that’s interesting, to start the thing about our mission statement. So, in the first few years, we obviously have absolutely no mission statement at all, because survival is the most important thing, and you don’t really think about any other thing.

And then a few years later, when we sat down and said, Okay, we want to be in the game, and we came up with a mission statement that says, make the internet change Vietnamese life. And, that is the whole genesis of us investing and pushing in for liaising and Zollo and all the other stuff we do. And three years ago, when I just started to say, Okay, we cannot have Vietnam define us, so we decided to really think about what we want to do. And then also, I think two years ago, 15 years, 15 years is a long time in a company, especially this type of work.

So, I kind of like to think really hard about what I want to do, and why I have to wake up every day and go to work. And I say like, there are two things that really motivate me, one is to actually be involved, including new products and new business that really have an impact on many, many users.

I think that the joy of seeing people using and enjoying our product. I think many of us are working in Tech companies, and that is a big right. It’s not just about being in a business position and making money but it’s about seeing the user really use our product, and see their life a lot better. And I think for a lot of tech company, that kind of like, sometimes there’s a lot of debate about whether that’s really true, or we all become greedy and power hungry and just kind of like you know, __ (14:35 inaudible), but I do believe in the romanticism of it.  

And so I said to myself, I do enjoy kind of like seeing our products grow and kind of like creating value and then secondly is I really kind of enjoy working with our team and seeing that you become stronger leaders and evolve.

So, I said, there are two reasons for me to go to work one is a new product and two is for people, so I just make it the mission of VNG. And that’s how I want the business to continue to evolve over the next 10 years, just to continue to build amazing products and have the best people growing within the business. And now we obviously want to set aside a much larger playing field to result in a global market.

So that’s what we do. In terms of IPO first is kind of like a milestone, we never really have to worry about money, I think that we do our business in a very conservative way. All the capital for new products and business comes from internally I say, we never have to raise any additional route, which makes us more like a dinosaur in the whole tech scene in the region which is not necessarily a good thing, but also not necessarily a bad thing, either.

You know, a few years ago, when we see companies like SEA or Gojek raising billions of US dollars, we actually question ourselves a lot. And we say like each company is going to have its own destiny or own ways of doing things. And even if we are not perceived as good or valuable as other companies it is okay because we are who we are, right? We’re being shaped by certain forces, by certain contexts.

Let’s not try to be someone else. So as long as we believe that our actions are in the right direction, we are happy. So, we do have plans for an IPO. I think that we want to do it for all the right reasons, similar to other companies. But for us, it’s just a milestone, and it’s not a goal, it’s not a destination, you know, the goal for the business is to continue its mission of building great products and growing by people as simple as that.

Tony Zameczkowski: So you mentioned building great products, growing, would you consider corporate development and starting to buy out companies in the region, or is it more or less only organic growth for you?

Le Hong Minh: I think, in the past 17 years, mostly organic growth and growth in business internally. We do very little M&A and investment, we also started changing that mindset as well. And for the simple fact that we think we need to learn more, and we need to open more for learning and growth because again we add a certain thing that we cannot change, there are certain things that we’re going to do, because of the habit and the thinking being shaped by a long history, then we need to really open up and learn from outside.

So right now, we do minority investment into different startups in Vietnam, and actually around as well. So, let’s say for our game business, we increase our level of investment for our game business, we’re investing in other countries, just for the fact that we cannot do everything ourselves, but we need to build that partnership, and we need to learn from other people.

So that’s the goal. We haven’t really thought about growing organically like using acquisition as an engine for growth yet. We haven’t really thought about it yet. Right now our investment is more or less like, okay, we know that we couldn’t do everything, let’s really work with the great people out there in the ecosystem. And let’s kind of learn from them as much as we can.

Tony Zameczkowski: So obviously the gaming industry, in Asia, inside out, what are the big trends, you see? Because the group here is, as you know, only investors, we are keen to identify great startups in the region in the gaming space. So, what are the key macro trends you’ve been seeing in this part of the world?

Le Hong Minh: I think the interesting part, and I think for us, that’s the few things that we obviously think of gaming become really big and really important across the world, and not just in the part of the world, I think the market has become a lot more attractive, a lot bigger than even five years ago.

And so obviously, the level of competition is going to be much increased, which is not good news for people like us, but I think overall for the market it is good. For example, three to five years ago, none of the big developers are going to think Southeast Asia is something that they want to do Direct Publishing, so it was easier for us to cut for a publishing relationship.

We just hand over this part of the work for you. But now a lot of big developers from China, from Korea, consider Southeast Asia to be more strategic and important, so they have to build their own publishing capabilities. So I think that is at least from my own perspective a major trend and something that we need to adapt to and we need to learn from.

But overall, we think it’s good because the more people invest in this market, the bigger the market is going to be and the more sophisticated the market it is going to be. So, even, if it’s going to be tough, short term, but long term, it should be good.

I think the second thing that we obviously see is that one of the things we tried to invest in is development capability, and it’s very, very hard. You know how difficult for a development studio in the startup and work to grow both because of the size of the industry, like, for the creative industry, I think that always needs to have a critical mass of concentration for people to learn and to, again, expand and move from different studio to studio and that how that creative industry, not just gaming, but also kind of like movie making, and then music can develop in different pockets around the world.

So, in this part it is much harder, even though it’s growing continuously, we see a lot of talent in this part of the work, but then still, we’re not sure whether we reached enough critical mass for the development industry to really grow. Obviously, another good thing about this is that I think, recently, I’m not sure how much you know, about the NFT space, but NFT it has become like a crazy area in Vietnam because the most successful NFT games actually being developed in our studio called Coax Infinity, even though that studio has a lot of international talent working with them.

So the idea is born out at Vietnam, but then the key people I think that more than 50% of the key leadership team is based out of Vietnam, from the US and so on, so forth, but, basically said that, and I think that now, like 100% of Independent School in Vietnam is moving into the NFT space. So, we also have kind of like debating and then also putting some of our resources in that part, but I think at least that development and the adaptability of smaller studios in the Southeast Asia region is very, very fast.

So the three things that we talked about today, like looking at the overall market, how to work with the big developers, how to deal with the market become a lot more competitive, a lot more, expanding faster, how to build to invest in the development capability in Vietnam, as well as in the region, and how to looking at a new trend like NFTs and what is going to come next month, we don’t know.

Tony Zameczkowski: You mentioned gaming NFT. Do you hear that there is room for another global gaming company, such as VNG or Garena to emerge from Southeast Asia?

Le Hong Minh: I mean, Garena is already a global company. I think they actually run, if not the most successful game globally, even though the bulk of the development is coming out of China, their China studio, but then I think all the publishing ability is based in Singapore.

So already Garena is the most successful global game company that we’ve seen in the past five years, I mean, if not ten based on the success of the game, even though I think that the success of the game is very interesting and if we are looking at how gaming companies are being formed. Let’s say a big name like a lot comes from the Western world you’re going to look at Activision Blizzard, you’re looking at Supercell, and those really creative studios.

They really come up with new genres, they really do great products. But the studio coming from China, I think that they are really good at using a modal that is embedded somewhere and then making the most out of it. More in terms of game design, gameplay to make it scale and make it be engaged and people going to spend a lot of time and spend a lot of money and also on the publishing side on the marketing side, how to grow that to the biggest possible kind of audience.

I think that the Chinese studios and overall really master I think not the creative side, but I say the scale side of the business model. So, which one is going to be more important or will win out in the future it’s hard to say but at least I mean, no one has seen something like free fire over the last five to ten years on the global scale, not to mention like, Southeast Asia.

Tony Zameczkowski: Thanks, Minh. So I would like to shift gears, and I’d like to talk to you not as the founder of VNG corporation, but now as an investor, and an active member of the XA network. So first of all, what is exciting you in this part of the world? And what are the key challenges you would like a startup in this region to solve? And the third part of the question is, do you have any investment in this?

Le Hong Minh: I think maybe what I say is not going to be any insightful for you guys because you’re going to be the same. But I think, for me, obviously, I grow a lot of my views and insight, because I’m based in Vietnam. But I think similar to other parts of the region there’s a huge transformation from a digital perspective going on, we kind of have been getting to know about what’s happening in China.

So like, you’re looking at the visualisation in different parts of the world, like the Western world, and then the developing world. So China, is an example of how visualisation happened in a so-called still developing world, I mean, like, not really fully developed.

But it’s just been amazing like the level of visualisation of a country has become, I would say that, again, from a scale and perspective, China is the best in the world, when it comes to visualisation. Maybe not necessarily from an R&D and creative perspective, but from a scale and application perspective it is the best in the world.

So I think that this part, like Southeast Asia, hopefully, and maybe eventually going to go to the path of China, where we’re going to scale and adapt and apply visualisation to all aspects of the economy and in the business and people’s life, especially we have seen that kind of grow in the past five, six years in 2015 it is amazing to see this kind of change happen.

I still feel before 2015 it is still considered okay, it’s promising, but we don’t know when the promises will be realised. But now everybody is like come on let’s try not to miss the goal. So I think there’s a huge opportunity in Southeast Asia countries regarding visualisation in different aspects, like, you name it.

So the challenge is how to adapt and build products and business to realise that trend, and I think it’s still a difficult challenge because the resource goes from a people from a talent perspective, I mean, to some extent capital, but even not that all but mostly from a people or from a talent perspective is really still a major challenge here. Any tech company can say that even in China or in the US, but I think here it is much more challenging.

So that’s number one and number two is like, there’s a big debate in terms of like Southeast Asia is really one reason or just a collection of different countries. And, so obviously a company like Sea and Grape Soda can be considered as one big market. So, another thing is how more and more companies are able to really build, like a product and platform that cross different countries in the region.

And we still think that it’s not easy, it’s very, very challenging. So, I think that’s two big names that maybe many of you are going to say, so basically, my investment assets from an XR network perspective are because I want to grow VNG to a global scale. Hence, it’s always important to build the network, to get to know some of you more deeply, and not just put myself into the network.

So number one, and number two is, my theory of investment is very simple. I make the same amount of investment to let’s say three or four companies every year, without spending much time to really kind of like, in detail because, again time is something that I need to use very selectively. So, my investment is to make, like, the same number of bets every year on great ideas and great people. And let’s hope that one of them turned out to be a home run. So maybe I’ll be 10 back or maybe 20 or 30 back I don’t know, you guys have more understanding.

So I’d rather not spend time choosing too much, but then I just say, okay, of all the deals that come through maybe I try to make like two or three or four kinds of like, same amount of investment and that’s it, let’s see how it turned out.

Tony Zameczkowski: And as you know, I mean, when we invest at a very early stage, it’s all about the founder, right? Or the founding team. So what are you looking for in founders?

Le Hong Minh: I think anyone who is brave enough to be a founder already kind of, like, deserves our support in some way or another, I think that we all go through that part. I feel that anyone who has a company is the same, it’s like, looking for passion looking. I think it’s all the same quality, looking for passion, looking for the right way they do the business, looking for general intelligence, and also a little bit of humility.

So that’s for me, because how much can you assess the person by just hearing them talk for one hour it is very, very difficult. So just make a judgment call, whether this is someone who is really passionate and you really kind of like, believe that they can give their best in doing the business. That’s all.

Our Guest: Mr.Le Hong Minh

Mr.Le Hong Minh studied at Monash University in Australia, working for PWC and VinaCapital before founding VNG in 2004. He is a leading thinker and speaker on technology trends, startups, and entrepreneurs in Vietnam. He is also a regular speaker on global stages, such as the World Economic Forum, Forbes on annual conferences, and the Economist conferences. Mr. Minh was honoured as one of the 10 most influential people on the Internet in Vietnam for the decade 2007-2017.