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What Brought this Silicon Valley Guy to Vietnam : Strategy to Tap into $260 Billion Savings Market
Imagine millions of people using online accounts via QR codes without having actual physical bank accounts.
When the concept of 'money' is encompassed online like that, it creates many opportunities for entrepreneurs. Providing easy-to-use fintech services as a middleman can be a great path to entrepreneurial success.
In particular, Vietnam is one of the rising hotspots for fintech startups to look for the chance to bloom. According to UOB, the number of fintech firms in Vietnam increased from 39 in 2015 to 200 in 2022. This data indicates that the fintech sector in Vietnam is in the very early stages and has a lot of space to grow.
That is the reason Michael Do, the Co-founder and CEO of 1Long, moved from Silicon Valley to Vietnam.
His vision was clear: providing a convenient and reasonable fintech product to Vietnameses. In order to do so, 1Long is building the platform for the customers to keep their savings with various options, not limited to the deposit with a fixed amount of money for a predetermined period of time. If the team can pioneer the banking deposit system in the early stage of the market, it might be a winning game for the startup.
What exactly brought Michael Do from Silicon Valley to Vietnam? What is the precise reason this promising fintech startup in Vietnam looks for opportunities in the banking deposit business? What kinds of business scenarios do they have in the short & long term?
Asia Tomorrow met Michael Do via a video interview to hear the full story of him coming to Vietnam to start a business. The team of 1Long was dedicated to fundamentally alter the landscape of financial services and the usual behaviors of users in Vietnam by developing the user-centric fintech product that is hard to find in the Vietnamese market.
From Silicon Valley to Vietnam : What Brought Him Here?
Q. First, please introduce yourself to the readers of Asia Tomorrow.
Hi. I am Michael Do, the founder and CEO of 1Long. Launched in 2023, 1Long is a fintech service that makes investing very simple and intuitive. Currently, we are focused on cash savings.
Q. I heard you worked in the U.S. financial industry before starting a business in Vietnam. Could you tell us more about this?
I was born in Vietnam and moved to Delaware, USA, when I was three years old. I grew up there. It wasn't until I started attending the University of Southern California that I began to see a broader world and learn more. I met super international friends with diverse nationalities and had the opportunity to taste delicious foods from each country.
Thanks to my studies in finance during college, I worked as an analyst at an American investment firm and a product manager at a Silicon Valley unicorn company after graduating.
Then, I moved to Vietnam, taking a significant pay cut, because it has always been my dream to start my own business. Vietnam, rising as a developing economy, seemed like the right place for such a challenge.
Q. What entrepreneurial opportunities did you see in Vietnam at that time?
The Vietnamese fintech market is attractive. It’s an emerging field with a lot of potential.
In June 2021, I joined my first startup, Anfin, as a co-founder and Chief Product Officer. We dived into the digital financial brokerage sector. That autumn, we were selected as a part of the Y Combinator Winter 2022 batch and received an investment of $75 million.
At the time, the pandemic had opened up an era of online trading. The GameStop stock price surge was a huge event that exemplified this era, occurring just 3-4 months before we founded Anfin.
By then, countries like Singapore and the European Union each had a prominent online trading app. However, I discovered that the market competition was not intense in Vietnam.
In Vietnam, financial investment services were not well developed, forcing individuals to buy stocks at high prices. I wanted to solve this problem to simplify retail financial transactions by creating an online trading app in this market. (The company is still around but I decided to pursue a different vision).
Q. What new vision did you envision through 1Long?
The 1Long team identified a pain point in the Vietnamese banking deposit system.
In Vietnam, customers deposit a fixed amount of money into a fixed deposit for a predetermined period. Upon maturity, they receive the amount with the interest rate applied at the time of deposit. However, if they terminate the deposit early, they lose all the interest.
1Long saw this as unfair to customers and believed liquidity needed to be provided. We thought of offering a service where customers don't have to receive their saved amount back at the set interest rate and period.
Therefore, our team applied aggregation* and fractionalization** techniques to our fintech service, enabling us to offer high interest rates and constant liquidity to our customers. Thanks to this, 1Long users don’t have to commit their deposits for the bank-defined period and can receive their deposits back at a higher interest rate than the applied rate.
*Aggregation: The process of collecting data from multiple or all financial accounts of an individual or household into one place, also known as financial data aggregation.
**Fractionalization: A method that allows retail investors to invest in a divided form of an asset class.
Q. You mentioned that 1Long has incorporated aggregation and fractionalization. Could you explain more about each technique?
When purchasing CDs (Certificates of Deposit*) or bonds, there is a minimum requirement that must be met. For bonds, typically, you need about $50,000 to buy one lot, and for CDs, you need approximately $5,000.
Currently, each 1Long customer has an average account size of $5,000, which alone is not sufficient to purchase bonds or CDs. Therefore, customers initially come to 1Long for cash savings.
At this point, 1Long can aggregate individual funds to purchase bonds or CDs and then sell them fractionally to the customers. This allows individuals to invest at a price lower than the minimum thresholds.
1Long's aggregation technology is essential here. It involves the real-time aggregation of data on customer deposits coming in and going out, similar to monitoring cash flow like a bank. This technology is crucial to ensure that there is enough money in the vault when a customer wants to withdraw funds, thus emphasizing 1Long's focus on real-time liquidity and cash flow prediction through aggregation.
*Certificate of Deposit (CD): A bank-issued time deposit that has added transferability, making it a highly liquid financial product that can be traded through brokerage firms and comprehensive financial companies. Although premature withdrawal is not allowed, the ease of transfer facilitates its liquidity.
What is Needed for Business/Products to Innovate the Vietnamese Financial Market
Q. It seems that attempts like fractional investing or adding liquidity to customer deposits are not yet common in Vietnam.
1Long is definitely a first-mover. I believe we are leading the trend in the personal asset management domain in Vietnam. This is because the concept of 'customer-friendly' services in terms of passive investment* is relatively new here. Ultimately, 1Long is a company that offers verticalized passive investment solutions.
*Passive investment: An investment strategy that mechanically buys and sells securities based on the fluctuations of major indices.
Q. What is the scale of the Vietnamese cash savings market that 1Long is reaching out?
In Vietnam, the scale of cash savings, according to the balance sheets of major state-owned banks, totals about $260 billion USD. It is understood that since the Vietnamese government operates these banks, the general public trusts their cash savings services, which is why such a large amount is gathered in savings.
However, 1Long aims to further differentiate ourselves in this area. For starters, through 1Long's services, we can offer higher interest rates than banks or provide liquidity levels that are comparable to or slightly higher than those of banks. In the future, we plan to introduce a broader range of asset management options, including real estate and stocks.
Q. Could you please explain in more detail the types of services that 1Long provides?
1Long offers two main types of services, and we guide our customers to decide which cash savings service would be best for them through consultation.
Firstly, 1Safe focuses on high interest rates. When people have cash on hand, they usually open two types of accounts. One of these is a 'liquid cash account', which allows for flexibility to withdraw and transfer funds at any time. It's often used for paying credit card bills or rent.
Everyone probably has such an account. The issue is that the interest rates on these deposits are not high enough. 1Long believes that the interest rates for cash savings accounts, which are used daily should be higher (similar to fixed income investing* or CD). Therefore, 1Safe offers a daily cash savings service with an annual interest rate of up to 6%.
*Fixed income investing: A type of investment/security that pays its investors/holders a fixed amount of interest over a fixed period. Unlike stocks, where future payments are unknown, fixed income securities provide a steady flow of cash flow based on a known interest rate or dividend.
The second service, 1Term, focuses on term liquidity. It's a service designed to address the pain points found in services offered by banks.
Typically, when saving with a bank, you choose from various options like 6 months, 12 months, 24 months, etc., and decide on one of these periods. However, 1Term promotes itself as a "long-term high interest rate cash planning account." You can receive an annual maximum interest rate of up to 8.5% with 1Term if the deposit period is long enough.
Let's say a customer decides to deposit $100 in 1Term for six months. Like a bank, 1Long provides the service under the assumption that 'the customer can afford not to use this money for a while and will save it.'
However, unlike traditional banks, 1Long allows customers to set their desired duration (time journey). For instance, in the case of the customer who saves $100, this means that in the first month, they could withdraw $101, and in the second month, $102, offering flexible withdrawal options.
Therefore, customers of 1Term do not need to decide about liquidity on the first day they join the product. They can withdraw cash from their account whenever they need it. In other words, while banks provide services with fixed options, 1Long offers more flexible and varied options, allowing customers to choose when to withdraw cash and what interest rate they will receive.
This flexibility marks a significant difference in the financial services offered by 1Long compared to traditional ones.
Q. Can you disclose the scale of the assets or accounts managed by 1Long?
Certainly. Currently, the total assets under management at 1Long amount to $500,000. There are about 400 accounts where money is deposited.
Q. Would you explain about your business model, please?
At the pre-seed stage, we assumed it's more crucial to explore a variety of business possibilities than hanging on to the overall revenue. Even so, our current revenue primarily comes from the net interest margin. This refers to the margin earned when the money invested or deposited through the app exceeds the money paid out in interest.
Of course, there are key metrics we focus on besides the revenue growth. For 1Long, the total assets under management (the entire amount of money deposited through the app) and the number of funded accounts (accounts with actual deposits) are crucial.
In terms of funded accounts, the churn rate is particularly significant. For now, as the net interest margin is derived from here, the churn rate is not only vital for our business but also indicative of customer satisfaction.
Lessons Learned from Starting a Fintech Startup in Vietnam
Q. Are there any regulatory or technological challenges in the Vietnamese financial market?
Vietnam is predominantly state-owned, so numerous licenses are required to operate an asset management business. There is also strict monitoring and control over money moving domestically and internationally. Being an emerging market, the pace of regulatory changes can be slower than the speed of technological advancement.
Furthermore, Vietnam's current infrastructure emphasizes that customers must have authorization over their own securities accounts.
This indicates that, even if trading is done using app services, the app cannot trade with the customer's money directly. Instead, it involves a process where the app requests the customer to transfer funds, which adds the inconvenience of customers having to make the transfers to their securities accounts themselves.
1Long is adapting to this market infrastructure and developing its business. We anticipate that these are areas that will become more efficient over time. Moreover, we are considering various possibilities for our fund management business:
- First approach: Forming partnerships with existing asset managers to manage 1Long customers' assets.
- Second approach: Directly obtaining a fund management license. If applied for, it can be acquired within about six months, and once obtained, it allows easier distribution of fund management-related products.
- Third approach: Acquiring a fund management company. Going this route would eliminate the need for obtaining a separate license and would make it easier to launch new mutual funds or ETF products.
Q. I'm impressed by how actively you and your team are pioneering the early fintech market, given its regulatory and technological issues. Can you tell us how you built your team?
The startup ecosystem in Vietnam is not very old. It's probably fair to say that it started to come together around 2013 when mobile companies began to draw attention. That's about ten years ago. Only now are experienced local entrepreneurs beginning to emerge.
Our co-founders (who are Vietnamese) have either founded a company before or have early startup experience. They understand the significance of these responsibilities well.
Hoang Nguyen is the co-founder and COO of 1Long. We met at Anfin. He knows the local domestic nuances of Vietnam even better than I do and works closely with regulatory bodies.
Joshua Hong is another co-founder and serves as the Chief Business Officer of 1Long. We also met at Anfin. He is primarily responsible for forming partnerships, managing accounts, and handling sales. The three of us, all experts in our fields, have come together to create the great company that 1Long is today. (For reference, I’m especially in charge of fundraising.)
We also formed a dedicated co-founding team. This team includes not just the co-founders but also the head of tech and the head of product, which we took great care to build early on. I believe it's essential that power is not concentrated only among the co-founders but distributed among 5 to 8 individuals with special roles and responsibilities.
Q. As a co-founder and CEO, how do you define your role?
An employee hired to perform tasks focuses on their skill set and tackles very specific problems. From my experience, a Product Manager (PM) would exert effort to improve the product. As a CEO, however, I learned that I must view the bigger picture. I need to think multi-dimensionally about how each element of the business can be organically connected.
In particular, the ability to attract talent is a criterion that determines whether you are a capable co-founder or CEO. A CEO must persuade people to want to join the company. It involves clearly explaining why this service is necessary here and now, and making it interesting for potential hires, much like convincing customers or investors.
Above all, a leader must show results. For instance, since my role involves fundraising, I need to be able to secure funding even during economically tough times.
Since becoming CEO, I have spent every day considering how to achieve the best results with the resources available, how to craft a mission and vision that facilitate good hiring, and how to meticulously manage and utilize the budget. It feels like I live my life minute by minute.
Despite having held prestigious and hard-to-obtain positions such as an analyst at an investment firm and a Product Manager at a Silicon Valley unicorn company, I find being a CEO to be truly meaningful and rewarding. It is more challenging and demanding than any other job I've had, but personally, it energizes me and makes every day exciting.
Q. What advice would you give to other founders who are struggling with team building and fundraising in early-stage startups?
Fundraising for startups has become significantly more difficult. Both the number and size of deals are decreasing. However, I firmly believe that entrepreneurs who actively participate in various startup communities, events, and accelerator programs will inevitably find opportunities that can help their businesses.
I would also advise early-stage founders to make active use of social media platforms like LinkedIn. Diligently build relationships with everyone from investors to industry professionals, and regularly post your thoughts and insights. Writing alone can expose you to a global community and audience instantly, and may even lead to inbound inquiries from investors.
If you have the opportunity to pitch to investors, I strongly recommend including 'information that the investors may not know' in your pitch deck. This will enhance the credibility of your story.
As a C-level executive deeply focused in this industry, include one piece of information that is likely unique to your knowledge and may be unknown to others, which can differentiate your storytelling.
For example, when we were fundraising for Anfin, we specifically highlighted the current status of fractional shares. We included the fact that 'three months ago, fractional shares transformed the entire trading market, making batches of 10 to 100 shares trade at ten times their previous value.'
Highlighting such details not only establishes your team as experts but also provides investors with information that can foster mutually beneficial relationships.
The Future of 1Long: How They Will Solve Customer and Social Issues through Technology
Q. 1Long emphasizes that "every user should be able to access financial services with just 10,000 VND (slightly less than $1)." Can you explain the context behind this goal?
This goal reflects the company's philosophy. In my opinion, everyone should be able to save money and get a chance to utilize financial services well. In contrast, financial education is not yet widespread in Vietnam. As a result, people often hope that the cash they save will increase tenfold within a week. There is a societal need for greater financial literacy.
1Long is building a product that allows anyone to save money in an easily accessible way, even with a small amount of capital. We aspire to change the market atmosphere so users can say, "Oh, I put money in 1Long for a year and got back 8% more. After two years, it increased by 16%, and there was no loss of principal," encouraging them to establish long-term financial plans.
This philosophy will also be applied to other services 1Long will offer in the future. The cash savings service we currently provide is just one method; moving forward, we will introduce more personal financing product options that align with our company’s vision.
Q. Could you introduce any new projects that 1Long is experimenting with in line with this philosophy?
Lately, our AI engineer who studied at Duke University and has experience working with a blockchain company in Vietnam is developing a Robo-broker.
We are testing this system experimentally in Ho Chi Minh City. The focus is now on real estate, where the system 1) assesses customers' income and assets and forecasts market prices, and 2) recommends properties suitable for those customers.
It's a highly experimental project, but we expect it’ll become a useful guide for brokers to assist customers in the future.
Q. What are 1Long's short-term plans? Specifically, how do you plan to use the recently acquired pre-seed funding?
Products are critically important to 1Long. Since we have not established physical retail stores, our products essentially serve as our storefront. Our product and engineering teams, which comprise the majority of our organization, are focused on creating service infrastructures, apps, and features that are customer-centric, striving to define and resolve customer problems.
We also plan to actively invest in product modularization. The journey of asset management differs greatly depending on whether a customer is investing $1, $100, or $1 million. We intend to develop product modules suitable for each stage.
Additionally, we are going to invest in sales and marketing. We intend to use our resources to sponsor, participate in local community events or host an event. We are also considering investing in expanding into suburban and rural areas of Vietnam.
Meanwhile, preparing for the next round of investment is part of my role. In this interview, I have outlined our vision and future challenges, and we are all committed to achieving these goals while seeking greater value recognition in the lead round.
Q. What are 1Long's long-term goals as a company?
Our long-term goal at 1Long is to lead our customers to manage their assets responsibly and successfully through our products. Plus, the success of our business strategy hinges on securing large-scale accounts. We aim to build a successful business foundation by establishing networks with high-wealth individuals and opening their financial accounts with 1Long.
Interview by May Jang
Written by Jinny Kim (underdogs)
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