The funding focus on Vietnam has remained strong in Southeast Asia, as the country continues to maintain a strong economy and eager startup ecosystem. As one of the few countries that avoided a serious COVID-19 pandemic, the local economy was not severely impacted.
This has led to continued fundraising in the market, though less than the strong 2019 showing. This is to expected as the pandemic has impacted global business and trade, so Vietnam is still proving to be a go-to-market for investors.
To find out why and how this is impacting the region, we spoke to Vy Le from Do Ventures, a newly formed venture capital fund focused on Southeast Asia. Currently raising a US$50 million fund focused on Vietnam, Vy has considerable experience in the market and was able to share deep insights into the country.
Vietnam has had a thriving startup ecosystem for a while now. We look at a breakdown of their startup scene from 2018.
Congrats on the new fund. How is fundraising progressing?
Thank you for your kind words. As announced, we hit our first closing at more than half of the $50M target from a number of entrepreneurs in Vietnam and top institutional investors in Korea and Singapore such as Naver, Sea, Vertex Holdings, Woowa Brothers, etc.
Why the focus on Vietnam? What about the market makes it the focus of your fund?
Compared to other countries in Southeast Asia, Vietnam presents a robust domestic consumption environment with a steady annual GDP growth of 6-7% and a relatively low inflation rate. In particular, the country is at its demographic sweet spot with a young population, fast-growing middle-class, and tech-savvy consumers. Therefore, we believe the current environment is an ideal opportunity for the fund to invest in early-stage tech companies in Vietnam.
Specifically, the amount of invested capital and the number of technology deals done have grown eight-fold from 2016 to 2019. Notably, the tech investment in Vietnam reached the tipping point of $861 million in 2019. Considering the absence of active local funds at this moment, we are well-positioned to capture the potential market opportunity.
Moreover, given the difficulties that the entire ecosystem is experiencing under the influence of the current crisis, Do Ventures will provide a much-needed support for entrepreneurs weathering the ongoing pandemic.
You mentioned proptech and HRtech as new industries entering the market, why those two in particular and do you see any new ones on the horizon?
As aforementioned, Vietnam is in its demographic sweet spot and a lot of young people are now actively looking for jobs after graduation. On one hand, Vietnamese youth place an emphasis on having a successful career, so people now are willing to invest more time and effort in finding good jobs. We believe that if we can apply technology to facilitate them in job hunting, we could solve a critical pain point for consumers in the market. On the other hand, companies are also more willing to invest in the recruitment process in order to find out high-quality personnel. Therefore, we think there would be various opportunities for HRTech to thrive in the next few years.
Regarding the Proptech sector, the real estate market in Vietnam has been booming for the past few years. The rise of the middle-class and the increase of disposable income among young families are the main drivers for a higher demand in the market. This has led to the remarkable growth of the primary market. Recently, we have seen a number of new theses that are based on transactions.
In short, the country’s demographic features have led to the emergence of new business models in these two sectors.
Besides, based on our survey on 50 active funds in the region, investors are looking for opportunities to invest in various sectors, including education, healthcare, financial services, enterprise solutions, etc.
How quickly do you think the market will rebound post-COVID-19?
Regarding the startup environment, we think that startups would bounce back soon. According to our recent survey on 50 active funds in the region, Vietnam is the top destination for investment in the next 12 months. Besides, the investment sentiment in Vietnam remains quite positive; the surveyed funds expect to invest in 117 – 200 deals in the next 12 months. Nearly 80% of the investors have planned to deploy 1-5 deals.
Since COVID-19 broke out, we think that Vietnam’s government has been striving really hard to control the spread of the virus. Currently, across the entire country, there have been 1,098 cases in total, and only 40 cases remain active.
We speak to Cento Ventures about Vietnam’s amazing 2019 fundraising records.
What is the next big industry for Vietnam after e-commerce and fintech?
COVID-19 has definitely catalysed significant changes in customer and enterprise behaviors. Hence, we expect Education and Healthcare – the 2 sectors that benefit directly from the digital transformation acceleration – will see a lot of disruptive business models in the near future.
What’s next for DO Ventures?
Typically, after every crisis, there would be pioneers in different sectors. For example, after the financial crisis in 2009, we witnessed the emergence of disruptive business models such as the sharing economy, P2P lending, and cryptocurrency.
We find this a critical moment no exception. During and after COVID-19, consumer behaviors are fundamentally changing. We have been well-prepared to support tech pioneers that can create innovative products to disrupt the market and create a lasting impact for customers at this unprecedented time.