Although 2019 saw an investment peak in Vietnamese startups, funding dropped by 22% in H1 2020, from $284 million USD in the same period last year to $222 million USD, due to COVID-19 travel restrictions and complications in deal-making activities. Despite the limited number of new investors entering Vietnam’s market in H1 2020, H2 is witnessing a pickup in fundraising activities, keeping Vietnam ahead of Singapore.
The funding scene in Vietnam is flourishing according to Cento Ventures, with an impressive two-year leap from having one of the weakest startup ecosystems in the region to becoming the third busiest in H1 2019, preceded by Indonesia and Singapore. Vietnam surpassed the latter for the first time in 2019, when its total tech startup funding reached $741 million USD, compared to Singapore’s $693 million USD.
Vietnam startups raised a total of $246 million USD in H1 2019 with 63% of the funding captured by three of its big players Tiki, VNPay and VNG. The retail, digital payments and edtech sectors dominate the investment list with a diverse mix of foreign investors, led by Korean, Singaporean and Japanese Venture Capital firms (VCs).
Why Vietnam?
According to Do Ventures, 55% of investors preferred Vietnam as an investment destination for the next 12 months, followed by Indonesia (42%) and Singapore (14.6%). With 80% of them planning deals over the next year, the focus is likely to be on the education, healthcare and financial services sectors.
DO Ventures shares why they see Vietnam as the next big market for the region.
Foreign funds invest millions of dollars into Vietnamese startups, encouraged by the country’s favouring factors, such as increased internet penetration, its young, tech-savvy population and its fast-growing middle-class.
Global firms backing Vietnam’s startup scene
Affirma Capital announced in February an investment of $34 million USD in Sieu Viet Group, an online recruiter and owner of the job listing websites TimViecNhanh, ViecLam24h, ViecTotNhat and MyWork. Affirma Capital is no stranger to investing in Vietnam as this was its fifth deal. It has previously backed children’s lifestyle platform N KID Group, agrochemical distribution and food production company Loc Troi Group JSC, restaurant chain operator Golden Gate and Online Mobile Services JSC, which operates eWallet MoMo. Momo raised a $100 million USD funding from US-based equity firm Warburg Pincus.
US-headquartered VC firm 500 Startups invested in 19 new companies in 2019 and aims to reach the target of 80 companies invested cumulatively by early 2021.
Payment solutions firm VNPAY raised $300 million USD from Japan’s SoftBank and Singapore-based sovereign wealth fund GIC.
South Korean STIC Ventures has also granted capital to many startups, such as eCommerce operator Tiki, and other firms such as Cammsys Vietnam and Nanogen Biopharmaceutical. Tiki received a $130 million USD investment from private equity fund Northstar Group, becoming one of the top 5 funded startups in Southeast Asia at the time.
Do Ventures launched a $50 million USD fund for Vietnamese startups in July, backed by Korean Internet giant Naver, Singapore-based VC firm Vertex Holdings, Korean app developer Woowa Bros and leading consumer Internet company Sea.
The investment vehicle has hit over half of its $50 million targets and initially focussing on early-stage companies, before investing in seed to Series B rounds. The firm hopes to encourage faster digitalisation of traditional businesses and increase consumers’ accessibility for better customer experience.
Funding future is bright
With Southeast Asia seeing some of the highest internet and smartphone penetration rates in the world, technology is much more accessible to all than in previous years. Vietnam has latched onto this phenomenon and also has a young talent pool with a growth mindset and a fast-growing economy. These factors, coupled with a significant public policy towards the health crisis, are helping to invigorate the funding scene in Vietnam. The county shows immense long-term potential for startups serving both domestic and foreign markets.
However, as further disruptions and economic effects due to the coronavirus pandemic are likely to challenge Vietnam startups, the ability to embrace change is crucial for their growth and survival. Some may need to reinvent themselves altogether, while others may require a simple pivot in their offerings or business plans.
Tran Hai Linh, CEO of eCommerce platform Sendo, noted: “To grab the opportunity, startups should step up and try new things. The key ability for them to win is to create a unique point. No success can be achieved by copying. Startups in Vietnam can exploit new fields which nobody has done before to be the next disruption to succeed”.
With the support of government policy and the opportunities arising from the rollout of 5G in the country, Vietnam looks set to continue to prosper as a startup hotspot and attract VC funding.