When Vnacapital first partnered with US venture capital firm Draper Fisher Jurvetson, it stood alongside IDG as one of just two venture capital funds in the local market. Things have come a long way since that time, with a market cap standing at more than two hundred billion dollars compared to just less than a billion back then.
Head of VinaCapital Ventures Hoang Duc Trung has spent 15 years in the technology-related investment field and witnessed the development of the tech space in Southeast Asia being directly involved in bringing them from startup to IPO. When he first engaged in fundraising activities and speaking with Limited Partner investors for a fund launched by DFJ in 2006, he found he had to first explain to them where Vietnam was on the map.
“It was always the same questions— why technologies, why Vietnam, where the hell are you, why would I want to invest in you guys?” said Hoang. “But later on, with a sizable market population, with the asset capability, with the penetration of the internet and the tech-savvy younger population with more income disposal, things have been easier for us. Now, we don’t even have to explain it. When we go overseas, people come up and say, ‘Hey I want to talk to you, I hear that you come from Vietnam.’”
Nowadays Vietnamese startups are attracting increasing attention from foreign funds. The country’s favorable demographics and techsavvy population indicate great potential for business growth, with a high internet and smartphone penetration providing market conditions for all kinds of digital services and products.
Investors are also seeing a steady technology workforce graduating from universities and working at larger corporations, as well as increasing numbers of business founders who have studied or have working experience in developed countries and companies, giving rise to what’s now considered the third wave in Vietnamese entrepreneurship.
“The level of confidence has improved, thanks to an exposure to real industry knowledge,” said Hoang. “There are so many large corporations and international companies in Vietnam now. After a certain time, employees who work for such companies start identifying real problems and they really want to solve them, and that prompts them to come out and become entrepreneurs. So confidence in both ideas and solutions, I think, is much higher now than before; it’s practical, it’s realistic, with the backup of successful business models from international firms.”
TIPS, TRENDS AND TECH
While Hoang sees the pandemic as having affected the investment market in that foreign investors are unable to come into Vietnam to do their due diligence, it has also given corporates a chance to look back at their operations and find ways to enhance their operational efficiency. This in turn has given startups new opportunities to approach and onboard these corporates as new clients. Investment activities have continued to be vibrant in Vietnam throughout the Covid-19 period, with GDP and businesses continuing to grow strongly and interest rates declining and remaining low.
Despite the Covid pandemic, international and domestic investors are still pouring capital into startups in various stages, ranging from Seed to Series A and up to Series D. Along with investment funds, large enterprises in Vietnam are also some of the key sources of investment for startups. VinaCapital Ventures’s investment in GoStream and Homebase stand among recent notable deals, as does VNG’s investment in Gotit and EcoTruck, and a consortium of investors investing US$100 million into Momo.
Hoang, whose team now receives several funding pitches daily, now sees Vietnam’s investment ecosystem as being relatively well-developed. “There are three or four key components,” explained Hoang. “First, the government understands how technology can help to develop the economy and has policies to support it. Second is the university system, and to use technology to describe a certain solution in the market, the education must be at a certain level, you cannot just come out and develop things by copy-catting or by replicating,” he said.
“The third one is the startup community itself, which nowadays is more mature and is ready to deal with real situations and also the opportunities of the new economy. Last, but not least, is the business community. Now you see VinGroup, FPT, and Masan, they are all very pro-innovation, and they are ready to do M&A deals or cooperate with younger creative businesses. So all of these things work hand in hand to create a more mature and well-established investment environment. That’s why Vietnam is now ready.”
As for hot tips for investors into up-and-coming opportunities in Vietnam, Hoang remains unable to advise. “If you ask me about the trends, by the time I tell you about one it’s already late,” he said. “If you think it’s a trend, then you will have problems with other incumbents or other companies in the market. So my tip for the early-stage investor is that Vietnam is a country where you don’t have dominance. Lots of businesses still have the chance to be successful,” Hoang said.
“So, if you’re an investor looking for a real operation, experience and exposure will be very helpful in identifying the problem you want to solve. Identify the entrepreneur you want to work with, and then help them to develop and build the solution and then bring it to the market. So this operational skill set will help entrepreneurial companies in the next round of fundraising, and those opportunities are most likely to be successful in this country.” [C]
