A version of this article was first published in financial asia.
Venture investors are eyeing Vietnam as the latest destination for capital. The Vietnamese startup raised a record $1.4 billion in 165 deals last year. according to Vietnam’s National Innovation Center (NIC). This year, he closed out 2019 with $894 million and 126 deals. This shows that dealmaking in the market has picked up momentum after a slight Covid-19-induced dip in 2020.
Binh Tran, co-founder and managing partner of Ascend Vietnam Ventures (AVV), said startup founders not only in Vietnam but throughout the region are eyeing the Southeast Asian country as an ideal starting point for regional businesses. I explained that there is
“Vietnam’s tech ecosystem is relatively young, about six to seven years old, so most of the VC opportunities are seed-based,” said Tran. Targets announced by the government in 2016 1 million startups by 2020 as a tipping point
The goal may have been ambitious, he explained, but it set the intention to promote and support the nascent startup ecosystem and create hype about the digital economy.
But Vietnam’s population of 100 million is small compared to Indonesia’s 280 million and China’s 1.4 billion, so companies need to look outside the domestic market to scale. suggests Tran.
“Solutions coming out of Vietnam will not only serve emerging Asia. Some of these solutions will be the world’s leading companies to beat Silicon Valley,” he said. financial asia.
AVV, which closed its debut fund above its $50 million goal in June this year, is one of a wave of new venture capital investors looking to the market. These also include GGV Capital. Opened two offices in Vietnam in May this year.mekong capital closed $246 million fund last year. VinaCapital has been in Vietnam since 2003.
Factors that make the country attractive to foreign investors include strong GDP growth. twenty years before Covid-19 and Estimated at 7.5% In 2022 – and a young, English-speaking and skilled workforce.
Additionally, Tran emphasized that there are no large conglomerates or families that act as barriers to entry for new startups. In contrast, such “gatekeepers” are prominent in other markets, including Indonesia.
“97% of companies in Vietnam are SMEs, so there is a very accessible and level playing field,” he explained.
Marina Tran-Vu, Canadian-born and founder of Vietnam-based sustainable startup brand Equo, also noted the county’s young population, growing middle class and investment in land and infrastructure. She sees similarities to China.In April this year, Equo Raised $1.3 million in seed funding from NextGenVentures, East Ventures and others.
Indeed, in context Global supply chain issues Vietnam, exacerbated by pandemic restrictions and geopolitical trade tensions between China and the United States, has attracted interest in its potential to further develop as an international trading and manufacturing hub. This has led many companies to adopt a “China plus one” strategy for diversifying and managing their global supply chains. That means we are reducing our reliance on China and instead looking to the Southeast Asian market.
“I think people are looking outside the mighty country of the country [China] for other occasions. Vietnam looks like a natural ‘next in line’ country based on the same kind of trajectory or route,” she said.
Vinny Lauria, managing partner at Golden Gate Ventures (GGV), said Vietnam’s valuation was “adequate” compared to Indonesia and China, which have attracted the majority of US capital to Asia over the past few years. I’m here. Earlier this year, he moved to Ho Chi Minh City to coincide with the opening of his two new offices in the company.
Lauria and the GGV team see opportunities in the market across three major sectors: edtech, healthtech and fintech, in addition to B2C and B2 “Small b” services. He said he cited Vietnam as one of the top of Southeast Asia’s “Golden His Triangle of Startups”, the others being Singapore and Indonesia. He named his VinFast, an electric car maker, as a “remarkable company” in Vietnam. Gaming Unicorn, VNG; and e-wallet, Momo.
Series B and later
But the lack of what Tran-Vu called “founder education” is responsible for Vietnam’s relatively small check size, explaining why startups often fail to get past Series A’s.
“Many Vietnamese start-ups are at a disadvantage because they do not know how to evaluate their own companies or do not evaluate them as aggressively as other companies in the same sector in different countries. I think they lack a bit of experience and education,” she said. FAs.
When it comes to exit options for investors in Vietnam’s startup ecosystem, acquisitions are likely to be preferred over listings on domestic stock exchanges, Tran-Vu suggested. Lack of perceived fame, compared to New York listings, could be one factor, she explained.
However, listings on local exchanges are becoming increasingly attractive as an exit option, and it is likely that we will see dual listings for startups with wider geographic footprints, Loria explained. did.
“The Vietnamese government continues to update its strategy on the exchange, which was launched in 2016, and this is still sharp. It’s a long-term view of a government that clearly recognizes that it needs to be sophisticated and competitive,” he noted.
The new Securities Law enacted in 2021 has relaxed conditions such as profitability requirements for listing on the Ho Chi Minh City Stock Exchange (HOSE). However, uncertainty remains as to how the market will react to a large domestic listing. “Nobody wants to be a guinea pig,” said Loria.
“In this sense, we are five to six years behind Indonesia. [on HOSE] Right now, but later yes. We are optimistic,” he concluded.
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