04.06.2021, 21:17

Vietnam emerges as hot spot in Southeast Asia for venture capital post-COVID pandemic

Despite the hardship brought about by COVID-19, Vietnam is becoming ever more capital-attracting. 2020’s difficulties have barely stopped venture capital activity in the country.

In fact, the total value of investments poured into Vietnamese startups in Q1 2021 reached more than US$100 million, increasing by about 34% YoY with foreign investors being dominant, as reported by South Korean venture capital firm Nextrans.

Global firms backing Vietnam’s startup scene

Emerging from the pandemic while other countries are still in the midst of the crisis is giving Vietnam an advantage. The country’s startup ecosystem has been transformed from the second-least active to the third-most active among ASEAN countries, trailing only Indonesia and Singapore.

Also, profiles of investors making deals in Vietnam are increasingly diversified. If the majority of deals were from Singapore and Japan back in the 2017-2018 period, the market now is extremely vibrant with the participation of several investors from different parts of the world such as South Korea, China, even the Europe, Middle East, and Africa (EMEA) region. Many of them have made investments in Vietnam for the first time. Local investors are also active, participating in roughly 30% of deals.

Among the Vietnamese startups that have drawn significant interest from regional and international investors recently is Loship. Recently, Vietnam’s one-hour delivery startup Loship has announced its latest investment from Skype co-founder backed MetaPlanet Holdings. This is MetaPlanet’s debut investment in Vietnam, as part of its strategy to capture the emerging market opportunities in Asia. “MetaPlanet is planning to pay more attention to the rapidly growing economies in Southeast Asia. I’m delighted to be off to a strong start in Vietnam by adding Loship as our first portfolio company there,” said Jann Tallinn, Skype co-founder, Partner of MetaPlanet Holdings in a statement.

Loship is also backed by a diverse range of international investors including Smilegate Investment (South Korea), Golden Gate Ventures, Vulpes Investment Management (Singapore), DAAL Ventures and Wealth Well (Saudi Arabia), Eucagi Ventures (Nigeria), to name a few.

This is great validation that many venture capitalists from the Middle East and Africa region are starting to shift attention and make deals in Vietnam. Vietnam’s startup scene is on the cusp of something big, and is likely to replace Indonesia to become the next favorite destination of foreign investors. “It’s now the time for investors to set foot in the Vietnamese market,” affirmed Le Han Hue Tam, General Manager of Nextrans Vietnam.

Other notable deals in Vietnam included a US$2.6M investment led by Singapore VC firm Jungle Ventures in electric motorbike brand Dat Bike, and MoMo’s series D funding round with the participation of Warburg Pincus, Affirma Capital, and Tybourne Capital Management. In addition, Vietnamese flexible pay startup Nano raised a US$3M seed round led by Golden Gate Ventures and Venturra Discovery. English learning app ELSA wrapped up a US$$15M investment in financing rounds co-led by Vietnam Investments Group and SIG.


Vietnam emerges as hot spot in Southeast Asia for venture capital post-COVID pandemic

What’s behind the boom?

Several factors are likely to contribute to the boom period of venture capital activity in Vietnam.

1. Successful containment of COVID-19

Vietnam has undoubtedly shown strength and stability in weathering the COVID-19 storm. Coping with the recent acceleration of Covid-19, Vietnam’s government has strictly imposed a range of social distancing and movement restrictions, with the Covid-19 vaccines being widely rolled out soon. This is the country’s fourth wave of Covid-19 since the pandemic began, and everyone’s fingers are crossed that it will be managed as well as the last three.

2. Sustained economic growth

Vietnam’s economy has been rapidly growing at an unprecedented rate, with the forecasted GDP growth rate of 6.3% in 2021 (according to KPMG). Also, the economy is dominated by a young and tech-savvy population, which is embracing the mobile internet economy as a norm in their daily lives. Not to mention, Vietnam is the sole economy in ASEAN not forecast to tip into recession this year.

3. Government-led initiatives

The immeasurable efforts of the Vietnamese government has also contributed a great deal to Vietnam’s thriving startup ecosystem. Numerous government-backed measures and stimulus efforts have been established to support startups, with former Prime Minister Nguyen Xuan Phuc approving the National Digital Transformation Program in June 2020, or the recently implemented EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement. These efforts have significantly paved the way for greater investment inflow to the country.

4. High entrepreneurial spirit

In addition to these macro trends, the entrepreneurial spirit of Vietnamese people is noteworthy, and this spirit has been demonstrated even more strongly and clearly in times of crisis. “Nowhere else in the region can you find as much drive, spirit, and enthusiasm from young people to start their businesses from scratch. Vietnamese people are hungry for entrepreneurship and innovation, and the influx of returnees from overseas is helping improve the quality of the startup ecosystem,” Loship CEO Trung Hoang Nguyen further shared.

What lies ahead

All of the aforementioned ingredients have helped Vietnam to not only survive but thrive in this new rapidly emerging world. It is expected that 117-200 deals will be made in the next 12 months. The so-called “hot” sectors are likely to be Fintech, eCommerce, and Logistics. On another note, the local government has set the ambitious goals of having at least 10 unicorns over the next decade and becoming a technology startup center in Southeast Asia.

Vietnamese startups who are able to future-proof their business models, harness digital technologies, and provide relevant opportunities and solutions will be best positioned to produce solid returns and attract a greater number of seasoned investors in the time to come.

By My Duyen


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