29.10.2021, 09:54

The Role Of Venture Capital Funds In Building Vietnam’s Startup Scene

In the midst of the COVID-19 pandemic, Vietnam’s startup ecosystem has proven the significant role venture capitalists play in its growth. When the coronavirus forced customers to change their spending habits, investors became not just sources for financial capital to keep a startup going, but also helped founders and teams to navigate a challenging economic and social period. 

Pioneering blockchain-based game Axie Infinity surprised the startup community this month when it reached a total market capitalization of $2.4 billion, after three years since its launch - a record time in the Asian tech world. KiotViet, a leading merchant platform for small and medium enterprises, meanwhile, successfully bagged a whopping $45 million in Series B funding led by global investment firm KKR last month. 

These fresh capital will help further drive these businesses up and forward, allowing them to grow their teams, expand their offerings and services, and become success stories — something the world needs right now, considering how, after nearly two years, we’re still grappling with the coronavirus. 

Any bright ideas need financial support to materialize. | Source: Shutterstock

Venture capitalists and individual angel investors, who themselves know first-hand the extraordinary risks that come with building a business, are vital to ensure a startup’s success especially now that everyone — investors and investees alike — are trying to ride this downturn and strive to emerge even stronger post-pandemic.

“‘The strong are the ones who change to survive’ should be the guiding principle of any strong founder. And our fund’s investment motto, under all circumstances, is to believe and invest in those strong founders,” Genesia Ventures-Vietnam Head Dung Hoang said in a previous interview with Vietcetera.

Thanks to the growing number of venture capital firms supporting Vietnam’s startup scene — Genesia Ventures, 500 Startups, VinaCapital Ventures, Mekong Capital and FEBE Ventures to name a few — the new wave of Vietnamese entrepreneurs now has bigger chances to scale exponentially and dominate their market.

Driving innovation

Venture capitalists make financial choices that will make or break a startup. But when they do put their trust and money into a business, it will impact years of its growth. Because they bridge newly established businesses to the global market, it is the investors’ responsibility to fund research and development, as well as assume the most risk (especially true for early-stage capital) but allow for the greatest profit and growth potential.

Knowing they have a solid backup, startup founders are more driven to innovate, to bring forward ideas that are aimed to change the community, if not the world. 

Vietnam-based VinaCapital Ventures, for one, focuses on investment, development, and incorporation in a comprehensive digital ecosystem of world-class technology firms. According to a blog from Cekindo, VinaCapital empowers entrepreneurs with great ideas and helps them to develop enterprises that leave a major impact on people’s lives in and beyond Vietnam.

FEBE Ventures, meanwhile, has been focusing on fintech, logistics, healthtech and edutech. Its co-founder Olivier Raussin said the founder-centric fund gives entrepreneurs a complete freedom to develop truly unique solutions. Nano, one of the startups in its portfolio, offers blue-collar workers affordable financing by solving two common B2C bottlenecks: credit scoring and cash collection. With FEBE’s help, Nano became the first Vietnamese startup to be selected by Y Combinator in the US. Other startups in FEBE’s portfolio include Propzy, a category leader in real estate, and Clevai, a tutorial company. 

Startups backed by investors who share the same passion and mission with the founders are more likely to remain in the business longer and see greater revenue volume. | Source: Shutterstock

Giving great ideas the chance to take off

Not all great ideas are given the opportunity to materialize and grow into an actual business. In the competitive world of startups, probably only 1% of pitched business concepts see the light of the day. Unfortunately, most of the ideas that get rejected come from female entrepreneurs. Shuyin Tang, co-founder and CEO at Beacon Fund shared in an episode of Vietnam Innovators how it always bothered her that women in Vietnam are not getting enough funding or are often getting sidelined by investors. 

“Vietnam has become a hot market for funding. With the incredible handling of COVID-19 last year, everyone wants to put their money into Vietnam,” shares Shuyin. “But there’s a particular segment that seems to not get the attention it deserves. Why are there less women entrepreneurs getting the funding they need?” she told VNI host Hao Tran.

Tang founded Beacon Fund, which aims to make the fundraising process more transparent and accessible for female entrepreneurs. Beacon Fund helps female-led startups attain sustainable growth, acknowledging their hardships and celebrating their victories.

The most helpful venture capitalists and investors provide all the necessary assistance startups need. | Source: Shutterstock

Pushing success rate up

Venture capitalists bring decades of expertise to the table of a startup, and they definitely already understand the ropes it’ll take to achieve business goals. It’s been proven time and again that startups backed by investors who share the same passion and mission with the founders are more likely to remain in the business longer and see greater revenue volume. Suffice to say, having the right investors will increase a business’ chance of succeeding.

It also helps that venture capitalists don’t just have deep pockets but are also well connected to the global market, they know who to approach and promote the startups to, and they have more access to different economic segments. Through this, the startups they support get more attention, and thus bigger potential for revenue.

The most helpful venture capitalists and investors provide all the necessary assistance startups need, give them the harshest critiques, but also commit to full-time level of support and fostering to help startups grow.

The program “Initiative for Startup Ecosystem in Vietnam until 2025” (also known as National Program 844) was approved by the Prime Minister on May 18, 2016 and assigned to the Ministry of Science and Technology of Vietnam in charge of implementation. The program aims to create a favorable environment to promote and support the formation and development of fast-growing businesses based on exploitation of intellectual property, technology, and new business models.