Despite the hardships brought about by COVID-19, Vietnam is rapidly emerging as a capital-attracting hub. The trials of 2020 have done little to deter venture capital activity in the country. In fact, the total investment in Vietnamese startups surged to over US$100 million in Q1 2021, showcasing a remarkable 34% year-on-year increase, fueled largely by foreign investors, according to South Korean venture capital firm Nextrans.
Global Firms Backing Vietnam’s Startup Scene
As the world grapples with the ongoing effects of the pandemic, Vietnam is enjoying a unique advantage. Its startup ecosystem has transformed significantly, moving from being the second-least active to the third-most active in the ASEAN region, trailing only Indonesia and Singapore.
The profile of investors is also diversifying. In the 2017-2018 period, most deals came from Singapore and Japan. Today, the market boasts participation from a wide range of investors, including those from South Korea, China, and even the Europe, Middle East, and Africa (EMEA) regions. Many of these investors are making their debut in Vietnam, highlighting the increasing appeal of the market. Local investors are not left behind, participating in roughly 30% of the deals.
A standout in this vibrant ecosystem is Loship, a one-hour delivery startup that has recently attracted investment from MetaPlanet Holdings, co-founded by Skype’s Jaan Tallinn. This investment marks MetaPlanet’s entry into the Vietnamese market as part of its strategy to tap into emerging 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 Tallinn.
Loship’s diverse investor backing includes names like Smilegate Investment (South Korea), Golden Gate Ventures, and DAAL Ventures, among others. This backing from various international investors showcases the shifting focus and growing interest from venture capitalists, particularly those from the Middle East and Africa, toward Vietnam’s startup scene. Experts suggest that the country is poised to become a favorite destination for foreign investors, potentially displacing Indonesia’s position.
Notable Deals in the Pipeline
Several exciting deals have emerged from Vietnam’s thriving startup landscape. Noteworthy examples include:
- Singapore’s Jungle Ventures leading a US$2.6 million investment in Dat Bike, an electric motorbike brand.
- MoMo, which secured a Series D funding round with participation from Warburg Pincus, Affirma Capital, and Tybourne Capital Management.
- Nano, a flexible pay startup, successfully raised US$3 million in seed funding led by Golden Gate Ventures and Venturra Discovery.
- ELSA, an English learning app, wrapped up a substantial US$15 million investment in financing rounds co-led by Vietnam Investments Group and SIG.
What’s Behind the Boom?
Several factors contribute to the booming venture capital activity in Vietnam:
1. Successful Containment of COVID-19
Vietnam’s effective response to the COVID-19 crisis has instilled confidence in both investors and startups. The government’s implementation of strict social distancing measures and a comprehensive vaccine rollout has allowed the country to navigate the pandemic with relative stability and strength.
2. Sustained Economic Growth
The Vietnamese economy is projected to grow at an impressive 6.3% in 2021, according to KPMG. This growth is buoyed by a young, tech-savvy population that increasingly embraces the mobile internet economy, making Vietnam unique within ASEAN as the only country not expected to slide into recession this year.
3. Government-Led Initiatives
The Vietnamese government has played a pivotal role in nurturing the startup ecosystem through various initiatives. Programs such as the National Digital Transformation Program and trade agreements like the EU-Vietnam Free Trade Agreement have reduced barriers to investment and paved the way for inflows of capital.
4. High Entrepreneurial Spirit
The entrepreneurial spirit among Vietnamese people is already remarkable and has become even more pronounced during 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,” noted Loship CEO Trung Hoang Nguyen. This hunger for innovation, coupled with the influence of overseas returnees, is vital for enhancing Vietnam’s startup ecosystem.
What Lies Ahead
With the right ingredients in place, Vietnam is not only surviving but thriving. The forecast suggests that between 117 to 200 deals will take place in the next year, particularly focusing on hot sectors like FinTech, e-commerce, and logistics. The government has ambitious goals of nurturing at least 10 unicorns over the next decade, aiming to establish Vietnam as a technological startup hub in Southeast Asia.
Startups that adapt their business models for the future, leverage digital technologies, and address relevant market needs are well-positioned to yield solid returns and attract seasoned investors in the times to come.
Duyen Tran is a Public Relations Specialist at Loship.
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