Vietnam proves to be the right place and right time for venture capital

Deals struck and more coming

Within the framework of the Vietnam Venture Summit 2019 held in Hanoi on June 10, numerous venture capital funds have pledged to inject an aggregated $425 million into local startups over the next three years. Some of the eminent names include Alpha Venture, Insignia Ventures, Monk’s Hill Ventures, 500 Startups, Vingroup, and Jungle Ventures and so on.

VinaCapital Ventures, the technology investment arm of VinaCapital, on the same day, has announced its strategic partnership with Mirae Asset – Naver Asia Growth Fund, a $1 billion joint fund by Korea’s leading financial group Mirae Asset and internet company Naver.

According to Khanh Tran, partner at VinaCapital Ventures, while Mirae Asset with over $375 billion in assets under management will pour cash into the company, Naver, which operates the most-used search engine in Korea, will work with VinaCapital Ventures and its portfolio companies to help them grow and potentially expand beyond Vietnam.

Korean-backed DT&I Investment, likewise, revealed its $1.4 million investment in Propzy, a local O2O (online to offline) real estate platform that seeks to rectify property buyers’ concerns over transparency, trust and efficiency.

Apart from the deal, DT&I has also made two other investments in Vietnam earlier on, with one to be food app Lozi, and is seeking to boost the number to 10 or more this year.

“We’re looking into lifestyle, B2C, less of the high techs but more of the traditional businesses. By next year, we’ll have a dedicated fund just solely for the Vietnam market,” said Michael Son team manager of Venture Capital Department at DT&I Investment on the sidelines of the summit.

DT&I, according to Son, only invests in South Korea and Vietnam. The country, in this case, is considered a great gateway into the Southeast Asia markets. The investment fund has thus put lot of time and energy into the market to take advantage of its talent pool, highly-educated society and focus on education that have given birth to many talented engineers here.

Together with the committed fund, the high opinions and expectations that investors have had for the local economy and its startup community, early-stage companies and emerging firms in Vietnam can further count on the EUR3-billion fund designated to support the startups worldwide, which has been announced by the European Chamber of Commerce in Vietnam (EuroCham) at the event.

Right focus

The potential sectors that investors or venture capital funds have set their eyes on in Vietnam are not of a total surprise but those that are emerging with the rising economy or are to cater to the public demands.

Ollie Wood, head of Talent at Golden Gate Ventures, named B2C, logistics and fintech with attention on payment services to be of the fund’s serious focuses across Southeast Asia at present.

“We do feel that logistics is something important [in Vietnam] as there’re a lot of problems within that space and there’re a lot of good companies that are addressing different aspects of the logistics problems. We’ve done quite a lot of logistics investment in Indonesia and we’re looking at it more broadly across the whole region,” said Wood.

“We also look at education technology, healthcare technology and property tech as well. We don’t overly look at all sectors but it bases on our research to tell us whether it’s the right time to invest in a certain market,” he added.

For BCG Digital Ventures, who seeks to partner with corporate to build new startups and co-invest in ventures built by themselves and is currently active in Malaysia, Indonesia, and Singapore, its next target will be setting up its venture in Vietnam.

“So far we have not done a venture built in Vietnam but we’re in discussion with 2-3 big companies in Vietnam, so I hope that something will materialise sometime later this year,” said Hanno Stegmann, venture architect director at BCG Digital Ventures.

Stegmann said that sectors of interest to his firm are big consumer, media and fintech. In addition, B2B also attracts big investment from BCG and it has built some mobility ventures in B2B, logistics, agriculture, which are also very relevant to the Vietnam market.

The focuses of these firms perfectly coincide with Bain & Company 2018 Private Equity and Venture Capital Survey that pointed out that among the sectors that attract high investment, technology has grown to be Southeast Asia’s leading investment sector, with 40 per cent of the total deal count in 2017.

In 2018-19, Southeast Asia’s hot investment sectors will be technology, consumer, healthcare, logistics, education and agriculture.

Right place, right time and right people

It seems to be the ideal time for venture funds to spend money in local startups or investors to set up their own venture funds in the country now, as the government has had a clear intention to foster the growth of its entire startup ecosystem.

For Wood of Golden Gate Ventures, he felt that his firm is getting the right signal and support from the local government to invest in local startups. These are evident in numerous accelerator programmes built in recent years like the Business Startup Support Center and the upcoming National Innovation Centre, which all aim at nurturing talents, strengthening the tech-capacity of the nation and building an ecosystem.

Wood noted that given the talent pool, the supporting government policies and the improving infrastructure, it is just the right time for his funds and other investors to drive into the local market.

According to Wood, it is not only Golden Gate Ventures but also other investors from Singapore and Japan are wishing to invest more in Vietnam or setting up their base here to welcome more deals coming to them.

“I think a lot of investors from overseas, like a number of investor from Singapore or the Korean and Japanese funds, are definitely interested in and are ready to be here.”

“The money is there and we’re ready to back the companies and it’s more that we need to find the good quality founders and companies to invest in,” Wood told TheLEADER.

According to Bain & Company, Vietnam and Indonesia generated 20 per cent of the region’s private equity deal value over the past five years, and that percentage is likely to grow. Its recent survey also showed nearly 90 per cent of investors said the hottest Southeast Asian market outside of Singapore in 2018-19 is Indonesia and Vietnam.