According to the Vietnam Startup Report 2022 conducted by Korea’s Nextrans venture fund, Vietnam is one of the most promising destinations for investors in the Southeast Asian market.
By 2022, Vietnam’s digital economy will reach 23 billion USD and is expected to reach approximately 50 billion by 2025. With the booming e-commerce scene, Vietnam has become one of the fastest growing digital economies in the region.
According to StartupBlink startup ecosystem research center, Vietnam has enough growth momentum to surpass Thailand’s current position (ranked 53rd in the world and 4th in Southeast Asia) if it can maintain its growth rate of the ecosystem.
Hanoi and Ho Chi Minh City will continue to be the driving force behind Vietnam’s startup ecosystem in the future. With a large economy (reaching 413.8 billion USD, ranking 5th in ASEAN, 14th in Asia and 37th in the world), Vietnam’s startup ecosystem has a lot of growth potential even if startups do not expand into international markets.
Venture capital poured into the start-up stage
In the period from 2021 to 2022, in Vietnam, more and more domestic and international investors are pouring capital into the early stages of startups. According to a survey by Bain, Vietnam, among Southeast Asian countries, is the most attractive destination for investors pursuing a long-term vision.
Despite the economic downturn and the caution of investment funds in the world at the moment, investors still believe in Vietnam’s long-term prospects. According to DealstreetAsia, Vietnam has 11 venture funds that focus on investing in the early stages of startups, such as AVV, Do Ventures, Nextrans, ThinkZone, Touchstone Partners, VinaCapital Ventures…
Of which, there are 7 maiden funds and 4 venture funds specializing in investing in the Vietnamese market (Vietnam-focused fund).
The total value of assets raised by these companies and investment funds is worth 371 million USD. In 2023 and 2024, they aim to raise 200 million USD.
Since 2021, venture funds specializing in investing in the Vietnamese market have made many deals, playing an important role in supporting Vietnamese businesses in the early stages of their start-up. In contrast, startups, in the later stage, often get funding from regional or global funds.
Venture capital activities
Despite holding large amounts of capital, headwinds in the economy have made venture capital funds more cautious when investing in startups. The number of deals halved, the value of deals decreased by one third compared to 2021, reflecting the slowdown of investment activities.
Although investment in the early stages of startups is still strong, in 2022, the total investment value of startups will still decrease significantly due to the lack of funding in the late stage.
After peaking in 2021, the number of deals and total investment capital into Vietnam in 2022 decreased significantly due to cautious sentiment of investors. Investors are increasingly choosing to invest in startups with more stages and more careful due diligence. In terms of stage, most capital flows to early-stage startups, while few investments are on later-stage. Investors are now scrutinizing the company’s profitability and the feasibility of exiting their investments.
E-commerce remains the top investment attraction in 2022, accounting for 31% of total investment, followed by Fintech (26%), Logistics & Transportation (15%), educational technology, medical and health technology accounted for 6% and 5% of total investment, respectively. Investments in food technology (Foodtech), electric vehicles (EV), real estate technology (Proptech), and software as a service (SaaS) accounted for a total of 8%. Investment activities in other industries accounted for the remaining 9% of total investment capital. This funding is mainly poured into startups in the media, blockchain and travel industries.
Startup’s credit demand starts to increase
Under pressure from investment valuation, more and more startups choose to borrow capital from banks and financial companies to avoid being undervalued when raising capital.
Typically, Be Group borrowed about 60 million USD from Deutsche Bank of Germany, F88 borrowed 60 million USD from CLSA Capital Partners and 10 million USD from Lendable. In addition, VinFast also borrowed USD 135 million from the Asian Development Bank (ADB).
Valuation adjustments are starting to happen, especially for late-stage investments
Since the second quarter of 2022, late-stage capital calls (belonging to series B) have come under a lot of pressure. The average value of these rounds decreased as a result of a more difficult fundraising environment, cross-fund exits, as well as valuation recalibration and increased investor caution. Meanwhile, seed round and Series A deals continue to grow. However, early-stage deals can also come under pressure as wary investors may prefer to support startups that have already made certain gains in their existing portfolios than new, unfamiliar startups
