Erik Jonsson, an e-commerce veteran and partner at global early-stage venture capital (VC) firm Antler, says the Vietnamese e-commerce sector is going through an interesting churn as it gets ready to usher in a new wave of e-commerce enablers.
The VC, which is headquartered in Singapore, forayed into Vietnam in June this year and is currently scouting for investment opportunities in the new economy sectors.
“The time for a VC-backed co-founding team in Vietnam to build a B2C competitor to Tiki or Lazada probably has passed,” Jonsson opined.
“E-commerce is such an interesting and dynamic industry – evidenced by the amount of funding raised by Vietnamese e-commerce players in the last 3-5 years – that there are still plenty of opportunities. We see a lot of e-commerce enablers emerging, i.e. ventures that focus on a specific problem within the e-commerce industry,” he told DealStreetAsia in an interview.
Currently, a spate of e-commerce enablers is mushrooming in Southeast Asia. These include names such as Return Genie, a company created in Antler’s eighth programme in Singapore, that uses innovative insurance solutions to enable instant returns for customers, as well as protection for e-commerce merchants. Locad, also headquartered in the city-state, is another Antler e-commerce enabling portfolio company, specialising in multi-channel fulfillment and on-demand warehousing services.
Jonsson believes that going forward, these kinds of niche products will gain popularity in Vietnam as the market matures.
Vietnam’s e-commerce sector grew by 46% YoY to reach $7 billion in 2020 – it is expected to touch $29 billion by 2025, per a SE Asia e-Conomy report jointly published by Google, Temasek and Bain&Co.
The country currently has the highest number of people shopping on e-commerce platforms in Southeast Asia standing at around 49.3 million, according to the E-commerce White Book 2021 released by the Vietnam E-Commerce and Digital Economy Agency (IDEA).
Before joining Antler as partner in June this year, Jonsson worked as the co-founder and managing director of e-commerce platform Zalora Vietnam, which was acquired by Thailand’s retail giant Central Group in 2016.
Between 2012 and 2017, he was also involved in setting up three different e-commerce businesses in the country.
E-commerce enablers provide digital companies whatever it takes to sell efficiently online. They are expected to see traction as the overall e-commerce activity gathers pace.
Going forward, Antler plans to start its first programme in November in Ho Chi Minh City in two phases. The first phase will be spread of over 10 weeks – it will involve finding a co-founder and validating an entrepreneur’s business idea. The founders will pitch in their ideas to Antler’s investment committee and if successful, they will receive an investment of $50,000.
In phase 2, the shortlisted founders will continue to scale their ideas, develop minimum viable products (MVPs), acquire customers and further validate their models. At the end of phase 2, portfolio companies will have the opportunity to present at Demo Day to an audience of global investors.
Even as Vietnam is still reeling under the COVID-19 crisis, Jonsson believes it’s a great time to get ready to build something new since “the world is recovering.”
“By the time you are ready to go to market, many industries might already have started ramping up again and you’ll be in pole position to benefit from it. ,” he emphasised.
As Antler carves out its expansion plans in the country, it looks to fund companies that innovate traditional Vietnamese industries and use resources the country has to offer through the Antler platform.
“We are fairly sector agnostic so whatever the founders want to build in the programme is what we’ll build, regardless of industry or sub-sector…,” he added.
So far, Antler has built a global presence in 16 locations around the world since its inception in 2017 and has invested in over 300 technology companies.
For Jonsson, nurturing early-stage startups is more like passion. However, the market is not devoid of challenges. Vietnamese founders, who have great ideas, typically prefer to keep a full-time job and dabble with their startups on the side, he said.
“Until they are ready to go all in and work on something full-time it will be hard for them to attract funding from any investor, which greatly limits their ability to scale.”
Another gap that is very apparent in the market revolves around the pipeline of startups coming up. Antler aims to create 20-25 new companies a year through its programmes.
The last one that affects the ability of Vietnamese startups to scale is the lack of exposure to the global scene. “As a venture capital firm present in 16 countries, this mindset is something I believe Antler can help instill in Vietnamese startup founders,” said Jonsson.
Despite gaps, Jonsson is still bullish on opportunities in Vietnam that are different from other markets that Antler is currently engaged in.
Vietnam is globally known for its engineers and software developers.
“Much of this talent has traditionally been used in outsourced development work to other countries and I am excited about helping these talents in building their own ventures and following their own dreams,” he added.
Changing investment landscape in Vietnam
Jonsson has been in Vietnam since 2008 – he spent his first year with Vietnam Investments Group in the private equity space. The rather long stint in the country has helped the Swedish entrepreneur see very clearly the changes in Vietnam’s investment landscape from its infancy days to the current times.
“The largest change is probably the increasing number of investment opportunities,” he added.
According to Do Ventures’s report, in 2020, the amount of capital invested in Vietnam, however, decreased by 48% to $451 million, primarily due to the absence of large-ticket transactions last year.
“There are so many more VCs active in Vietnam today than there were even just 5 years ago. This is driven by the rising number of startup ventures that are being formed every year.”
The second is the legal framework to actually set up and operate a new company, as well as invest into, and exit from it, which has been made friendlier and easier to navigate.
He pointed out that the process of obtaining a licence for a wholly foreign-owned entity, the timeframe of which has been brought down from 1.5 years to 45 days.
Furthermore, the COVID-19 pandemic over the past year and a half has altered the entrepreneurial landscape in the country.
The pandemic, he went on, has added an additional filter of realism. Many VCs are created and run by ex-entrepreneurs and one key entrepreneurial trait, he mentioned, is evergreen optimism.
As such, it’s quite easy to get excited about many pitches that seemingly solve very meaningful problems for consumers or businesses, but in light of this global pandemic “we often have to take a step back and vet the resilience of the business model in perhaps much deeper ways than we did pre-pandemic,” he said.