Exits are tricky for investors in Vietnamese startups

For investors, Vietnamese startups present an exciting bet but tough exit environment and fewer liquidation events may come as a dampener.

IDG Ventures, the first venture capital (VC) firm in Vietnam, has exited from a spate of its portfolio investees, its vice president Nguyen Hong Truong asserts that there are many startups in Vietnam for VCs to invest in, but divestment is an entirely different story.

IDG Ventures, which almost kickstarted the startup wave in the country, invested in what local folks call “the first generation of startups”, including VNG Corp, Vietnamworks, Peacesoft, Vatgia and VC Corp.

The VC space in Vietnam, according to the fund vice president, is interesting yet tricky because most of the time, investors and founders cannot plan their exit strategy. The divestment opportunity, as well as the buyers, can come completely unexpectedly. Also, sometimes it is more difficult to exit from a high revenue business, he shared at a seminar on founders and VCs’ exit hosted by Topica Founder Institute, as the incubator released its report on startup investments in 2015.

Related: Vietnamese startups close over 60 deals in 2015

In addition, the IPO market, a significant exit route in mature VC markets, is hard to enter as the liquidity of the local market is still very limited, and the listing process requires lots of criteria to meet.

Given this scenario, investors experiment with innovative exit strategies. For instance, they take the startups to other countries and expose them to foreign investors, thereby opening more exit doors.

An example of this case is online advertising agency CleverAds, whose CEO Nguyen Khanh Trinh was present at the seminar, which expanded into the Philippines, Indonesia and Myanmar, making it attractive for South Korea’s Yello Digital Marketing to acquire 50 per cent stake in the Vietnamese venture last year.

Related: Korea’s Yello Digital Marketing invests in Vietnam’s marketing platform CleverAds

S Korea’s Yello Digital Marketing eyes wider Asean reach with Singapore HQ: CEO David Lee

e-commerce platform founder Nguyen Hoa Binh, also an angel investor who has funded some 20 startups and recently exited from advertising solution startup Moore, advocated that founders should always look for a way out. “If you are too focused on a product or idea that does not develop at the right time, then you’ll lose other opportunities,” he said.

His strategy was to try multiple projects. Binh believes there would be some good products among that variety which would be attractive for investors, resulting in an exit path for founders.

In 2013, Binh sold half of his payment venture Nganluong.vn in a series A round. Before that in 2008, Peacesoft, the company behind Nganluong.vn, raised series B funding as investors bought the stakes of IDG Ventures Vietnam and partially from the founder.

According to him, exit is not purely about making money, it is capital accumulation to continue to do business. “So exit is not a goal, it’s just a milestone in your business circle,” he said.

Meanwhile, Truong thought founders should consider selling the business, because in some cases, it is better than running the venture. Giving projections, he said, the market could see more buyouts as companies are looking at a bigger play.

Related: For investors, SEA is tricky as divestment is not easy: IDG Ventures’ Truong Nguyen

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.