US-based VC firm Goodwater Capital sees Vietnam as a core market in SE Asia

Eric Kim, co-founder and managing partner at Goodwater Capital.

US-based venture capital (VC) firm Goodwater Capital is betting big on Vietnam’s burgeoning fintech startup ecosystem as it considers the country its core market in Southeast Asia.

The VC firm, which has backed many of the world’s tech giants such as Facebook, Coupang, and Kakao, made headlines earlier this year when it co-led the over $100 million Series D funding round in Vietnam’s largest e-wallet app MoMo.

More recently, the firm joined a $3 million seed funding round in Y Combinator-backed Vietnamese startup Nano Technologies.

“Vietnam is a very unique market,” Eric Kim, co-founder and managing partner at Goodwater Capital, tells DealStreetAsia in an interview. “We’re very impressed with the entrepreneurs in the market….great entrepreneurs make great products. That’s why, we’ve been more and more active in Vietnam.”

Apart from fintech companies such as MoMo and Nano Technologies, Goodwater Capital has also invested an undisclosed amount in the country’s B2B e-commerce startup Kilo in its seed funding round.

Going forward, the venture capitalist is also open to opportunities in healthtech, edtech, social media, transportation, and housing.

Edited excerpts from an interview with Kim:

In Vietnam, you have so far invested in three companies — Momo, Kilo, and Nano Technologies — all of them go on to signal Goodwater Capital’s growing interest in the tech space.What are the opportunities you see in the market?

Vietnam is a very unique market in itself with 100 million people — a very rapidly growing, middle-class population —  and increasing smartphone penetration. We are impressed with the way global entrepreneurship is growing in Southeast Asia. Our involvement in Southeast Asia, Vietnam specifically, happens very organically. Goodwater is a global consumer internet-investing VC firm. Since our inception in 2014, we have invested in over 12 countries all around the world.

We see Vietnam as a core market [in Southeast Asia]. Our experience in the region includes Indonesia as well. In Asia, we’ve also invested significantly in South Korea. Ten years ago, when I was first investing in South Korea, there were a lot of questions around the validity of the tech market there – whether there would be exits or IPOs. Today, it’s proven to be quite a large market opportunity. Kakao, and Coupang have grown to be $45 billion, and $80 billion public companies.

They helped to prove that the global startup ecosystem outside the Silicon Valley can be vibrant, dynamic and rapidly growing as well.

What we really appreciate about Vietnam and companies like Momo is that they’re really serving the end-consumer in a unique way – and there are great needs that they are solving.

We’re very impressed with the entrepreneurs who are leading these companies – at the end of the day, great entrepreneurs make great products. And, that’s why, we’ve been more and more active in Vietnam.

Generally speaking, what I think is happening in Vietnam and other high growth markets is that technology companies are starting to build flywheels so that the end-consumers are better served as they scale up in size.

MoMo is already a big name in digital payment. How can it continue to build more products, reach better scale, and do something different?

I don’t want to speak on behalf of their specific plans. But what I can say as an investor is that they are really pursuing a super app strategy for financial services in Vietnam. Anywhere you go in the world, a lot of times, fintech companies are focused on one feature, or one product, and not a platform overall.

When you look at what Momo is doing, they’re pursuing a broad array of services for end-consumers, and for merchants in Vietnam to enjoy, and to be connected with themselves. So, whether it’s peer-to-peer payments, merchant acceptance, booking, movie tickets, or e-commerce transactions, it’s providing a portal for consumers to really be able to access services through the mobile app itself. That’s very creative.

As far as B2B e-commerce is concerned (where Kilo is operating), analysts argue that there’s very little margin, and that companies often cannot compete with traditional distributors, FMCGs, and retailers. What is your take on that?

As an investor, when we look at companies like Kilo, Nano or Momo, we take into account a long-term vision that entrepreneurs have for themselves. And, I think, that’s disruption. When incumbents are focused on profitability and their own day-to-day businesses, there are opportunities for startups to add value to the ecosystem and serve customers in a differentiated way. And, when you’re using technology as the primary driver for differentiation, and you have a long-term approach to serve customers, good things happen, generally.

Do you think that the B2B segment could witness consolidation going forward, since there are lots of players in the market currently?

A lot of it will come down to entrepreneurs and their execution. I don’t think anyone, for example, could exactly predict the future of how the e-commerce market in South Korea would play out. Coupang, for example, last year did $12 billion in net revenue.

Everyone said there’s no margin in e-commerce [in South Korea]. It’s a very competitive market. So, whether it’s B2B e-commerce or B2C e-commerce, I think when companies use technology, there are ways to grow, and come up with profitable business models that are for the long term.

It’s different from private equity where the cashflow is more visible and there are elements to see on the ground. But oftentimes, the best ideas are very simple but they haven’t been done before. People had thought a lot of things were impossible for Coupang. When people are saying ‘It’s impossible’, that usually means there’s a great opportunity.

In Vietnam, what are the other tech verticals that you are looking at?

Certainly, we’re very involved with fintech. Within consumer technology, we’re looking at everything from consumer-healthcare (healthtech) to edtech, social media, transportation and housing. All these are key verticals for us, that we’re spending a lot of time on.

What are Goodwater’s typical cheque sizes? You participated in Nano Technologies’s $3 million funding round, while for Momo you have co-led its $100 million investment.

We only do consumer tech investments. So, that gives us some specialisation and focus. And that also lets us be flexible with regard to the stage we are investing in. We’re here to help and serve entrepreneurs from seed to growth stage.

In the past, you’ve also exited companies through the IPO route. However, in a market like Vietnam, companies may not be ready yet to hit the bourse. What are your thoughts?

As companies scale, and the overall Vietnamese market grows with strong business models, capital markets will open up. It may be a bit nascent today, but over time, the growth of technology companies will push the capital markets to grow and provide them with the opportunities to go public.

Going public in any country is not easy — it requires companies to get their management teams and infrastructure in place.

Let’s talk about Coupang. It had a landmark debut in the US — what is the secret sauce to its success? After its IPO, do the public markets in the US have a different appetite towards Asian stocks?

I think, a successful IPO of a company like Coupang coming out of South Korea is positive for the overall East Asian region. And I think that extends to Southeast Asia as well. The key lesson that I’ve learned over time with working with companies like Kakao, and Coupang in South Korea, Xendit in Indonesia, and Momo in Vietnam, is the fact that you cannot underestimate the power of countries in East Asia and Southeast Asia.

These are significant economies with large populations, growing middle-classes, and smartphone penetration. That is going to create massive winners over time. Take markets like the Philippines and Thailand – they are huge as well. So, whether you are an entrepreneur or an investor – local or international – you cannot underestimate the power of the local market.

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.