South Korean venture capital firm Nextrans, which invests in early-stage startups, is planning to bet more money on Vietnam’s later-stage firms, as the country witnesses a spate of growth-stage businesses that are carving out expansion plans after surviving the pandemic.
Nextrans, one of Vietnam’s most active VCs, will look at startups with a valuation north of $10 million, general manager Le Han Tue Lam told DealStreetAsia in an interview.
“Vietnam’s startup ecosystem is now more mature. There are more high-quality founders who have the required drive and thoughtful conviction about what businesses will work. That’s why there are more South Korean investors coming to Vietnam, willing to bet their money on companies that have proven that their business model is effective,” she added.
Even as it shifts its focus to later-stage companies, Nextrans will still keep an eye on very early-stage startups that can prove their ideas are scalable. “We will scout for opportunities in many sectors, but will pick only select companies that dominate the sector,” emphasised Lam.
This year, Nextrans is targeting 15 new investments in Vietnam, besides follow-on investments.
To date, the VC firm has deployed $4 million across 17 deals in the country, mostly seed-stage investments in fintech, logistics, and healthcare sectors. Prominent portfolio companies include SaaS provider Base.vn, HR tech company TopCV, publisher-centric platform Ecomobi, healthtech company eDoctor, and logistics startup Ecotruck.
Ecotruck last year raised $4.2 million in a Series A round from foreign and local investors including the Vietnamese unicorn VNG.
Most recently, another portfolio company Citics, a proptech player, raised $1 million in a pre-series A round from Vulpes Investment Management and TheVentures. Citics is one of the startups that Nextrans has invested in at a very early stage.
Nextrans is one of 33 investment funds that collectively committed $815 million to support startups in the country at the Vietnam Venture Summit in November last year. The summit is an initiative co-organised by Vietnam’s ministries of investment, and technology and science, and the Singapore-based Golden Gate Ventures.
“We believe that Vietnam will be the next destination for capital flow into Southeast Asia not only because of market potential but also due to an open ecosystem and a highly supportive government. It’s the best time for “farming” and seeing your investments blossom in the next few years,” Lam told us at that time.
Currently, late-stage deals account for an outsized proportion of the total capital invested. The Vietnamese market has witnessed the emergence of seven $50 million-plus deals with a combined value of $692 million since 2018, which indicates the interest of big investors in the market and their willingness to place more concentrated bets on assets that they perceived as most valued, according to the report Vietnam Tech Investment Report 2019-H1/2020 by Do Ventures.
Experts believe there could be increased traction in terms of big-ticket transactions in areas such as technology that have thrived during the pandemic.
Investor and partner
In addition to being an investor, Nextrans also acts as a partner of its portfolio startups. It has set a goal to support its Vietnam portfolio in raising $20 million in 2021.
Recently, the VC firm kicked off Generation 2 of its Venture Capital Foundation Program in Vietnam, which was established in May 2020 to train startups and founders to win and work well with investors. The programme offers Ivy League-quality contents, localised for Vietnam and delivered by high-profile experts.
The Generation 2 programme will provide two intensive learning months, covering three specific subjects with the involvement of experts from four countries. The 10-week programme is aimed at promoting the development of Vietnam’s startup ecosystem to catch up with top regional countries in terms of both scale and professional capacity.
South Korean investors
Nextrans was founded in 2004 by Eddy Hong who has 20 years of experience in the venture capital industry. Eddy is one of the many Korean investors choosing Vietnam as an investment destination.
The Do Ventures Vietnam Tech report showed that the number of foreign investors entering Vietnam spiked to a record 109 in 2019. Korean VCs continued to show the highest interest, followed by ones from Singapore and Japan.
DealStreetAsia reported last year that South Korea’s Smilegate Investment is planning to launch a second Vietnam-focused fund after backing four Vietnamese startups from its $10 million debut vehicle. Smilegate Investment is the corporate venture capital arm of the game developer Smilegate, the creator of Crossfire – an online first-person shooter (FPS) available in 80 countries with 650 million registered players.
Its portfolio in Vietnam includes proptech startup Hoozing, delivery startup Lozi, and multi-channel sales and management platform Sapo Technology.
STIC Ventures, a backer of Vietnam’s e-commerce platform Tiki, is another active South Korean venture investor in Vietnam. It led a $2.5 million Series A round in hotel booking platform Go2Joy in 2020. Wonik Investment Partners, Wadiz Platform, and existing investor KB Investment also participated in this round.
South Korean VCs coming to Vietnam often partner with local firms or other South Korean firms. “We have been looking at the Vietnam market for a while now. In fact, it took us about 2.5 years before making our first investment and we also have cross-sharing of knowledge with our co-manager Korea Investment Partners (KIP), which funded Tiki and Appota. Hence it is familiar with the market,” said Daren Tan, managing partner for venture investments at Golden Equator Capital (GEC).
GEC-KIP, which has a corpus of S$120 million ($87 million), invested $2.3 million in Vietnamese proptech startup Rever in 2019.
Meanwhile, in 2019, Vietnam’s $100 million VC firm VinaCapital Ventures established a strategic partnership with Mirae Asset-Naver Asia Growth Fund, a $1 billion joint fund by Korea’s leading financial group Mirae Asset and the Korean internet company Naver.
“We consider our partnership with the Mirae Asset-Naver Asia Growth Fund to be strategic both for VinaCapital Ventures and the startup ecosystem in Vietnam,” said Trung D Hoang, head of VinaCapital Ventures.
A slew of Korean VCs have included Vietnam as part of their investment thesis including Access Ventures, BonAngels Venture Partners, and DT&Investment. Several corporates have also bet on local general partners. For instance, Korean retailer GS Shop and plastic pallet manufacturer NPC, through its investment arm Ncore Ventures, are LPs in 500 Startups Vietnam Fund.