Foreign startup accelerators are queuing up to tap early opportunities in the burgeoning startup ecosystem of Vietnam.
Invention Lab, one of the leading startup accelerators in South Korea, is the latest to set foot in the Vietnamese market looking to clinch early-stage investments from next year, according to a top executive of the firm.
“I am looking for investment opportunities in Vietnam from next year. We are running our own $5 million Vietnam fund and the ticket size is approximately $200,000 to $300,000,” David Kim, founder and CEO at Invention Lab told DealStreetAsia. The firm will be “focusing on seed investment rounds as an accelerator.”
Invention Lab is not the only one betting big on the southeast Asian market.
Recently, Shinhan Future’s Labs, another South Korean accelerator, set aside as much as $25 million for investments in Vietnam and Indonesia in the SE Asian region apart from its home market. The firm, which entered Vietnam in 2016, is slated to start its third batch of accelerator programme later this year.
Even as the primary role of startup accelerators is to bridge the gap between emerging businesses and potential investors, it is the mentorship that’s critical for a startup to scale up, said experts. Besides, the cash investment is an important factor that helps entrepreneurs take the plunge and launch their ventures.
Given that the internet economy in this region has recorded a growth rate of over 40 per cent year-on-year, it is an attractive market for fund managers.
According to a recent report launched by Google, Singapore’s state-owned investment firm Temasek, and Bain & Co, Vietnam’s internet economy is slated to hit $12 billion this year, similar to Singapore’s figure, thanks to a vibrant e-commerce space where homegrown firms Sendo and Tiki compete with Southeast Asian players such as Lazada and Shopee.
“Downstream fundraising is one of the key performance indicators for accelerators. Fundraising is a way of proving the added value the accelerator has created, as well as an external investor’s recognition that the company is ready to grow with additional capital,” said Sean Lee, head of venture investment at GS Shop.
Echoing the sentiment, Angelia Le, vice president & head of investments at ThinkZone, said: “We simulate our values chains as a ‘school system’. When you see potential startups but they still lack knowledge, you provide hands-on experience for them, fix their business, invest a small amount of money to let them accelerate.”
ThinkZone is a newly-established accelerator in the domestic market, which is currently in the process of setting up a venture fund.
Spotting big opportunity in the country, earlier this year, Singapore-headquartered Insignia Venture Partners forged a partnership with Vietnam’s homegrown Topica Founder Institute (TFI) to invest in startups across sectors.
Meanwhile, The Saola Accelerator, named after the rare Vietnamese deer also known as the ‘Asian unicorn’, has closed Batch 1 wherein it invested in 6 companies with a ticket size of $100,000 to $300,000, according to GS Shop’s Lee. Going forward, the startup funding platform is working on its two forthcoming batches.
In a market like Vietnam that has just opened up, accelerators play an important role in undertaking the right due diligence process, thereby analyzing technical, financial and market risks that in turn also prepares a company for the next round of funding, Le explained.
South Korea’s Lotte Accelerator that committed to investing at least $1 million in Vietnamese startups through an alliance with Vietnam Silicon Valley continues to fund startups across sectors, with a corpus of $40,000, double of 2018, through the “VSV Bootcamp Program Batch.
Even as the role of venture capitalists and accelerators is different, Kim said the two categories of risk capital investors also share a lot in common. He said the Korean government recently announced its intention to pave the way for a Venture Investment Promotion Act wherein accelerators will also be able to create venture funds. In other words, it will create a situation where accelerators will be positioned as VC funds.
The entrepreneurial landscape in Vietnam is, of late, aflush with investments with global fund managers such as GIC, Warburg Pincus, Hanwha Asset Management and TA Associates getting increasingly active in the country across various sectors from real estate, logistics and consumers to technology.
These firms invested an aggregate of $1.6 billion in Vietnam in 2018, a significant 285 per cent jump from the corresponding year 2017, according to data available with Grant Thornton. This year, in terms of value, private equity investments have already touched about $800 million. That, however, does not include the $1-billion strategic investment in Vingroup made by South Korean juggernaut SK Group and the $300-million figure in VNPAY that we reported earlier.
Meanwhile, according to joint research by Ho Chi Minh City-based venture capital ESP Capital and Singapore’s Cento Ventures, startup investment in Vietnam hit $246 million this year through June on 56 deals. Of which, there were 24 deals in early-stage round with a total value of $6 million, up 20 per cent compared to 2018.
Investment is expected to top $800 million by the end of the year, which would represent a rise of at least 80% over last year’s $444 million.