Bullish US investors spot big promise in Vietnamese tech startups

US investors are increasingly stepping up their focus on Vietnam as they gear up to grab a slice of the country’s booming startup ecosystem.

Early last month, blockchain-based game developer Sky Mavis made headlines when it amassed a whopping $152 million led by US investor Andreessen Horowitz.

The round, which also saw the participation of venture capital firms Accel, Paradigm, and Samsung Next, pegged the valuation of the startup at around $3 billion making it the country’s third unicorn after VNG and VNLife.

Following the deal, yet another Vietnamese blockchain gaming studio Sipher closed a $6.8 million seed round co-led by two US-based investors Arrington Capital, and Konvoy Ventures, besides South Korea’s Hashed.

In the fintech space, VNLIFE Corporation, the parent firm of payment unicorn VNPAY, in July raised over $250 million in a Series B funding round led by US-based General Atlantic and Dragoneer Investment Group.

MoMo raised over $100 million in its Series D round earlier this year, co-led by Silicon Valley investor Goodwater Capital and existing backer Warburg Pincus.

Separately, B2B startup KiotViet, a merchant platform for micro, small, and medium enterprises (MSMEs), raised $45 million Series B capital from US-headquartered private equity powerhouse KKR, with the participation of existing investor Jungle Ventures.

“Vietnam tech startup space is now ready for prime-time. We now have many great companies that have become unicorns or can become one and are able to do so in an increasingly shorter amount of time. The list will continue to grow,” James Vuong, CEO at fintech firm Infina told DealStreetAsia.

The startup, that raised an oversubscribed $2 million seed round from Saison Capital, Venturra Discovery, 1982 Ventures, 500 Startups, Nextrans, and angel investors, has recently seen an investment flowing in from Goodwater Capital.

Source: DealStreetAsia’s SE Asia Deal Review: Q3 2021

Meanwhile, US strategics, too, are betting big on Southeast Asia, with its growth prospects on the back of a rising ‘netizen’ population and strong domestic consumption.

Indonesia’s ride-hailing and payments major Gojek, which merged with online marketplace Tokopedia this year to form GoTo, added search giant Google to its cap table in early 2018. Later in the year, its arch-rival Grab secured funding from Microsoft.

More recently, Grab’s record SPAC deal and the GoTo merger are expected to draw the spotlight to the region.

According to experts tracking the investment landscape, action is expected to continue over the next few years with countries such as Vietnam and Indonesia becoming two pacesetters in Southeast Asia.

“Indonesia and Vietnam are hot markets but valuations in Indonesia are going through the roof, so Vietnam is now top for many investors,” Vuong said.

Advantage Vietnam

According to a report by Google, Temasek and Bain & Co, Vietnam’s digital economy is projected to grow to $52 billion by 2025 from $14 billion in 2020.

The growth in numbers is expected to throw open significant opportunities in new economy sectors such as edtech, health tech, fintech and retail, besides traditional sectors like manufacturing, real estate.

Vietnam could become a major hub for high-tech manufacturing, as US pressure on China is forcing a re-alignment of the supply chain that supports the computer, smartphone and telecom industries. Already, Intel has chosen the country to house its biggest chip assembly plant worldwide.

Funding in the country is also expected to get a boost from its growing middle class that is open to investing in assets like stocks and crypto.

Currently, the startup ecosystem in the country is at a stage where it’s prompting the participation of both local and global investors. However, as it matures with startups scaling, the role of US investors is only set to increase.

“We back good founders anywhere in the world, but lately we are seeing more and more great teams coming out of Vietnam. We got to James via a colleague in the Kauffman Fellows Program and decided to invest because they are building the Robinhood of Vietnam and we were an investor in Robinhood in the US,” said Ish Dugal, founder of Golden Arc Capital.

Golden Arc is a Silicon Valley-based investment firm that manages VC growth equity & late-stage investments. The firm was one of the investors in Robinhood’s Series G $200 million round.

Startup fundraising in Vietnam eclipsed the $1 billion mark for the first time this year. As of September 25, total funding in the country reached $1.4 billion, three times larger than that of the first nine-month of last year, according to DealStreetAsia’s SE Asia Private Capital Markets Report 2021.

In terms of value, US investors are the ones who led the big-ticket transactions ranging between $50 and $150 million this year.

Active global investors

Apart from US ventures, South Korean firms are also actively investing in Vietnam.

In 2019, the number of foreign investors entering Vietnam spiked to a record number of 109 with Korean VCs accounting for the most number of deals, followed by Singaporean and Japanese investors, according to Do Venture’s Vietnam Tech Investment Report (2019- H1 2020).

The participation of US investors in the venture capital space, however,  started gaining steam in the country only from this year.

This is even as US venture capitalists have been operating in the region for quite some time with names such as Y Combinator and 500 Global (formerly known as 500 Startups) doing the rounds in the startup ecosystem. Late last year, the latter announced its goal to invest in 80 Vietnamese startups by 2021.

Expand Table

YearStartupSectorFunding typeMoney raisedUS investor 
2021VNLIFEFintechSeries B$250MGeneral Atlantic, Dragoneer Investment Group
Sky MavisGameSeries B$152MAndreessen Horowitz, Paradigm
MoMoFintechSeries Dover $100MGoodwater Capital
Warburg Pincus
SipherGameSeed$6.8MArrington XRP Capital, Hashed and Konvoy Ventures
KiotVietSaaSSeries B$45MKKR
Nano TechnologiesFintechSeed$3MGoodwater Capital
Sky MavisGameSeries A$7.5MMark Cuban
KiloE-commerceSeedUndisclosedGoodwater Capital
2020Propzy ProptechSeries A$25MNext Billion Ventures
JobhopinHR techSeries A$2.45MEdulab Capital Partners
FinhayFintechUndisclosedUndisclsoedJeffrey Cruttenden
2019MoMoFintechSeries C$100M (DSA source on investment size)Warburg Pincus
TelioE-commerceSeries A$25MTiger Global
ELSAEdtechSeries A$7MGoogle’s AI-focused venture fund Gradient Ventures

Among the most active US investors in Vietnam country this year, Goodwater Capital’s name features. Apart from MoMo, it has parked capital in B2B e-commerce startup Kilo, and fintech startup Nano Technologies.

In September, the US-based VC firm raised $1 billion in new funds to invest in early and growth-stage consumer tech startups globally. The firm had said that it had the access to an additional $500 million corpus to support late-stage hypergrowth companies.

In an earlier interview with DealStreetAsia, Eric Kim, co-founder and managing partner at Goodwater Capital, had said that Vietnam is a very unique market. “We are impressed with the way global entrepreneurship is growing in Southeast Asia. Our involvement in Southeast Asia, Vietnam specifically, happens very organically.”

“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,” Kim had then added.

Meanwhile, Silicon Valley-based Light Speed Ventures is also spotting big opportunities in Vietnam as the country’s SME segment is now mature enough to use technology for its growth.

“We used to focus a lot on Singapore and Indonesia. Now, [we’re] actively looking at some of the other markets such as the Philippines and Vietnam as well,” Akshay Bhushan, partner at Lightspeed Venture Partners, had earlier told DealStreetAsia.

In 2020, Lightspeed Venture Partners officially launched its office in Southeast Asia, eyeing seed to Series B deals. Its portfolio companies in the region include Singapore’s ride-hailing giant Grab, and Spatial data platform NextBillion; and social commerce startup Chilibeli, B2B marketplace Ula, logistics startup Shipper – all headquartered in Indonesia.

Challenges to tackle

Even as the Vietnamese government has adopted measures to simplify administrative and licensing procedures to create a supportive investment process for foreign investors, it still takes time for changes to take effect.

In January 2021, Prime Minister Pham Minh Chinh outlined the country’s ‘National Strategy on the Fourth Industrial Revolution by 2030’ to attract the proactive participation of investors.

“Vietnam’s government is collaborative and takes feedback from foreign investors. However, there is a big gap between listening and drafting the policies. It may take at least 5 years to see significant changes,” said a foreign venture capitalist in Vietnam on condition of anonymity.

Also, with the adverse impacts of the COVID-19 crisis still looming large and restrictions being there on free movement, challenges are far from over for foreign investors trying to access the Vietnamese market.

Many US funds often do not have resources on the ground in Vietnam, which sometimes makes it difficult for Vietnamese startups to approach US investors, noted Infina’s Vuong.

The US currently ranks 11th out of 141 countries and territories investing in Vietnam, according to data available with the Ministry of Planning and Investment. As of August 20, 2021, US investors had 1,122 valid projects in Vietnam, with total registered capital of $9.7 billion.

 

Valerie Law contributed to the story.

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.