Vietnam-focused VCs eye startups enabling digital adoption by SMEs

The Landmark 81, Ho Chi Minh City, Vietnam/ Photo: Tron Le/ Unsplah

Venture capital investors in Vietnam are betting big on startups enabling digital transformation in small and medium enterprises across various sectors.

Active investors in the region – Do Ventures, Quest Ventures, Genesia, BEENEXT and VI Group  – are bullish on backing tech startups that are mounting traditional or physical businesses onto the digital platform.

The reasons are not too far to seek. Vietnam is emerging as the most digital of all economies within the Southeast Asia region, according to the Google, Temasek and Bain & Company 2020 report. With a projected GDP contribution of 30% by 2025, Vietnam’s digital economy is expected to reach $52 billion by then.

Furthermore, the global pandemic has accelerated online adoption across a variety of sectors even as the Internet user base in Vietnam, which has a population of about 97 million, has reached over 68 million.

 

“Digital transformation is a must for most companies because people are going digital. And, businesses are under increased pressure to optimise their user experience and to create personalised service experiences for each customer. And this trend has been greatly accelerated by Covid-19,” according to Genesia Ventures principal Yuto Kono.

Genesia has 90 portfolio companies mainly in Japan and Southeast Asia. More than 80% of them are providing solutions to boost digital transformation progress, Kono added.

Homegrown Do Ventures, which launched its $50-million debut fund in September last year, is focused on investing in startups that can enable customers to enhance user experience and create innovative business models.

The VC firm has backed fruit selling platform F99, computer vision and AI tech company Palexy and edtech startup Manabie that merges online and offline learning.

“Digital transformation is crucial for any business that wants to continuously add value to their customers. Therefore, technology and innovation are key to significantly improve the customer experience and optimise operations,” Do Ventures co-founder and general partner Vy Le said.

Singapore-based Quest Ventures plans to invest up to $10 million in digital economy-focused companies in Vietnam. “Quest is looking for tech companies that will disrupt the agri-food tech sectors, fintech, and smart cities/urban solutions spaces,” said senior associate Michelle Ng.

Japan’s Genesia Ventures believes that there is a great opportunity for startups that provide platforms and SaaS to help traditional companies achieve digital transformation.

In Vietnam, Genesia’s portfolio includes Kamereo, BuyMed, Manabie, eDoctor and Homedy.

Singapore-based venture capital firm BEENEXT, meanwhile, is looking at ramping up its early-stage investments in Vietnam. The VC firm is bullish about digital inclusion of Tier 2 and 3 cities in fintech, healthtech, and edtech, as well as B2B supply chain innovation for micro, small or medium-sized enterprises and agritech/industrial-tech expansion.

Last year, the investment firm closed a $110-million fund to invest in emerging Asian markets. Vietnam will draw a higher share given that the economy has shown resilience and attracted investor interest, according to BEENEXT’s venture investor in Vietnam Michael Do.

Vietnamese private equity firm Vietnam Investments Group, which has largely backed consumer-focused non-tech businesses, is planning to pursue more tech investments to cash in on the digitalisation boom following the pandemic-induced shifts in user behaviour.

Startups driving digital adoption

The macro infrastructure that is aiding the trend in Vietnam is the 5G mobile network in the four major cities of Ho Chi Minh City, Hanoi, Da Nang, and Hai Phong.

Furthermore, the National Digital Transformation, launched last year, has spurred the growth of startups providing solutions for SMEs. Many of these startups are planning to raise capital to scale and develop new products.

“Startups can be innovative and disruptive. They exist to explore risky ideas that incumbent players would not be willing to try. Therefore, startups can be seen as a key pillar in today’s digital landscape,” Le from Do Ventures said.

“Incumbent players, especially the bigger companies, tend to be impeded by hierarchy and bureaucracy, slowing down innovation. This is where startups will have the upper hand in providing a fresh perspective and new solutions relatively quickly that will cater to changing consumer behavior and customer demands,” said Kono.

B2B startup KiotViet, which bagged a $6-million Series A financing from Singapore VC Jungle Ventures and Indonesian unicorn Traveloka in 2019, has 130,000 merchants using its services. The startup plans to raise Series B funding round this year, said Tri Cao, Deputy General Director of Citigo, the parent company of KiotViet.

Vietnam-based multi-channel sales and management platform Sapo is raising a new funding round to develop merchant solutions to support sales processes such as payment, logistics, finance, Sapo CEO Tran Trong Tuyen said.

Sapo, which has 100,000 merchants to date, raised a seven-digit-US amount in a Series A funding round led by South Korean investor Smilegate Investment and Vietnam’s homegrown venture capital firm Teko Ventures last year.

“We highly value the capabilities of big data and drive an ecosystem that helps retailers adopt big data-driven technologies,” he added.

Other funded startups providing digital transformation solutions for SMEs include Beenext-backed Base.vn and TA Associates-backed Misa.

Challenges

While digital transformation provides a large canvas of opportunities for tech startups, not all mainstream businesses are ready for adoption yet.

“The biggest challenge is changing the mindset of top executives at companies in Vietnam. Management’s commitment is essential for the success of the digital transformation. It is important to have a strong will to carry out digital transformation,” Kono said.

The challenge could be educating not just the SMEs but even micro-businesses in Vietnam, Ng from Quest Ventures said.

“Micro-businesses and SMEs do not have the capacity for a digital transformation team to map out their plan,” she added.

Sapo’s Tran shared that digital transformation requires high-tech and expensive infrastructure equipment and quality manpower for a successful application.

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.