Vietnam’s local funds see opportunities in COVID curveballs

Source: Ho Chi Minh City

The COVID-19 crisis has allowed domestic funds in Vietnam to tap into the burgeoning startup ecosystem that earlier saw significant participation from foreign investors.

Deals clocked during the first half of 2020 saw increased participation of local firms and foreign investors with personnel based in Vietnam, according to a report by Do Ventures.

Of the total 61 deals done during the January-June period, more than a fifth, or as many as 13, saw funding from local Vietnamese firms alone.  In 2019, participation from Vietnamese funds stood at 15 per cent, while in 2018, 10 out of 55 deals saw funding from domestic firms.

Next100, a $10 million early-stage fund operated by Vietnam technology company NextTech Group of Technopreneurs, has emerged as one of the most active local VC funds during the pandemic.

The fund has conducted six investments with a ticket size of about $500,000 in startups pioneering digital transformation, helping businesses cope up with the pressures of the pandemic. Most recently, it has invested $500,000 in Computer Vision Vietnam (CVS eKYC) that provides artificial intelligence solutions for fintech companies.

For Next100, the pandemic is an opportunity that clearly defines its investment strategy as it plans to participate in seed rounds of startups with an investment of $100,000 to $1 million.

Said Nguyen Hoa Binh, chairman of NextTech Group: “Due to COVID, startups face many difficulties. Therefore, this is a good opportunity to buy a startup with a cheaper price. At the same time, this is also an opportunity to purify the market. I believe that after each crisis, a new batch of unicorns will appear.”

Local advantage

“Travel restrictions or not, we have always believed that we have an advantage over foreign players in that we have long-established and extensive local networks, combined with international experience and an understanding of the local culture and landscape,” said Trung Hoang, head of VinaCapital Ventures.

“However, we believe that the optimal combination is a collaboration with foreign players – we all have different strengths that are complementary,” he added.

Although remaining cautious, the $100 million venture capitalist has been actively pursuing sustainable opportunities. It has completed a couple of transactions in 2020 without its co-investors traveling to Vietnam to close the deals.

During this period of travel restrictions, the firm has adjusted its investment processes in a number of ways such as helping the investor hire local advisors for due diligence (DD) and management meetings and arranging for high-quality videos to capture the products/services, and soon.

“These creative approaches helped to get deals done and to continue to build the bridges to the VN startup ecosystem,” Hoang said.

The firm said it evaluated more than 170 opportunities in Vietnam and the broader Southeast Asian region since the beginning of the year. With the current deployment rate, the investment firm expects to be on the road again sometime next year.

Last year, the VC firm 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.

So far, they have jointly invested in one company, but declined to disclose details. The partners are currently reviewing a few additional co-investment opportunities.

Separately, Nguyen, the chairman of NextTech Group, said that because it is a small local fund with smaller investment capital, it can invest more selectively. “Local relationships, local ecosystems that match startups’ business models are sometimes more important than money,” he added.

 

Most early-stage deals in 2020 have been conducted by local investors or foreign investors with personnel based in Vietnam (Do Ventures’s Report)

The opportunity is also likely encouraging more local funds to set up shop.

Do Ventures is a new homegrown venture fund established by Vietnamese venture capital executives Nguyen Manh Dzung (formerly with Cyberagent Capital) and Le Hoang Uyen Vy (ex-general partner at ESP Capital) in September.

The fund is seeking to raise $50 million in capital for its debut vehicle. Limited partners who have so far backed Do Ventures include first-generation entrepreneurs in Vietnam as well as institutional investors from Korea and Singapore such as NAVER, Sea, Vertex Holdings and Woowa Brothers, among others.

After launching in September this year, Do Ventures invested $900,000 in F99, a platform selling fruits. Both Dzung and Vy, in an earlier interview with DealStreetAsia, had shared that this is the time for local funds to step up their investment activities.

“Do Ventures wants to tap qualified early deals and help the startups grow… Having too many funds participate in one early round would consume founders a lot of time to work with different investors while at the early stage, they have to be very much focused on building the business,” Dzung had said.

Newly-established homegrown venture capital firm Viet Valley Ventures invested in three technology startups including JobsGo, WindSoft and EcomEasy this year. The investment amount was not disclosed but a representative of the fund said that these are all technology-related startups, that have the potential for development and do not burn a lot of money.

Established in 2019, Viet Valley Ventures plans to pick up five startups every year and dole out $200-500,000 per transaction.

Meanwhile, Vietnam’s early-stage accelerator ThinkZone in February announced that it is seeking to raise a $30 million venture capital fund focused on tech startups in Vietnam and Southeast Asia.

To date, the accelerator has raised $5 million and has invested in six startups with total capital of $600,000.

Do Bui, CEO of ThinkZone, however, said that it is not really an opportunity to close many investments because startups are staring at a slew of challenges. However, “the pandemic has reduced the competition among investors, so this is an opportunity to invest in a startup at a more reasonable price,” Bui emphasized.

Expand Table

Investments by Vietnam's domestic funds in 2020

InvestorFund sizeNumber of investmentInvestees Deal details
VinaCapital Ventures$100M1Wee Digital (fintech) Seven-digit US dollar. Co-invested with South Korean VC firm InterVest
Do Ventures$50M1F99 (Marketplace)$900,000
Next100$10M6Top CV (HR tech; Computer Vision (AI solutions); Chatbot Vietnam JSC, other three deals are NOT disclosed $500,000/each
ThinkZone Ventures$30M (target)6Emddi (on-demad ride-hailing), Gimo (salary services provider, HouseCare (household service), iSalon (beauty services), other two deals are NOT disclosedNot disclosed
Viet Valley Ventures-3JobsGO (HR platform), WINDSoft (software solutions and mobile applications for administration), Ecomeasy (Marketing and Sales solution provider)



Not disclosed
VIC Partners-2Happy Skin (beauty startup) and Gadget Inc (which owns telesales solution platform Callio) -
Teko Ventures-1Sapo (multi-channel sales and management platform)Series A funding round, led by South Korean investor Smilegate Investment
FEBE Ventures$25M8Three Vietnamese startups include Clevai, (AI-enabled after school tutoring platform); Propzy (proptech startup); Nano (early-wage access platform) among othersNot disclosed

Still, some foreign investors with personnel based in Vietnam also contributed to the total of investment capital during the pandemic. 500 Startups, one of the most foreign active investors in the country, conducted two news investments into Bizzi.vn, an accounting automation tool, and audiobook and podcast platform Voiz FM.

Genesia Ventures, which opened an office in Vietnam in 2019, co-invested in a $2.5 million pre-Series A round in BuyMed, a pharmaceutical distribution network. The firm’s head of Vietnam office in an earlier interview with us said that it is also considering two follow-on investments in edtech and foodtech companies that have the potential to expand their businesses after the pandemic.

These follow-on investments will have a ticket size of about $1 million, higher than previous rounds, that in turn help them extend their runway, accelerate their expansion plans to meet consumer demands after the COVID crisis.

Road ahead

According to the Do Ventures report, investment in Vietnamese tech startups in the first six months fell 22 per cent year-on-year to $222 million due to the COVID-19 pandemic.

Industry observers expect fundraising activity for risk capital investors to weaken during the next few weeks as fund managers, too, take a cautious approach towards fresh investments and preferring to focus on executing their strategy.

Still, long-term investment sentiment remains high in Vietnam, as surveyed funds are looking to invest in 117-200 deals over the next 12 months.

Nearly 80 per cent of the investors said they have plans to deploy capital across 1-5 deals next year, with education, healthcare, and financial services being on everyone’s priority, according to the Do Ventures’s report.

Next100 intends to focus on a B2B2C model driving digital transformation, while ThinkZone seeks to make eight investments at a seed round via ThinkZone Ventures. From its accelerator, it plans to tap 13-15 startups.

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.