From just a handful of venture capital investors five years back, Vietnam is seeing a growing tribe of seasoned professionals setting up new funds to support the startup ecosystem that is now entering a mature phase.
These VC executives have branched out to set up funds to follow their own investment theses and strategies.
“As the tech ecosystem in Vietnam has evolved, so has our strategy,” said 500 Startups Vietnam’s top executives Eddie Thai and Binh Tran, who have recently launched their own VC firm Ascend Vietnam Ventures.
The duo launched 500 Startups’ Vietnam office and have built a massive portfolio of 76 companies in their five-year stint. They will continue to support portfolio companies of their previous fund.
Their new firm will focus on seed-stage investments but cut bigger cheques of $500,000-$2 million each and make follow-on investments of up to $4 million. The firm is targeting to invest in 25 startups over the next three years.
“We’re excited to be focusing even more on teams building regional or global winners right here in Vietnam. Hence our prioritisation of certain verticals like fintech, edtech, and future of work. But we’re still happy to take a look at any startup that doesn’t fit into our categories because of the rare chance they can become a category creator,” Ascend Vietnam Ventures general partner Eddie Thai told DealStreetAsia in an interview.
According to Thai, funds established a few years ago were primarily investing $50,000-$500,000 per deal due to the early stage of the Vietnamese startup ecosystem. There were very few startups that were seeking funding at Series A and onwards, he observed.
“The tech ecosystem has also grown and matured as we’ve seen an increase in the number and quality of founders who are building deeper solutions. We’ve also seen seed rounds more than double in size and seen dozens of early-stage investors join us in finding the region’s next market leaders,” Ascend Vietnam general partners said.
Other country-focused VCs include Do Ventures, Touchstone, ThinkZone Ventures, Next100, Viet Valley Ventures, VIC Partners, Teko Ventures and FEBE Ventures who are targeting to seize new and upcoming opportunities.
Take the case of Khanh Tran, who left the country’s largest venture capital investment vehicle VinaCapital Ventures, along with Tu Ngo, co-founder and chairwoman of private equity-backed YOLA Education, to set up Touchstone Partners.
Touchstone is seeking to help Vietnamese startups develop environmental, social, and corporate governance (ESG) elements in businesses, without compromising on financial returns, right at the early stage.
“It’s not a requirement, but we prefer founders who already have an ESG focus and have built that into their products,” Khanh Tran, Touchstone’s managing partner told DealStreetAsia in an earlier interview.
In April, the VC firm secured the first close of its debut $50-million early-stage fund.
In September last year, VC industry executives Nguyen Manh Dzung and Le Hoang Uyen Vy set up Do Ventures to launch a $50-million debut fund to invest in emerging Vietnamese businesses –from seed to Series B levels.
Nguyen was head of Vietnam and Thailand markets for the Japanese CyberAgent Capital while Le was General Partner of ESP Capital.
The duo believes that the smaller cheque size investments make it difficult for startups to fund their expansion plans and raise the next round of capital. Do Ventures plans to address this gap by leading a seed round with an average cheque size of $500,000 and follow-on investments of $1-2 million in Series A and another $2-3 million at the Series B stage.
|Venture firm||Started by||Date of establishment||Fund corpus (target)||Earlier fund|
|Ascend Vietnam Ventures||Eddie Thai and Binh Tran||July 2021||$50M||500 Startups Vietnam|
|Touchstone Partners||Khanh Tran and Tu Ngo||April 2021||$50M||Khanh Tran was Founding Partner of VinaCapital Ventures. Tu Ngo is co-founder and chairwoman of private equity-backed YOLA Education
|Do Ventures||Dzung Nguyen and Vy Le||September 2020||$50M||Dzung Nguyen was Country Head of CyberAgent Capital in Vietnam and Thailand. Vy Le was General Partner of ESP Capital|
Per a Do Ventures report, the number of early-stage deals with cheque sizes of over $500,000 has fallen sharply in the first half of 2020 while late-stage financing – those in the $2 million-10 million- has gained momentum in terms of both value and volume.
Vietnam has recorded seven $50 million+ 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, per Do Ventures’s Vietnam Tech Investment Report 2019-H1/2020.
The total amount of venture capital invested in Vietnam in 2017 was $290 million, according to data collated by Hanoi-based Topica Founder Institute (now Tech Founder Institute). In 2019, that figure touched $1 billion.
Five years ago, Vietnamese VC play was largely dominated by local players such as VinaCapital Ventures, 500 Startups Vietnam, ESP Capital, Viet Capital Ventures, and Teko Ventures.
Apart from the growth of new local funds, Vietnam is also seeing a rising number of overseas venture capital firms stepping up their presence in the burgeoning tech scene.
Most recently, global early-stage venture capital firm Antler announced plans to launch its Vietnam programme later this year and invest in companies through its Southeast Asia fund. Antler also roped in Erik Jonsson, the co-founder and MD of Zalora Vietnam, to lead its operations.
In increased interest from South Korean investors, Nextrans is planning to bet more money on Vietnam’s later-stage firms while Smilegate Investment is setting up its second country-focused fund, Kairo Fund II.
“The size (AUM) of the most newly-established funds is comparatively big ($50 million), promising to boost a large number of companies of early stages,” said Nextrans general manager Le Han Tue Lam.
“We believe that this trend will undoubtedly create a much more vibrant market for all investors both locally and globally,” Le of Nextrans added.
In 2020, over 50% of VC deals were invested by homegrown VC funds, according to the latest report of Do Ventures. Local capital availability has proved to be one of the most crucial support for early-stage entrepreneurs to tide over the pandemic-induced crisis.
“I believe that Vietnam still needs more homegrown VCs who have a deep understanding of the local market. I think there will be more prominent homegrown funds emerging in the next few years. Of course, there must be a balance. Vietnamese startups also need a lot of foreign funds coming in the future,” said Nam Nguyen and Nhat Nguyen, partners of ESP Capital.
Moving forward, Thai predicted that homegrown VC funds will increasingly lead the charge on early-stage opportunities while international investors will step in to capture growth-stage opportunities.
“Each time a startup achieves a major milestone (substantial traction; successful capital raise from marquee investors; exit), more resources will come, creating an accelerating flywheel,” he added.