Vynn Capital, the venture capital firm founded by former Gobi Partners vice president Victor Chua, has signed a strategic agreement with Vietnam’s National Agency for Technology Entrepreneurship and Commercialisation Development (NATEC) to improve the funding funnels in Vietnam.
The partnership would include helping Vietnamese corporations invest in startups, building angel networks in the country, and enabling cross-border expansion for Vietnamese and overseas startups, among other initiatives, representatives from NATEC and Vynn Capital shared at a closed event on Tuesday.
NATEC is an entity under Vietnam’s Ministry of Science and Technology, designated to develop the tech startup ecosystem in Vietnam, especially in terms of connecting startups with international investors.
“Vynn Capital has been a long-time investor in Vietnam. With this new partnership, they will help us with a lot of new projects, including our ongoing establishment of angel investor networks,” said Pham Hong Quat, NATEC’s general director.
“Following this signing ceremony, we will set up a plan for the year ahead with detailed action items.”
Meanwhile, Chua, managing partner of Vynn Capital, emphasised on the importance of encouraging local corporates to work with startups and invest in them.
“Corporates do not have the speed and culture of startups. Meanwhile, entrepreneurs are not to be hired. We should encourage corporates to invest in startups, instead of copying them, to help build startups to regional companies,” he said at the event.
During Chua’s time at Gobi Partners, he helped the China- and Malaysia-based firm clock the first deals in Vietnam, which were investments into travel tech startup Triip and fintech company OnOnPay.
Vynn Capital, which is raising a $40-million fund for which it has already received commitments from Malaysia’s MAVCAP, expects to disclose new investments in Vietnam and Indonesia this year.
Also present at the event on Tuesday were Vietnamese accelerators and corporations like telecom company CMC Corporation, Vietcombank and Sovico Holdings, a company owned by the chairwoman of Vietnam’s biggest low-cost carrier Vietjet.
DEALSTREETASIA talked to Chua about the prospects for the partnership.
Can you share some quantitative results that are expected out of this partnership with NATEC?
We don’t have any specific set numbers yet. But a few KPIs at least from our point of view that we want to focus on include, first of all, getting more Vietnamese corporates to work with startups by investing directly or indirectly into the startups. Second, it is important for us to be able to bring more startups to Vietnam, and the third thing we want to focus on is how many startups we can support to help them expand beyond Vietnam. Look at Grab and GOJEK – the cool thing about these unicorns is that they are not just in one country. You eventually have to expand. So, we want Vietnamese startups to look at the broader picture.
I don’t want to promise on numbers, but for Vynn Capital, we definitely put Vietnam as one of our key markets alongside Indonesia and Malaysia when it comes to investments. We have been talking to a lot of Vietnamese startups and expect at least one of the investments will be closed in the next couple of months.
What are the barriers you see that prevent corporates from investing and cooperating with startups?
I think the biggest issue for corporates to work with and invest in startups is the culture. You need someone who sits in between startups and large corporates, because otherwise, no one is going to be able to manage that relationship. Corporates don’t work as fast as startups do. So, in many cases where the startups need support, corporates wouldn’t be able to respond as quickly as possible. Whereas compared to VCs, we can work immediately. Our time zone is more in sync with startups than corporates. I don’t think many corporates are ready to fully invest in startups. They need to learn before they start to do more direct deals. While we also co-invest with LPs, we always position us as a partner for corporates rather than (getting into) an LP-GP relationship. We want other corporates to co-invest with us, so that they don’t have to be the one who facilitates the growth of startups.
NATEC mentioned the establishment of angel networks in Vietnam? How will you support them?
We are helping across the whole spectrum of the investment industry in Vietnam. The reason why you need angel investors is because angel investors play a large role in sourcing out very early deals, which VCs cannot take in terms of risks. These are very early stage, very localised, so we need the angels to be there to support them before VCs come in to grow the business to a much more scalable manner.
In Malaysia, we also have the Malaysia Business Angels Network, along with VC and PE funds. We are also trying to create more VCs in Malaysia as well, to complete the whole funding cycle, from seed to Series B, C rounds, etc. So for Vietnam, you need that whole funnel to be able to grow the ecosystem. It is crucial to have angel investors to be able to build a complete ecosystem. But angel investors need to learn from someone as well. That is why Vynn Capital comes as someone who can share the knowledge about investing into and managing tech companies.
Other than sharing expertise, what will be the initiatives from Vynn Capital for Vietnam moving forward?
Part of my roadmap for Vietnam is setting up a Vietnam vehicle. The timing of that trigger depends on the maturity of the local partners that we have. NATEC and the tech ministry have the local network, whereas we have the expertise. So there is a good complimentary value that we can work with. And we have the flexibility in working together, which means our collaboration would not just be limited to what we talked about today. In the future, it could involve many more facets of work, thanks to this long-term relationship with NATEC. As a foreign investor, there is a certain level of challenges, too. So, being able to work directly with the government helps us bring a lot more attention from other foreign investors from countries like Japan, Korea, Indonesia, Malaysia and Singapore to understand that Vietnam is open enough to work with foreigners. Hopefully, that will end up with more FDI into Vietnam as well.
At the very beginning, initiatives will be sharing of content syllabus. For example, sharing with corporates on how to do CVCs or invest in startups, and how corporates do an internal diagnostic and can find out which are the problem statements that need to be solved. There will be more concrete action plans to be worked out over the next couple of years. This is not a temporary collaboration, this is a long-term position we are taking with Vietnam. I have been in and out of Vietnam for the last few years since my days at Gobi Partners and have a long-term commitment to making things happen as we grow the ecosystem sustainable.
As a young ecosystem compared to several others in the region, what is your take on the prospects of Vietnamese startups expanding overseas? What do they need to improve?
Vietnam is probably one of the more international countries in Southeast Asia where even in your earlier days, there were local startups that were looking at regional and global expansion. I think what has changed is the thought of regionalisation is more mature. In the past, it was all about fundraising, now it is more about the nuts and bolts of how to build businesses. Startups now are more open to expand in a new market via partnerships rather than ‘I’m expanding because I am funded by someone’. Look at Indonesia, it has always been blessed with the huge population. But now they are trying to learn about other markets. That’s why Travelio is here.
So, that is the perspective I see for the time being. I expect more great things to happen in Vietnam given that so much money is invested in the country. There will be a multiplied effect that will see talents grow from this capital. You need to use the money to grow human capital, then there will be more innovation later on.
There’s no perfect ecosystem. Southeast Asia is a mix of many different problems and many different advantages. Singapore is very developed, structured market, but it does not have the market size. Malaysia has a slightly bigger market size, but we are still not as big as Indonesia, and we still need a lot of R&D. For Indonesia, there are also always challenges in structures, and they need to build more human capital to meet the demand of the number of startups. That is why it becomes more important for a company to be able to regionalise, to tap into the strengths of each market and combine them together. Bottom line, partnerships with locals and foreigners are important. I think it could be one of the key success factors of whether a company can become a good exit or not.
How does the pipeline look like for Vynn Capital?
We are not too much worried about the deal flow. Our investments are focused. We are not going to diversify too much because we believe in active management. We are focusing more on a high conviction batch rather than spreading ourselves to 30-40 companies, to make sure that we have more attention to be spent in each company, because we are also creating the relationship between them and our LPs and the corporates. But we do have quite a number of companies in the pipeline, which we are trying to finalise.