Can ‘Capital Winter’ Freeze The Growth Of Vietnamese Startups?

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If you’re an avid follower of Vietnam Innovators podcasts, you’re no stranger to their in-depth explorations of business nuances, startup strategies, skill sets, and the hottest career movements.

But picture this: the same insightful chats, but in a chill hangout spot, peppered with interactive games. Meet BizFF, a pun drawn from Biz and BFF (Best Friends Forever), the newest addition to the Vietnam Innovators ecosystem, debuting on May 7.

In this series, host Minh Beta, Chairman of Beta Group will welcome other field experts as co-hosts to join an entertaining round of “Lô Tô” - Vietnamese Bingo while providing valuable yet digestible insights into business and socio-economic narratives.

In the first episode, Minh Beta, alongside his two friends - Huong Tran, Venture Partner at Monk’s Hill Ventures, and Miro Cuong Nguyen, Global KOL & Partnership Director at VinFast - will explore the landscape of unicorn startups and survival tips that businesses can employ to remain resilient in today's challenging environment.

Unveiling the Mystique of Unicorn Startups

'Unicorn startup' means a startup company valued at over $1 billion in funding rounds. The concept first appeared in a 2013 TechCrunch article by Aileen Lee, co-founder of Cowboy Ventures.

Host Minh Beta likens 'unicorn' startups to their mythical namesakes—both rare and highly coveted. He sees entrepreneurship as a quest for these elusive successes, urging founders to dream big and boldly trek into the unknown to uncover or forge something truly groundbreaking.

The emergence of "unicorn startup" has sparked the birth of other terms like "minicorns" (startups worth over $1 million) and "soonicorns" (near-billion-dollar startups). Investor Huong Tran views these labels as handy markers on the startup journey, helping navigate the rough waters towards becoming a unicorn - a pie-in-the-sky destination that can seem as distant and mythical as the creature itself.

While valuing a startup can vary, all three agree the valuation is largely based on private valuation firms, which means the unicorn badge isn’t standardized.

She remarks, “There’s not much difference between unicorn and non-unicorn startups. What matters is which stage the startup is in—kindergarten, primary, rebellious adolescence, or university. Each phase has its challenges, but all demand relentless commitment from the founders, who tirelessly drive their ventures forward.”

Why are we currently experiencing a ‘capital winter’ for startups?

“Capital winter” refers to periods when investment significantly dwindles, posing numerous challenges for startups, regardless of their size. This downturn in investment is largely due to the ongoing economic slowdown following the pandemic, making a reduced influx of capital expected.

A report by Enterprise Singapore and DealStreetAsia highlights a stark reality: in 2023, funding for Southeast Asian startups was slashed by over 50% compared to the previous year. In Vietnam specifically, the drop in startup investments was 27.7%—the least severe in Southeast Asia but still notable.

By the end of 2021, Vietnam welcomed MoMo and Sky Mavis to its unicorn club, joining VNG (2014) and VNLIFE (2019). After that, the scene remains stagnant over the past three years. This prompts a crucial question for Vietnamese startups: How can they navigate through this capital winter and pave the way for new unicorns in the country?

Focusing on the Health of Startups

Despite the current economic downturn, significant investment deals can still occur because investment funds are pressured to deploy capital and identify promising startups to compete in the market.

In 2023, notable investments were made in companies like BuyMed, a pharmaceutical distributor; ELSA, an English learning app; and MindX, a technology education provider. Minh Beta points out that companies with a strong foundation, a validated business model, and resilient founders can still manage to secure funding even during tough times.

Like a marathon where the winner is the most resilient runner, this period is a crucial time to identify the most robust companies capable of long-term growth and sustainability. If raising funds becomes too easy, it might lead founders to have false confidence, lessening the urgency to operate their companies efficiently or to deliver returns to investors.

According to Huong Tran, the rise and fall of the fundraising market do not necessarily impact a company’s culture and operational outcomes. However, ignoring the health and sustainability of a company during these bumpy times can lead to poor business performance.

If Granted A Wish, What Would You Wish For Vietnam’s Startup Ecosystem?

Minh Beta: I hope Vietnam’s startup ecosystem can engage with and learn more from global intellectual leaders and insightful startup experts like those in Silicon Valley. Learning from the best could enlighten us on more effective and innovative practices.

Huong Tran: My wish is similar to Minh's, which is all about talents. Talent is way more important than profitability when it comes to evaluating startups. There are 2 potential sources of talent: local and “imported.” An example of “imported talent" is our co–host Miro Cuong Nguyen, who was born and raised in Slovakia and has now moved back to Vietnam. Like the U.S., Vietnam should strive to attract more global talents to speed up and improve its entrepreneurial path.

Watch the full episode here: