Will 2021 Be The Billion Dollar Year For Venture Capital In Vietnam?

When venture capital investment in Vietnam reached a record-breaking US$900 million back in 2019, it seemed well within reason that 2020 would be the year the billion-dollar glass ceiling shattered. Alas, the impact of Covid-19 brought about a slowdown in 2020, with capital investment dropping to US$600 million. A positive performance, all things considered. 

However, having thus far navigated the pandemic better than most countries, and registering an impressive 2.9% economic growth in 2020, it’s looking more and more likely that this year, capital investment will hit or even surpass the billion-dollar mark for the very first time. 

The Role Of “National Program 844”

The groundswell of capital being poured into Vietnamese startups is no coincidence, with the national government playing a leading role in its promotion. Back in May 2016, National Program 844, or “Initiative for the startup ecosystem in Vietnam until 2025” to give it its full English name, was put in motion by the Ministry of Science & Technology. 

As the name suggests, the scheme aims to provide assistance to startups through legislation, development training, capacity building, incubation and acceleration support, as well as network development on both a local, regional and global scale.

Since the initiation of National Program 844, the startup ecosystem in Vietnam has continued its remarkable growth and emerged as a regional hotspot, with four Vietnamese startups making Forbes Asia’s “100 To Watch “ list, and a host of others securing million Dollar funding. 

Tracking Venture Capital Investment in Vietnam, 2016 - 2021

2016, the year that National Program 844 was launched, was hailed “The Year of The Startups” by the Vietnamese government, as US$200 million in venture funding was invested in market-disrupting enterprises. 

As encouraging a figure as that was at the time, it pales in comparison to the progress made since then. Over the next three years, venture capital in Vietnamese startups would more than quadruple, finally peaking at US$900 million in 2019. 

Then came the pandemic, and Vietnam had to slow its expectations to an extent. As mentioned, US$600 million in investment still marked a positive year given the circumstances, while the high growth of the economy at large gave an indication that venture capital investment would bounce back this year. 

So too did the fact that while the total figure for investment capital dropped by around 30% in 2020, the actual number of investment deals had only fallen by 17%. Investment groups were being understandably cautious, but they weren’t pulling the plug altogether.  

As for 2021, the first three quarters of the year has seen Vietnam match 2020’s performance, and according to investment fund Do Ventures founder, Le Hoang Uyen Vy, further expected deals could well see Vietnam pass US$1 Billion for the first ever time, marking a phenomenal recovery in light of the ongoing pandemic. 

Venture Capital in Vietnam: The Main Investment Players

Vietnam’s emergence as a startup hub means that there’s no shortage of interested investors, from those who have been backing companies since 2016 and before, as well as new entrants to the arena. 

Established names such as CIG, Affirma Capital, and KKR, the global investment firm which recently backed merchant platform KiotViet to the tune of US$45 Million in Series B funding, help make up the internationally recognisable contingent. So too do HSBC Bank Vietnam, who have provided financial support to the likes of US based General Atlantic and Dragoneer Investment Group in their ventures. 

On the homefront too, there are plenty of investment firms providing support, the most high-profile of whom include 500 Startups Vietnam, Kusto Vietnam, Dragon Capital, VinaCapital Ventures, Zone Startup Ventures and 20-year veteran private equity company Mekong Capital 

One of the most notable new arrivals on the investment scene is the aforementioned Do Ventures, an investment fund which focuses solely on Vietnamese startups. In 2020, the firm announced the launch of its US$50 million fund, as reported by TechCrunch, to help local B2C and B2B startups navigate the pandemic-induced downturn and continue their growth. 

That the fund has been backed by the likes of Naver, Sea, Vertex and Woowa Brothers speaks volumes for the belief that prevails in the Vietnamese startup ecosystem. So too does the fact that Do Ventures founders Nguyen Manh Dung and Vy Hoang Uyen Le have previous investment experience with Vietnamese startups, including success stories Tiki.vn, Foody.vn and CleverAds. 

The Digital Transformation Drive 

Looking at the companies who have been receiving the bulk of venture funding, it comes as no big surprise that the tech space is where the money is headed. KiotViet and Kamereo, the B2B food sourcing platform whose series A funding Vietcetera reported earlier this year, are prime examples of recently funded startups who are helping their industries pivot to digital. So too are online recruitment platform Sieu Viet, and fintech startup VN Pay. 

It’s precisely this profile of tech-driven startup that’s catching the eye of FEBE Ventures, a Singapore based, though heavily Vietnam-focused, early stage Venture Capital fund. In a conversation with Vietcetera earlier this year, FEBE co-founder and General Manager Olivier Raussin namechecked fintech, logistics, healthtech and edutech as the areas of greatest interest for his company. 

With such an unprecedented focus of attention being put on finding and backing disruptive companies, coupled with the growing tech-savviness and spending power of the population, and ongoing government support, it seems that there’s rarely been a better time to launch, or indeed fund, a tech startup in Vietnam — no matter the impact of the pandemic. 

Indeed, In comments made to The Japan News, Singapore’s Golden Gate Ventures says that by 2022, Vietnam will have become the third largest startup ecosystem in Southeast Asia, and will have made up good ground on leaders Indonesia and Singapore along the way. 

A billion dollars of Venture Capital in 2021 or not, Vietnam is on the up.  

The story was produced in partnership with Initiative for Startup Ecosystem in Vietnam.

This story program "Initiative for Startup Ecosystem in Vietnam until 2025" (also known as National Program 844) was approved by the Prime Minister on May 18, 2016 and assigned to the Ministry of Science and Technology of Vietnam in charge of implementation. The program aims to create a favorable environment to promote and support the formation and development of fast-growing businesses based on exploitation of intellectual property, technology, and new business models.