Investments pouring into Vietnamese startups in the first quarter of 2021

The startup ecosystem in Vietnam has been transformed from the second-least active to the third-most active among ASEAN countries

South-East Asian business content provider, e27 reports that despite the hardship brought about by COVID-19, Vietnam is becoming ever more capital-attracting, noting that 2020’s difficulties have barely stopped venture capital activity in the country. In fact, the total value of investments poured into Vietnamese startups in the first quarter of this year reached more than US$100 million, increasing by about 34 per cent year-over-year.

Foreign investors are the dominant players in the market, as reported by South Korean venture capital firm, Nextrans. Emerging from the pandemic while other countries are still in the midst of the crisis is giving Vietnam an advantage. Vietnam’s start-up scene is on the cusp of something big and is likely to replace Indonesia to become the next favourite destination of foreign investors. 

Transformation of the country’s start-up ecosystem

Vietnam’s start-up ecosystem has been transformed from the second-least active to the third-most active among ASEAN countries, trailing only Indonesia and Singapore. Also, profiles of investors making deals in Vietnam are increasingly diversified.

e27 contends that if the majority of deals were from Singapore and Japan back in the 2017-2018 period, the market now is extremely vibrant with the participation of several investors from different parts of the world such as South Korea, China, even the Europe, Middle East, and Africa (EMEA) region. Many of them have made investments in Vietnam for the first time. Local investors are also active, participating in roughly 30 per cent of deals.

Among the Vietnamese start-ups that have drawn significant interest from regional and international investors recently is Loship. Recently, Vietnam’s one-hour delivery start-up, Loship announced its latest investment from Skype co-founder backed MetaPlanet Holdings.

This is MetaPlanet’s debut investment in Vietnam, as part of its strategy to capture the emerging market opportunities in Asia. “MetaPlanet is planning to pay more attention to the rapidly growing economies in Southeast Asia. I’m delighted to be off to a strong start in Vietnam by adding Loship as our first portfolio company there,” said Jann Tallinn, Skype co-founder and partner of MetaPlanet Holdings in a statement.

Loship is also backed by a diverse range of international investors including Smilegate Investment (South Korea), Golden Gate Ventures, Vulpes Investment Management (Singapore), DAAL Ventures and Wealth Well (Saudi Arabia), Eucagi Ventures (Nigeria), to name a few. 

This is great validation that many venture capitalists from the Middle East and Africa region are starting to shift attention and make deals in Vietnam.

Successful containment of COVID-19

Vietnam has undoubtedly shown strength and stability in weathering the COVID-19 storm, offering a successful example of how a developing country can fight against the pandemic. Despite the gloomy global market, Vietnam’s prospects for recovery look bright as businesses resume operations, and consumers flock to restaurants and shops.

Vietnam’s economy has been rapidly growing at an unprecedented rate, with the forecasted GDP growth rate of 6.3 per cent in 2021, according to KPMG.

In addition, the economy is dominated by a young and tech-savvy population, which is embracing the mobile internet economy as a norm in their daily lives.

Not to mention, Vietnam is the sole economy in ASEAN not forecast to tip into recession this year.

The immeasurable efforts of the Vietnamese government have also contributed a great deal to Vietnam’s thriving startup ecosystem. Numerous government-backed measures and stimulus efforts have been established to support start-ups with former Prime Minister, Nguyen Xuan Phuc approving the National Digital Transformation Program back in June 2020 and the recently implemented EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement. 

These efforts have significantly paved the way for greater investment inflow to the country. In addition to these macro trends, the entrepreneurial spirit of the Vietnamese people is noteworthy, and this spirit has been demonstrated even more strongly and clearly in times of crisis.

Vietnamese people are ‘hungry for entrepreneurship and innovation‘

“Nowhere else in the region can you find as much drive, spirit, and enthusiasm from young people to start their businesses from scratch. Vietnamese people are hungry for entrepreneurship and innovation, and the influx of returnees from overseas is helping improve the quality of the startup ecosystem,” Loship CEO, Trung Hoang Nguyen shared. All of the aforementioned ingredients have helped Vietnam survive and thrive in this new rapidly emerging world.

It is expected that 117-200 deals will be made in the next 12 months. The so-called “hot” sectors are likely to be fintech, e-commerce, and logistics.

Vietnamese start-ups which are able to future-proof their business models, harness digital technologies and provide relevant opportunities and solutions will be best positioned to produce solid returns and attract a greater number of seasoned investors in the time to come.