Vietnam’s tech startups are reaping the benefits as the country sets its sights on becoming a fully digital society by 2030.
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In 2020, the government announced its national strategy on digital transformation, which aims to increase the digital economy’s share of gross domestic product from 14% currently to 20% by 2025.
The Southeast Asian nation hopes to become a high-income economy by 2045 by focusing on its digital economy.
According to the World Bank, “If digital sectors expand by about 10 percent every year, the cumulated monetary gains for the economy will exceed US$200 billion over 2021-45, or about the size of the country’s current GDP.”
That’s why officials are rolling out the red carpet for tech entrepreneurs.
In 2021, new startup support centers Hanoi, Da Nang and Ho Chi Minh City were announced. One year later, a roadmap for boosting innovation in science was revealed, with promises to spend 1% of GDP on scientific research.
Last year, the country pledged to introduce business innovation surveys to monitor the development of startups.
Vietnam’s start-ups attracted a lot of investor interest in 2022, according to a recent report by venture fund Do Ventures and the National Innovation Center, a government unit under the Ministry of Planning and Investment.
It ranked third in terms of deal count in Southeast Asia, and fourth in deal value last year, the report said. Notably, domestic funds were the top investors in local startups last year, accounting for 45% of total deal value.
However, the total value of investment in Vietnamese startups was only $634 million in 2022 — down 56% year-on-year from the record high of $1.4 billion in 2021, the report noted.
Fintech, retail, health care and payments were the most in-demand sectors for funding, it said.
The country’s current tech unicorns include electronic payment solutions provider VNPay, gaming startup-turned-conglomerate VNG, smartphone e-wallet Momo and blockchain player Sky Mavis, the maker of NFT-based game Axie Infinity.
Other names making waves include M Village, which offers co-living housing for young professionals, and TopCV, which focuses on resume creation tools to job-seekers.
Digitalization is particularly important for agriculture, one of the country’s most important economic sectors.
In 2022, the Ministry of Agriculture and Rural Development announced plans to build smart rural areas by 2025, specifically focused on improving production efficiency and introducing specialized digital infrastructure for farmers.
“Without going digital, transformation in farming activities and integration among stakeholders along the value chain would be a downward spiral for Vietnam agriculture, not only affecting farmers’ lives, but also all others,” said Tran Thi Nguyen, founder of Koima, an agritech startup.
It helps small-scale farmers increase their income, transform their traditional farm to agroforestry, which improves biodiversity, and gain access to financing without high interest rates through its crowdfunding platform.
Speaking to CNBC, a number of local investors identified their core areas of focus, which range from retail to logistics.
Venture capital firm ThinkZone Ventures has invested in 17 local tech-enabled startups with a collective valuation of nearly $200 million since the company was started in 2018. It believes health care, food and logistics, including transportation and delivery solutions, are particularly ripe for technology disruption. Each one boasts compelling growth potential based on soaring consumer activity from Vietnam’s expanding middle class, a company spokesperson said.
VinaCapital calls itself one of the first venture capital investors in Vietnam. It’s invested in 18 early-stage tech startups through its $100 million platform, VinaCapital Ventures, as well as maintaining 58 direct investments through its portfolio companies. It prioritizes startups that provide tech-enabled solutions to improve existing systems in agriculture, financial services, logistics, media and retail. Emerging technologies such as blockchain, AI, and electric vehicle infrastructure are some areas it believes will drive economic transformation going forward.
VIC Partners said it has invested in about 15 innovative companies since 2017, injecting around $100,000 to $200,000 for the first check in each deal, followed by another $100,000 to $200,000 in the following round.
Managing director Tung A. Tran said VIC is particularly bullish about ecommerce.
“We have invested in B2B SaaS companies that enable ecommerce businesses in recruitment, sales, marketing, payment, customer care, logistics and fulfilment,” he said, referring to cloud-based software programs that service the corporate world.
“We also invest in innovative ecommerce companies that sell directly to consumers through social media and implement technology in seamless business operations.”
Despite the influx of capital entering the digital tech field, investors warn of several structural obstacles that could limit growth going forward.
At the top of the list was regulatory framework such as tax, intellectual property rights and data protection required to create the most conducive environment for tech.
“The absence of global-class human resources is also a prevailing issue,” ThinkZone noted. “While Vietnam possesses skilled and seasoned professionals in programming, development, design, and various other roles, they have yet to reach the pinnacle of excellence.”
“Limited investment in research and development by large corporations is a significant obstacle for Vietnamese startups,” according to VinaCapital.
“It limits the potential for cross-industry collaboration and innovation, making it more difficult for startups to find potential acquirers or partners who are interested in their products or services.”
VIC Partners is most concerned about the global economic downturn. The firm expects cash flow issues to wipe out many tech startups in 2023 and 2024 while pushing more young people to pursue traditional business models, which would deprive the startup market of new ideas.
Once capital inflows are injected again into the developed market, it will take some time to trickle down to emerging countries like Vietnam, and then from the listed market to private equity and venture capital players, said Tran from VIC Partners.
“I predict 2023 and 2024 to be very good years for pre-IPO and [private equity] opportunities. Then from 2025 to 2026, the VC market in Vietnam may flourish again with another batch of great
take from: https://www.cnbc.com/