53% growth forecast for Vietnam startup investment after record year

Investment in Vietnam’s startups could hit $2 billion this year, mostly flowing into agriculture and technology, according to Vietnam Startup and Investment Club.

Hoang Cong Doan, chairman of the Ho Chi Minh City-based club told The Investor that the “taste” of investors this year remains unchanged, focusing on agriculture and technology.

“Investing in startups is risky, but the profits are relatively substantial due to their rapid growth. That's why investors continue to pour money into startups. I believe that this year’s Vietnam startup investments would reach approximately $2 billion.”

Compared to last year’s record height of over $1.3 billion, according to an annual report by ESP Capital and Cento Ventures, $2 billion means 53% growth year-on-year.

With more than $1.3 billion in 2021, Vietnam climbed to third place in the ASEAN startup ecosystem, trailing only Indonesia and Singapore, the report noted.

In 2020, startup investments halved compared to 2019 to $874 million due to the Covid-19 pandemic. However, it quickly recovered and peaked in 2021.

A report by investment fund Nextrans Vietnam shows that there were nearly 208 active venture capital funds operating and investing in Vietnamese businesses, including almost 40 domestic investment funds, by the end of 2021.

Big names and active funds in the market include VSV Capital, Vietnam Silicon Valley, Mekong Capital, 500 Start-up Vietnam, Vietnam Investment Group, IDG Ventures Vietnam, Do Ventures, and Genesia Ventures.

In the first two months of the year, Vietnam’s startup market witnessed a considerable number of successful startup fundraisings.

In the agricultural industry, e-commerce agriculture platform Mio raised $8 million in the series A funding round in January. In the same month, FoodMap, an agritech e-commerce platform, received $2.9 million in a pre-series A round led by Vulpes Ventures, Beenext, Ascend Vietnam Ventures, and Wavemaker Partners.

Rino, an e-commerce app, recently raised $3 million in a pre-seed fundraising round backed by Global Founders Capital (GFC), Sequoia Capital India, Venturra Discovery, and Saison Capital. The fresh fund will be used to open hundreds of its “dark stores” - order fulfillment centers that do not directly serve clients.

In the financial technology segment, fintech Funding Societies successfully raised a total of $144 million in a series C+ funding round in February, led by SoftBank Vision Fund 2 and new investors including VNG Corporation, Rapyd Ventures, Indies Capital, K3 Ventures, and Ascend Vietnam Ventures. VNG, in particular, invested $22.5 million in Funding Societies (operating under the name Modalku in Indonesia).

Meanwhile, Vietnamese investment app Infina also added another $4 million to its seed funding, from Sequoia Capital, Y Combinator, Saison Capital, Starling Ventures, Alpha JWC, and AppWorks.

In the e-commerce sector, cross-border e-commerce startup OpenCommerce Group (OCG) received $7 million in a series A funding round backed by tech unicorn VNG and venture capital fund Do Ventures at the end of February.

Social commerce platform Selly raised $2.6 million in a pre-series A funding round from CyberAgent Capital, Do Ventures, Genesia Ventures, JAFCO Asia, and Kvision.

In February, Pharmacity announced a $4 million investment in retail platform RELEX Solutions, which in turn assists Pharmacity in anticipating product demand and supplying essential products to customers. The RELEX platform will go live across Pharmacity’s operations in April.

In the electric vehicles sector, Selex Motors, a Vietnamese startup designing and manufacturing electric motorcycles, batteries and battery replacement stations, successfully raised $2.1 million in a seed round recently. The round was led by Touchstone Partners, among other investors like ADB Ventures, Asian Development Bank, and Nextrans, one of the most active Korean venture capital funds in Vietnam.

Referring to the current challenges, Doan said that so far, startups have encountered a typical lack of capital, knowledge of corporate governance, and market research. “Therefore, a company that wishes to attract investment must establish a relatively professional corporate structure and maintain its own brand. At the same time, it is necessary to have a unique idea to dominate the market in future.”

Even if a startup successfully raises funds, it must still focus more extensively on its strategy and core values, he added.

“Many businesses chase after the “glossy” external image after having little capital and reputation. They forget to pay attention to their products, so they will quickly lag, lose the market and eventually collapse.”