Bright prospect for venture capital influx into Vietnam startups

Venture capital in Vietnam hit a record high of $1.4 billion in 2021, shrugging off a pandemic-induced slowdown. Le Hoang Uyen Vy, co-founder and General Partner of Do Ventures, tells The Investor that investors will be interested in sectors that assist people in adapting to the post-Covid normalization.

As a co-founder of a venture capital fund, what can you tell us about investors’ current taste when it comes to Vietnamese startups?

Covid-19 has led to many changes in the behavior of consumers and businesses. The most visible trend is the rapid shift to online platforms in many consumer and service sectors, especially education, retail, and healthcare.

Companies were compelled to turn to remote human resources and work governance solutions to ensure business operations during social distancing. Therefore, in addition to fast-growing sectors like fintech or e-commerce, investors will be interested in sectors that assist people in adapting to the post-Covid "normalization", like as EdTech, MedTech, and digital transformation tools.

What is your assessment of venture capital flowing into Vietnamese startups last year?

Following a year of slowing down, venture investment capital in Vietnam hit a record high of $1.4 billion in 2021, according to Do Ventures' Vietnam Innovation and Tech Investment Report. Last year, Vietnam witnessed several fundraising rounds of more than $100 million and the birth of two unicorns, Sky Mavis, and Momo.

I think Vietnam’s stable social-political environment and economic growth will continue to bolster the confidence of investors looking at entering our market. We expect to see venture capital continue in stronger momentum as borders are opening up and travel has started to resume.

What advantages do Vietnamese startups have in attracting investment capital? And what are the challenges they confront within the pandemic context?

Vietnam’s digital economy is developing on solid foundations, including developed Internet infrastructure, a robust logistics market, an increasingly favorable legislative framework, and an abundance of tech talents.

As of 2019, which was before Covid-19, Vietnam ranked second only to Indonesia in terms of total capital invested. Even during the pandemic period, investors in the region remained optimistic about Vietnam, resulting in an all-time high amount of venture capital investment in our startups in 2021. Therefore, the country is an attractive market with numerous opportunities for startups to raise capital.

However, in comparison to the constantly growing number of startups, the number of funds in Vietnam remains modest. Thus, there remain funding gaps in the local ecosystem, particularly for the early-stage startups.

To create more tech unicorns, we must enhance startups' access to funding so that they can realize the full potential of their inventions and innovations.

What would be your advice to foreign venture investment funds in terms of choosing investee startups and cooperation with them after investing?

My view is that when choosing Vietnamese companies to invest in, foreign funds first need to do thorough research on the domestic market, given the variances in each industry’s nature and each country’s consumer behavior. Secondly, investors need to research the industry’s legal environment in which the business operates to understand the local regulatory framework.

In terms of the relationship between firms and investors, in addition to learning about indigenous culture, there are common ‘rules’ that are followed everywhere – transparency, respect, and trust. Once we invest in a startup, we will become the founders’ companions traveling on the same path.