Japanese fund highlights features of desirable startups in Vietnam

How do you evaluate the startup investment environment in Vietnam?

I have seen a marked maturation of the Vietnamese environment in recent years. Investment cash flow will always be pumped into ecosystems where investors believe there is room for prospective startups to develop.

Startups have more options and leverage to expand faster in an ecosystem with sufficient financing and support. This is known as the chicken-and-egg issue. When there are more prospective businesses, more investors will arrive with more capital, boosting competition among investors to invest in the most promising startups. Startup founders have more negotiation advantages and better choices.

I feel that the Vietnamese startup ecosystem is increasingly resolving the chicken-and-egg conundrum. However, there is still much work to be done in order for Vietnam's startup ecosystem to grow even more significantly and sustainably.

Numerous entrepreneurs in the education sector have recently raised money, despite the challenging economic climate. Do you consider the education sector a "hot" one? Will Genesia Ventures be making investments in the academic sector?

Genesia Ventures is currently investing in education startups, including Manabie, an OMO learning platform (combining both online and offline), and Rootopia, a school financing tool in Vietnam. Our fund will continue to hunt for promising entrepreneurs in this industry.

Which startups are still sought after by investors in the current difficult context, and which startups will find it difficult to raise capital in Vietnam?

In the current challenging economic climate, aggregate demand has generally declined, making it challenging for startups to fulfill their business goals or necessitating more time and resources to attain their objectives.

Food, medicine, and education are industries that are critical to people's lives and will likely be less affected than others. These startups still have the potetial to grow if they provide truly suitable services and can persuade clients to use them. These firms may still create income and profit while not being as ground-breaking as before, but they can survive and grow with immediate internal resources.

Entertainment, tourism, fashion, investment, payment, finance, and other non-essential industries will find it more difficult to navigate the current period. Startups in those fields require a large amount of money to lure clients while their pockets are emptying in the current harsh economic climate. As a result, it is considerably more difficult for them to generate enough profit to become self-sufficient, as well as persuade investors to continue with the next round of investment. As a result, investors will be more cautious about investing.

Furthermore, company models that require a large amount of initial cash will find it more difficult to convince investors. These models, for example, must invest in initial facilities, spend a lot of money to educate and recruit consumers, and so on. These company concepts all have one thing in common: "money coming out is like Da River water, money coming in is dripping (or not at all) like filter coffee."

Startups are always thirsty for financing in the face of high capital costs and restricted access. They are deemed dead without outside capital. As a result, investors will look for possibilities in business models that can create more sustainable cash flow.

I believe that this investment appetite will continue to be a trend through 2023, and probably until 2024, when the market really picks up with better liquidity.

What about the investment situation at Genesia Ventures this year?

Despite the challenging investment environment this year, we are continuing to actively invest in many of our core markets, including Japan, India, Indonesia, and Vietnam.

We will continue to actively invest in new businesses, spend a significant amount of our capital budget, and add new startups to our investment portfolio, particularly in Vietnam.

What are the criteria for the startups that Genesia chooses?

We are excited to be able to invest in scalable startups and founders who, from the outset, have a goal of building a company that will be successful for the next 10 years.

We are constantly on the lookout for businesses that can create a product supply that keeps up with the expanding market demand, reaching target customers exponentially at declining marginal costs.

Because the production and running expenses per product unit are continually optimized, these businesses are able to expand their commercial activities without needing to add a lot of resources.

Those startups will be able to grow faster and more profitably while maintaining sustainable growth. The founders of these scalable firms have keen minds and distinct visions for their development path to expand their startups at each stage from the very beginning.

To fulfill their vision and business objectives, founders must carefully select appropriate investors and venture capital funds that can truly accompany them on each step.

Are Genesia's investments in Vietnam in line with its goals and expectations?

We are an early-stage startup investment fund, needing many years of development together with startups to reach our goals.

We believe in the founders we select to work with, in their fighting spirit, ability, and bravery to overcome any obstacles and grow in accordance with expectations. We will always fight to do our best to support the startup's development, and the results will be revealed in the coming time.

How, in your opinion, can Vietnam entice more foreign investment capital, particularly from Japan?

I believe that in order for the Vietnamese ecosystem to attract more investment funds, including funds from Japan, we need successful startup exits.

We need startups that can thrive with a more sustainable and profitable business model, and a clearer exit route than they have today, which is crucial in order to provide investors with more assurance about the potential of Vietnam's startup ecosystem. Additionally, incoming founders should be sufficiently confident that their ventures will be a success.

If we don't make a successful exit, I'm afraid we'll be stuck with the chicken-egg problem forever. Specifically, if there are no real examples of successful ventures, talented people will not dare to commit themselves fully to startups, and there will be no quality startups with great growth potential.

As a result, there will be no confidence or capital inflow from investors. This would create a vicious circle, a deadlock that cannot be escaped.