According to the Vietnam Innovation and Tech Investment Report 2023 released on March 30 by the Vietnam National Innovation Centre and Do Ventures, the latter half of 2022 proved to be especially difficult for the startup community, with deal value declining by 65 per cent due to the worsening global tech crisis.

Last year, the venture capital invested in Vietnam decreased by 56 per cent due to the impact of global economic fluctuations. However, there was a recovery in the number of deals in the second half, indicating that funding momentum remained strong despite global challenges.

Furthermore, although there was a slight decline in both deal value and deal count for all check sizes, deals falling between $10-50 million demonstrated an increase in value. This implies that businesses that raised funds through Pre-A and Series A last year have advanced to the subsequent stage of growth.

Among industries, fintech remains the most resilient amid the changing climate. The financial services sector saw an impressive increase of 249 per cent in funding, representing the highest investment amount. Fintech deals remained robust, comprising 38 per cent of total capital invested, which is a 4 per cent increase from the previous year.

In an interesting development, Vietnamese investors emerged as the most active investors, holding the top position jointly with their Singaporean counterparts for the first time.

“Local venture capital firms continue to play an important role in the Vietnamese ecosystem with an increasing impact on local startups,” the report noted.

Despite the volatile global investment environment, the report assessed that Vietnam continues to be important to investors. “Vietnam remains a favoured destination due to its sturdy economic growth and skilled workforce,” the report said. “The most common advice given to startups is to focus on fundamental aspects, utilise capital wisely with a strategic approach, and adjust to changes in the economic climate.”

Indeed, venture capitalists generally remain upbeat about the country’s potential for startup and innovation growth, even in the backdrop of a tough fundraising market. Binh Tran, general partner of Ascend Vietnam Ventures, revealed that the fund plans to invest at the same pace they always have.

“Our focus on software innovation, driven by breakthrough solutions, ensures that we maintain our pace even in the face of a bear market. With a 5-10 year outlook, we understand that seed investing is a long-term game and are looking for tech opportunities that seek to create sustainable value,” Tran shared.

Vinnie Lauria, managing partner of Golden Gate Ventures, predicted that fintech, insurtech, healthtech, and proptech are the industries which will continue to see strong growth.

“Climate tech will emerge as another big bet, with the climate discussion becoming much more ubiquitous and organisations facing greater environmental, social, and governance pressures. We also anticipate a shift from strong crypto development teams to strong AI development teams,” he said.

Justin Nguyen, general partner of Monk’s Hill Ventures, went as far as suggesting that this year is the better time to start a company or be an early-stage investor in Vietnam.

“Investors remain attracted to the market’s robust economic growth, young skilled population, and its huge services industry that’s ripe for technification,” Nguyen emphasised.

“In fact, we’ve seen a 17x growth from 2018 levels in seed funding availability, measured by assets under management. Vietnam will continue to see a rise in investment levels given its favourable business climate – with startups staying instrumental in introducing technologies and solutions that ultimately contribute to the region’s economic growth story.”

In the same vein, startup founders are not allowing the current market conditions to stifle their ambition.

Quang Tran, founder and CEO of Onpoint E-commerce, said that the company has seen a 60 per cent growth in Q1 this year compared to 2022, and intends to operate normally while remaining a cautious outlook through the end of the year.

“In terms of resource allocation, we are focusing on areas that generate value while reducing waste, such as water and energy conservation. Additionally, investments in areas that are experiencing positive growth or require attention, such as new sales channels and new recruitment, will continue to receive attention and resources,” Tran said, emphasising the vital need to stay ahead in the market, especially in challenging times.

While Onpoint has no plan for another round of funding this year, which is a concern for most startups for fear of decline, he encouraged innovators to expand visions and focus on sustainability. “Valuation is only an indicator for a certain point in time, which can fluctuate due to external factors. As long as they focus on creating value and provide correct supply for existing demand, valuation will naturally go up,” Tran said.

Likewise, Nguyen Ba Canh Son, founder and CEO of DAT Bike, sees his next steps as a trade-off between short-term and short-term growth.

“Every startup wants to change the world - that’s the ultimate long-term goal, while the difficult macroeconomic landscape ahead creates obstacles for our short-term goals. Our approach is to solve short-term problems for survival at the lowest cost, while focusing our resources on the long-term goal,” Son said.

Source: VIR