Venture funds making great headway in Vietnam market

Venture funds making great headway in Vietnam market

Over the past two years, Vietnam’s internet and mobile market has caught the attention of both major domestic and international investors.

This trend is largely thanks to the great attention paid to this market by venture capital firms who are willing to invest in start-ups and new ideas.

According to vice president of IDG Venture Vietnam (IDGVV) Nguyen Hong Truong, a young population with an openness to approaching new technology is one of Vietnam’s biggest advantages over most other ASEAN countries in terms of the internet and mobile market.

Moreover, the process to equalise technology between urban and rural areas is said to be one of the fastest in the region. International investors feel that these factors are making Vietnam’s digital market more attractive than its neighbours.

The start-up wave in Vietnam is bigger than most countries in ASEAN, especially again in the internet and mobile sector. With diverse products and services, many local companies have already even expanded into overseas markets, Truong added.

Currently, IDGVV is funding 40 companies in the online and mobile service, technology, education, media and entertainment fields. With the dynamic growth of mobile and internet users, firms funded over the past two years have reached an annual growth rate of 30 per cent.

“IDG will continue investing in firms with potential, however our requirements will be higher,” Truong noted.

Compared to more developed countries, Vietnam’s start-ups are facing difficulties accessing funding. Truong however believes that investment into ASEAN, particularly by Japan and Korea, is an opportunity for Vietnam’s internet and mobile start-ups to blossom.

Online marketing and e-commerce are two promising areas. The increasing number of users is likely to encourage electronics entertainment firms to supply more internet and mobile services, serving the marketing purposes of many companies.

IDGVV is planning to expand the market through M&A by finding international strategic partners for its investee firms, and by expanding leading internet firms’ operations to the regional scale.

In the early stage Vietnam’s start-up trend, IDGVV invested into a wide range of firms, some of which have become very successful such as VNG JSC, VC Corp JSC, and Vat Gia JSC.

Not all venture capital firms have been as successful as IDGVV. General director of DFJV, a fund under VinaCapital, Than Trong Phuc said that after seven years operating in Vietnam, DFJV has invested in only 10 companies.

Last year DFJV withdrew from VON JSC, which owns two job finding websites named kiemviec.com and hrvietnam.com.

According to Phuc, in the early stage there were assistance organisations helping to strengthen start-ups before venture capital firms jumped in. But now these venture capitalists have to compete with not only each other, but also a rising number of individual investors, while not as many investee companies are showing potential.

Phuc admitted that even though American, European and Asian investors are targeting Vietnam’s market, funding for DFJV has not been easy over recent years.

Currently DFJV is assisting firms with a high growth rate, as its goal is to triple its capital investment.

“DFJV will invest in either a technology or entertainment firm this year,” Phuc said. In the near future, e-commerce, entertainment and communication firms will be at the top of their list, he added.

The word on the street is that IDGVV is the most risk-loving, capital-loose venture capitalist in the market, but it has yet to publish an updated list of new portfolio companies since its last report several years ago.

When it first came to Vietnam, IDGVV regularly posted its list of investments. But once the market became more stable, they only post new additions at the investee firms’ request, Truong explained.

Most companies that are funded by venture capital firms are stable and capable of achieving high growth rates. They admit that they can hardly survive without the fund.

One example worth mentioning is Appota, the first mobile content distribution platform in Vietnam. With their name in the top-nine digital content start-ups in Southeast Asia, Appota is now valued in the millions of dollars.

Appota’s general director Do Tuan Anh said the firm is being financed via Singaporean and Japanese venture funds. Apart from capital, they are bringing in other support such as networks and long-term consultancy, he added.

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