Investing in Vietnamese Startups: Quick Guide 2023

Vietnam has become a startup powerhouse in Southeast Asia attracting foreign investors from all over the world. Here’s the current state of the sector, opportunities for foreign investors, and challenges it faces.

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Last week, GIMO, a Vietnamese startup providing payroll services to blue collar workers, secured US$4.6 million in funding led by venture capital firm TNB Aura, according to Deal Street Asia.

GIMO is just one among a long line of startups in the burgeoning Southeast Asian nation to attract international funding.

Indeed, with an estimated 3,472 startups, Vietnam is quickly becoming a magnet for foreign venture capital looking to capitalize on an investment environment ripe with opportunity.

As an emerging market, investing in Vietnamese startups also comes with risks.

So, where are the opportunities? Where are these risks? And what else do investors need to know when considering entering the Vietnamese startup sector?

Startup trends in Vietnam

Vietnam currently spends about one percent of its GDP on innovation. For contrast, most developed economies spend about three percent.

This hasn’t stopped Vietnam from being a major draw card of venture capital in the startup sector. Fintech, in particular, has been very popular, attracting US$1.013 billion worth of investment from 2013 to 2021.

Startups in the retail space have been popular too. Since 2013, they’ve received a substantial investment of US$902 million.

Startup funding in Vietnam by sector, 2013-2021 (US$ million)

	2013	2014	2015	2016	2017	2018	2019	2020	2021
Payments	12	10	1	29	10	100	300	101	450
Retail	1	15	1	18	15	105	195	83	469
Employment	0	0	0.2	0.1	0	1	3	36	4
Real estate and infrastructure	1	0	0.1	0	7	6	16	26	29
Financial services	0	0	1	2	0	3	40	25	61
Business automation	0	0	0.1	0	0	1	60	18	55
Local services	0.2	0.1	4	2	0.2	4	5	10	4
Travel and hospitality	0	1	0	4	1	5	23	9	4
Education	0.2	3	6	1	5	53	32	8	55
Gaming	0	0	0	0	0	0.3	9	6	175
Logistics	0	0	0.3	1	0	5	58	4	8
Healthcare	0	0	0.1	0	0.2	0.2	12	3	37
Entertainment (non-gaming)	0	0	0.1	0	0	0	1	2	10
Advertising and marketing	6	7	30	1	6	3	15	2	0
Communications and communities	0	0.2	0	0	0	0	0	1	7
Multi-vertical*	0	0	0	0	0	0	29	0	42
Others	0	0	0.2	0	0	0	0	0	33
Total	20.4	36.3	44.1	58.1	44.4	286.5	798	334	1,443

Source: Vietnam Innovation & Tech Investment Report 2021

*Multi-vertical is used for companies that generate substantial revenue across different sectors.

Support for Vietnam’s startup sector

There are a broad range of Laws, Circulars, Decrees, and Decisions in place to promote Vietnamese startups. There are also a number of organizations and institutions that have been established to assist startups to develop.

National Innovation Center (NIC)

Established through Decision 1269/QD-TTg, the NIC is at the center of Vietnam’s push to develop the domestic startup sector. The NIC provides training and support for young enterprises and partners with international technology companies like Amazon and Google.

National Technology Innovation Fund (NATIF)

NATIF is a government agency and financial institution under Vietnam’s Ministry of Science and Technology that provides grants and preferential loans for research and development, innovation, and technology transfer.

National Agency for Technology, Entrepreneurship, and Commercialization Development (NATECD)

NATECD is a national platform under Vietnam’s Ministry of Science and Technology that provides training, mentorship, and financial aid for startups.

See also: 8 Regulations and Policies Supporting Startups in Vietnam

Human resources challenges for Vietnamese startups

But despite strong government support, Vietnam’s startup sector still faces a big human resources challenge.

Adecco’s Vietnam Labour Market Update in Quarter 3/2022, found that in 2022 IT enterprises would require 530,000 workers but would fall short by 150,000. This gap between what is needed and what is available is set to increase to 195,000 by 2024.

IT workers required vs deficit

	2018	2019	2020	2021	2022	2023	2024
Required	320,000	350,000	400,000	450,000	530,000	600,000	800,000
Deficit	–	–	–	–	150,000	175,000	195,000

Source: Adecco 2022

This challenge can be overcome if organizations are proactive in attracting and keeping talent. Clear company goals and values and diverse recruitment options may be key to successfully achieving these ends (See: Vietnam’s Tech Startups: Human Resource Challenges).

Key foreign investors in Vietnamese startups

Antler

Singaporean venture capital firm Antler is one of the most prominent startup investors in Vietnam. Through its local branch, Antler Vietnam, it claims to have invested in more than 15 companies in a range of fields, including education, real estate, and financial services. Collectively, it says its portfolio in Vietnam is worth over US$30 million.

500 Startups

With an office located in Ho Chi Minh City, 500 Startups, originating from the US claims to have funded more than 70 companies in Vietnam as of the end of June 2022. These companies range from finance and banking to fashion. Its most well-known investment in Vietnam was in Sky Mavis, which briefly went unicorn in 2021 (See below).

CyberAgent Capital

Japan’s Cyber Agent Capital also invests heavily in Vietnamese startups and has an office in Ho Chi Minh City. It has invested, in Vietnam, in well-known companies like Foody.vn and Tiki Corporation and also smaller scale, early-stage startups.

Vietnamese startup unicorns

VNG

Online gaming and social networking giant VNG, formerly VinaGames, was reportedly Vietnam’s first startup to be valued at more than US$1 billion in 2014. It primarily trades in online games and has Vietnam’s second most popular social networking site (after Facebook), Zalo. Most recently, VNG was valued at just US$364 million after struggling to turn a substantial profit for several years.

Sky Mavis

Ho Chi Minh City based, Sky Mavis, are best known for crypto gaming sensation Axie Infinity. In October of 2021, Sky Mavis announced Series B funding of US$152 million, valuing the Vietnamese startup at an estimated US$3 billion.

VNPay

Vietnam’s VNPay was declared a unicorn by Google’s e-Conomy SEA 2020. The app, which is used to facilitate electronic payments, received the title after reportedly securing US$300 million in funding from Japan’s Softbank Vision Fund and Singapore’s sovereign wealth fund.

The future of Vietnam’s startup sector

The desire within Vietnam to shift from a manufacturing-based economy to a high-tech economy has been well documented. Several supporting policies are already in place and a slew of profitable startups have emerged in recent years.

There is no one size fits all approach to startups in Vietnam. Covering a broad range of sectors, domestic startups each face their own unique challenges. Understanding these challenges – banking regulations for fintech projects or logistical barriers for e-commerce startups, for example – will be essential to any startup’s success.

For support collecting, analyzing, and understanding this information, contact our experts at Dezan Shira and Associates.

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