Total investment capital in Vietnamese technology startups in 2020 decreased by 48% compared to 2019, but Vietnam is still considered an attractive investment market for innovative start-ups.
The report "Vietnam Innovation and Technology Investment 2020" was received by the National Innovation Center (NIC-Ministry of Planning and Investment) and Venture Capital Fund issued by Ventures on May 31. Decision: 2020 is a challenging year but contains many opportunities for investment in innovation and technology globally, and the Vietnamese market is no exception.
The report said that the total investment capital in Vietnamese technology startups in 2020 reached 451 million USD, down 48% compared to 2019, mainly due to the absence of significant investments that have been closed by large companies. in the previous year. However, the number of investment deals decreased insignificantly, only about 17%.
In particular, the period of sharp decline occurred mainly in the first half of 2020 when the complicated developments of the Covid-19 epidemic affecting the economy weakened investment capital flows in the market. However, investment activity has quickly recovered since the second half of 2020 when the market recorded 60 deals – the same number as in the same period in 2019.
"The Government's efforts in realizing the dual goal of fighting the epidemic and recovering the economy have brought positive signals to the market," the report said.
It is worth noting that while the number of deals with an investment size of less than 500 thousand USD increased by 11%, the number of deals with an investment of between 500,000 - 3 million USD, 3-10 million USD and 10-50 million USD. USD all dropped significantly. Only the deal with an investment scale of over 50 million USD remains at the same level as in 2018 and 2019 (3 deals).
If counting the 7 deals alone with an investment of over 10 million USD, the total investment capital of these 7 deals has reached 334 million USD, accounting for nearly 75% of the total investment capital in Vietnam's technology startups in 2020. In addition, 59 capital raising deals with the scale of 500,000 USD/deal (equivalent to 12 million USD), an increase of 11% compared to 2019 shows that Vietnam's early-stage startups are still attractive to venture capitalists despite The economy is still being negatively impacted by the Covid-19 pandemic.
NIC is researching and proposing to build a legal environment for innovation in Vietnam and specific programs, policies, and pilot mechanisms to support innovative businesses. The collaboration between NIC and Do Venture in co-publishing the Vietnam Innovation and Technology Investment Report 2020 to provide information to investors about innovation investment activities in Vietnam, thereby enhancing the attraction of domestic and foreign investment capital for innovation.
Among the sectors attracting investment capital, payments and retail continue to receive the most large value investments due to the key role in the development of the Internet economy. Nearly 101 million USD was poured into the payment sector while retail was 83 million USD. For the period of 2021-2020, especially the period of 2018-2019 when the startup market develops hot, the total investment capital in these two fields is up to 564 million USD and 434 million USD respectively.
Notably, as noted by NIC and Do Ventures, financial services and real estate have begun to accelerate, with the lending business accounting for 86% of capital in financial services. In addition, long-term changes in consumer and business behavior are also setting the stage for emerging areas such as education, healthcare and business automation.
“However, transaction size and number of transactions remain modest as these sectors are still in their infancy with plenty of room for growth in 2021,” the report said.
According to Mr. Vu Quoc Huy, Director of NIC, in the context of difficulties in the global economy due to the Covid-19 pandemic, Vietnam is still an attractive destination for investors.
Specifically, the successful deal rate of Vietnamese startups accounts for 14% of the total number of deals in Southeast Asia and ranks third in the region (same position in 2019), after Indonesia (27%) and Singapore (37%). ). However, the proportion of investment capital in innovation and technology of Vietnam is only 4th, behind Indonesia (70%), Singapore (14%), Malaysia and Thailand (5%). "The absence of large-scale deals is the main reason why Vietnam's ranking in the region has dropped," the report said.
However, the number of investors in Vietnam in 2020 only decreased slightly compared to 2019 in which the strongest activity came from domestic investors and Korean and Singaporean investors while the number of foreign Japanese investors decreased significantly.
In 2021, there are 21 Vietnamese investors (up 1 investor compared to 2019), 20 Korean investors (down 1), 19 Singaporean investors (same level in 2019) and 7 investors. Japan (down 8).
Although investment capital in startups has decreased, Vietnam is still among the top in the region in terms of the number of investments. This is a positive sign in a difficult year from the inevitable impacts of the global Covid-19 pandemic.
According to data from our recently released report, although the total investment capital in Vietnamese technology startups has decreased, the number of investments has remained almost unchanged. This shows that Vietnam remains an attractive investment destination compared to other countries in the region, largely because the Vietnamese economy has recovered quickly thanks to effective government controls on the economy. with Covid-19.
The data in the report also shows that the sharpest decline occurred in the first quarter of 2020 when the new epidemic broke out. From the second quarter of 2021 onwards, investment activities will begin to return after investors and businesses have gotten used to the new situation.
Notably, the Covid-19 pandemic has created major changes in the behavior of both consumers and businesses as activities in life and work gradually move online. Along with already strongly developed industries such as e-commerce or financial technology (Fintech), industries such as EdTech (education technology), MedTech (health technology), Online media (online media) ), and digital solutions for businesses will have many breakthrough opportunities in attracting investment in the coming period.
In 2021, Vietnamese startups still have many opportunities to attract investment capital if they promptly grasp the market's needs and offer products that bring value to users, especially in difficult times. many changes today.
To enhance this capital attraction, the Government of Vietnam is also trying to create the most favorable environment to promote the startup ecosystem. As a venture capital fund belonging to the private sector, we hope to be able to contribute to the innovative start-up support activities of state agencies in many forms. The report “Innovation and Technology Investment 2020” is the first step in the desire for a long-term cooperation between Do Ventures and NIC.
“Notably, more than 75% deals were recorded by domestic funds or foreign funds with staff based in Vietnam. This shows that domestic venture capital funds play an important role in supporting Vietnamese startups, especially in the early stages, to continue to go further in this challenging period. ", said Mr. Huy.
According to Ms. Le Hoang Uyen Vi, CEO of Do Ventures, while the average transaction size of the Pre-A and Series A rounds decreased significantly by 50%, the average transaction size of the funding round was significantly reduced by 50%. series B spiked again.
Specifically, according to the report, the average transaction size of the Pre-A round is 0.2 million USD/deal (compared to 0.4 million USD/deal in 2019) and the series A round is 1.4 million USD. million USD (3 million USD/deal in 2020), the average transaction size of the series B round in 2020 jumped to 10 million USD/deal, a significant increase from 6 million USD/deal in 2019.
Ms. Le Han Tue Lam, Director of Nextrans Venture Fund in Vietnam (Korea)
In the period of 2018-2019, the startup market developed strongly and many startups were born. Startups that are considered seniors have only started in the years 2007-2008. Therefore, the Vietnamese startup market is very diverse, very early and has many young companies, at the seed stage.
To invest in the startup market in Vietnam, it is imperative to invest in these companies, startups at an early stage. With the current reality, it will take 5-7 years for the market to mature and have more choices for investors in late-stage startups.
Looking at the reality, when Vietnam's startup ecosystem started from 2015-2016, now is the ripe time and there are more mature startups. Therefore, in capital raising deals, these startups will call for larger investment capital from 5-10 million USD; even companies like Momo have reached hundreds of millions of dollars. This is the natural maturity of startups. And if you look at the development process, in the following years, the value of investment deals will be even higher.
How to choose and select investment depends on the strategy and taste of each investor; In which, with funds that focus on startups at a very early stage, they still invest at $50,000-100,000. Only early-stage startups need such capital.
Assessing the prospect of attracting investment capital in the innovation sector in 2021, the report said that Vietnam's technology investment market has an inevitable slowdown due to the impact of Covid-19, but the The opportunity for startups to break through is huge when venture capital activity gradually recovers.
“We believe that with efforts from the Government to promote digital economic growth and create a favorable business environment, Vietnam will have a strong opportunity to attract investment capital from abroad.” Mr. Huy emphasized.
In recent years, innovation is considered an important factor in accelerating Vietnam's economic growth. In January 2021, the Prime Minister issued the "National Strategy for the Fourth Industrial Revolution to 2030" with clear goals to concretize Resolution No. 52-NQ/TW of the Ministry of Finance. on a number of guidelines and policies to actively participate in the Fourth Industrial Revolution. This is an important milestone in the Government's efforts to create a favorable business investment environment for domestic innovative and start-up enterprises and foreign investors.
Next, the Ministry of Planning and Investment, the Ministry of Science and Technology and related ministries have gradually completed many legal mechanisms to support and encourage innovation and start-up activities in Vietnam. . Support policies, incentives as well as investment and divestment processes for foreign investors are also clearly regulated, making Vietnam the most attractive investment destination in the region.
In particular, the Government is taking drastic steps in developing the digital economy when initially implementing a trial legal framework (sandbox) for new industries such as technology and finance (fintech). These are efforts from the Vietnamese Government to create the most favorable environment where innovative businesses, start-ups and investors can join forces to make significant contributions to the economy. ', the report stated.