A little over a month ago Vietnamese venture capital firm Do Ventures released the Vietnam Tech Investment Report 2019–H12020, a report on the state of investment in Vietnam’s tech industry during the first half of 2020. This report came to my attention a couple of weeks ago, but due to other time sensitive topics I wasn’t able to address this report until now. This post will review some of the high level findings of the report rather than digging into too many actual numbers. You can submit your email to receive a copy of the full report from Do Ventures on their website here.
Perhaps the most interesting finding of the report is that Covid-19 led to an actual increase in the development of Vietnam’s tech industry in H12020. This was led by interest in technologies that would foster social distancing and limit face-to-face human contact. Technologies along these lines included online shopping and digital payments services. Perhaps more importantly as Vietnam has a large number of startups in the sector, cashless payments provided a boost in consumer awareness and use during H1. This is pointed up by the fact that such ecommerce transactions increased three to five times during the six month period.
Logistics and in-country shipment services have seen major developments as a result of Covid demands as well. From shipping of orders made via online shopping services such as Tiki and Sendo (both Vietnamese startups) or the increasing number of online grocery delivery services, the logistics industry is turning to technology to solve the problems caused by Covid and to continue provision of services without interruption.
These improvements do not, however, suggest that overall investment increased during the last six months. GDP growth fell from 6.7% in H12019 to 1.81% in H12020 due to the economic devastation of Covid. The report found that investment proceeds decreased by 22% year-on-year for the same period, falling from $284 to $222 million for 2019 and 2020 respectively. Additionally, deals made by foreign investors coming into Vietnam have dropped. While during 2019 investors came from Korea, Singapore, and Japan, the majority of deals made so far in 2020 have come from investors who already have a presence in Vietnam. This is seen as a result of travel restrictions and the uncertainty of how long the current lockdowns will run.
The Do Ventures report also found that H12020 has shown an increase in entry into new industries by startups in Vietnam. Technology companies have begun developing services in industries which it might not have considered before such as human resources and real estate. These new ventures expand the reach of tech startups and provide new ground for VC investment at seed funding. Furthermore, these startups enter a pipeline that will lead to additional rounds and eventual exits in the coming years, a trend that will continue to fuel investment in Vietnam’s tech industry.
The final trend that the report mentions is the decrease in exits from H12019 to H12020. There have been fewer exits this year, though the exits that have occurred have been of a larger than average size than last year. Do Ventures anticipates that the trend will be towards trade exits and secondary sales for the foreseeable future as the number of unicorns and growth companies mature enough to justify IPOs is limited.
Finally, Do Ventures conducted a survey of 50 investors over six major Southeast Asian markets and found that investment interest remains high. Of the six markets surveyed, Vietnam stands at the top of the list for desirable investment potential followed by Indonesia. From the view of Do Ventures, one of the few venture capital funds operating in Vietnam that is manned solely by Vietnamese, the future for Vietnam’s tech industry is bright. If the startups can continue to develop services tailored to meet the change in needs caused by a Covid-19 reality, those startups will continue to find funding at all levels and feed the pipeline towards successful exits for investors and entrepreneurs.
As mentioned, you can access the full report at the link above. And if you have questions about it please feel free to contact our friends at Do Ventures through their website at doventures.vc. If you need assistance with structuring or papering a deal, or are interested in setting up a tech startup, please contact your attorney on staff or get in touch with us through our website at www.indochinecounsel.com.