VN leads region in attracting long-term investment into innovative start-ups
The wave of innovative start-ups in Vietnam has developed at “dizzying” speeds, attracting the attention of many domestic and foreign investors, a seminar, entitled 'Investment Policies for Start-ups' in Hanoi heard on June 3.
According to statistics from the National Agency for Technology Entrepreneurship and Commercialisation Development, under the Ministry of Science and Technology (MoST), Vietnam currently has about 3,800 start-ups.
Of those eleven are valued at over US$100 million and three start-ups are valued at over US$1 billion, including Momo, VNG and VNLife.
Vietnam is currently the third pole in the Southeast Asian start-up golden triangle, along with Singapore and Indonesia; having the perfect combination of leading technology talent, and an existing innovation culture, which is highly attractive for global investors.
An important factor determining the success or failure of start-up enterprises is the ability to access capital.
Decree No 38/2018/ND-CP in 2019, contained detailed regulations on investments for small and medium-sized innovative start-ups and created the momentum for the creation and development of funds in Vietnam targeted at these types of ventures.
Statistics from BambuUP show that there are currently about 210 venture capital funds operating and investing in innovative start-ups in Vietnam.
Of these, nearly 40 domestic investment funds were established under Decree 38 with a total charter capital of more than VND100 billion (US$4.1 million). The number of angel investors, although not too large, is also gradually increasing.
The Vietnam Innovation and Tech Investment Report published by the National Innovation Center (NIC) said that the total amount of venture capital in Vietnamese innovative start-ups reached US$1.4 billion in 2021.
Of which, according to ThinkZone's, about 90% is in the form of foreign capital from foreign venture capital funds.
Because Vietnamese start-ups will often have to organise according to the proposals of foreign investors and restructure to receive this operating capital.
Foreign investors will often require Vietnamese starter companies to restructure and establish a parent company abroad, usually in Singapore, and then invest capital into this parent company.
"When restructuring, Vietnamese shareholders will have to carry out investment procedures abroad to establish a parent company abroad, and then the parent company must carry out investment procedures from abroad to Vietnam. This is a reality not only in Vietnam but has taken place in most emerging markets such as Indonesia, Malaysia, the Philippines, and China," said the report from the Scheme 844 office.
In terms of overall performance last year, in the current global economic context, venture capital activities in Vietnam continued to slow, marking a decline for two consecutive years since 2021. The total value of deals decreased by 13% in the first nine months of last year, to a total of US$427 million.
This trend is more clearly shown in the sharp decrease of 40% in the number of deals, reaching the lowest level since 2018, with just 56 transactions recorded.
The number of transactions also fell, specifically in those deals with small and medium capital amounts. The most significant decrease was 50% fall in deals with a value of less than US$500,000, showing the caution and strictness of investors even over minimal investment.
The number of transactions in the range of US$10-50 million fell slightly, still maintaining a higher level than the period before 2022.
This trend shows the increasing presence of mature technology companies in Vietnam's innovative start-up ecosystem.
Quoting a report by Bain & Company, the Scheme 844 office said that Vietnam was leading the way in attracting long-term investors in Southeast Asia. The survey showed that investors believed that investment activities in Vietnam would increase by 83% in the 2025 – 2030 period, compared to now.
Developing an innovative start-up investment fund model and forming a transparent and safe investment environment will maximise the opportunities for Vietnamese innovative enterprises to access domestic and foreign capital sources.
At the same time, it helps investors avoid confusion in the process of organising the best fit in terms for their investment.
