Vietnam Startup Investment is Not Slowing Down, but Japanese Strategic Investors are Eating VCs’ Lunch

By Dr. Pham Minh Tuan, Founder and CEO of Topica Education Group, a company offering online-offline Bachelor degrees in partnership with universities. Topica is also behind the Vietnam outfit of Founder Institute.

Photo credit: Topica

It is widely believed that the Vietnamese tech startup community is cooling down, and many founders complain about a lack of funding. At a recent presentation I made at the ConnectingBusiness2.0 conference in Singapore two weeks ago, I had shown the contrary based on a set of data I had compiled on startup investment deals in Vietnam over the last 18 months.

Deals Not Slowing Down, But Deal Sizes Are Getting Smaller

A quick overview: There were 13 deals closed in the first half of 2013, compared to 24 in the whole 2012 and 11 during previous year 2011, suggesting investment activities did not slow down. We still have the rest of 2013 to look forward to. While deal sizes are getting smaller, this is arguably part of a global trend: more seed and micro-VC funding, and a Series A crunch.

Second Startup Wave in Vietnam

Despite this, I believe there is a second wave of startup investments happening in Vietnam, where young companies are being seeded and backed. Some other interesting trends from my presentation that I want to highlight:

– Amidst a wider pan-Asia OTT war, E-commerce, Mobile and Edtech sectors are getting hot, with 7, 5 and 5 deals respectively.

– There were 4 investments into startups that target global/regional markets rather than domestic in the past 18 months, compared to almost none previously. This shows an increasingly more international outlook by the startups.

– Investors from Japan and Europe are taking over, each accounting for 7 deals in the period, on par with US-originated investors. From 2011-2004, US investors had dominated the startup scene. Interestingly, none of the recent deals were done by Singapore-originated investors.

– Strategic investors are bypassing VCs and angels. 6 early stage investments were done by strategic investors, and although 3 of them are acqui-hires, the other 3 are structured similarly to VC deals (cash into the company, minority stake, product and market development objectives). Are VCs and angels not supposed to make money in the middle?

You can check out the full presentation deck here: