Vietnam’s rising startup scene may have a glaring weakness

Queena Wadyanti provided data support for this story.

Last year, Vietnam’s tech ecosystem racked up three of Southeast Asia’s mega deals in a record-making year. About half a billion dollars reportedly went to three national champions: MoMo (e-wallet), VNLife (parent firm of VNPay), and Scommerce (logistics).

In terms of investment activity, Vietnam became the third most active ecosystem among the six largest ASEAN countries, according to a 2019 Cento Ventures-led report on the country’s tech investment. These large checks elevated Vietnam’s status as the next hot market for tech investors, the next place to be after Indonesia.

But what comes next for Vietnam’s tech ecosystem after this wave of funding rounds?

A closer look at the country’s funding deals in 2019, tracked by Tech in Asia, reveals a funding imbalance. Compared to Indonesia, Vietnam secured a comparable amount of late-stage funding, but it still lagged behind in earlier-stage money, perhaps indicating a smaller pipeline of startups.

Also, Vietnam saw fewer startups raising series A money and above as a percentage of seed and pre-A deals.

As Covid-19 hit, during the first seven months of the year, the number of announced deals for Vietnam was only 32 compared to Indonesia’s 82. Among them, only 7 were series A deals and only one was a series D deal, secured by Tiki.

While this financing gap between a more established ecosystem and a nascent one is normal, Vietnam is a slightly different case.

There’s no short supply of venture capital financing for Vietnamese startups, according to investors whom Tech in Asia spoke to, especially as the country is expected to be among the rare ones in Southeast Asia to experience a growing economy this year amid the Covid-19 crisis.

But from the VCs’ perspective, there seems to be a short supply of local tech companies that can or want to compete with their regional peers, resulting in a short supply of seed-stage startups that can grow to the next funding round.

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