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Tech startups on radar

Released at: 08:23, 24/03/2019

Tech startups on radar

Photo: Viet Tuan

Foreign investors have shown an increasingly keen interest in Vietnamese tech startups.

by Ngoc Lan

The first in a wave of investment in tech startups in the early stages of this year, Vietnamese home-sharing platform Luxstay raised $3 million in a Bridge Round from several investors, including CyberAgent Capital (CAC) and Y1 Ventures. Support from a range of investors proves the potential Luxstay holds and it already has 10,000 homes in Vietnam on its books and met demand for stays around the country.

Vietnam’s startup community has been more active than ever this year, with many tech startups announcing the receipt of millions of dollars of capital from foreign investment funds. Mr. Nguyen Manh Dung, Director of CAC, told VET that venture capital funds are primarily investing in fields such as hardware, software, clean technology, renewable technology, and biotechnology, but in Asia, information technology is the area attracting most attention from foreign funds. 

Funding coming

Fitness startup WeFit also successfully completed the next Pre-series A fund raising of $1 million from CAC, KBInvest, and other angel investors on January 9. Launched in late 2016, the app provides users with basic beauty and fitness care packages at more than 1,000 locations in Hanoi and Ho Chi Minh City. It now handles more than 150,000 bookings each month and has helped its partners boost their profits by an average of 10 per cent each month.

Tech startup JAMJA, meanwhile, announced on January 22 it received investment of $1 million from CAC and Bon Angels. It provides discounts on bookings for services such as restaurants, beauty care, and entertainment, cooperating with more than 4,000 outlets and with more than 1 million active users and more than 500,000 customers visiting outlets. The startup plans to deploy its app in Hanoi, Ho Chi Minh City, Hai Phong, and Da Nang. 

The SAMO Company also officially announced the completion of the first round of funding for TheBank.vn website, with investment from CAC and Ncore, at the end of January, though specific details were not disclosed. It offers a technology platform to compare and evaluate products such as credit cards, unsecured loans, collateralized loans, savings interest rates, and life and non-life insurance products. It now has more than a million visitors each month and has more than 30 bank, finance company, and reputable life and non-life insurance company partners. 

Mr. Dung said that information technology (IT) is part of people’s lives nowadays and is undergoing rapid development. Many experts believe that technology in Vietnam has major potential to attract investment from foreigners. According to figures from the Ministry of Information and Communications (MoIC) released at the end of December, Vietnam’s population now stands at approximately 95 million, with internet use at over 60 per cent, putting it 16th in the world in terms of sheer numbers. 

Regarding support from the government, addressing an MoIC conference in February on deploying 2019 tasks, Minister Nguyen Manh Hung noted that technology can be applied in almost all fields of economics, society, and culture, so Vietnamese tech companies must be more greatly involved to promote Industry 4.0 in the country. 

A representative from Bon Angels told VET that Vietnamese engineers are known for their talent, so foreign investment in local tech startups is not only due to the technology itself but also a belief in the skills and integrity of the country’s engineers.

Advice for tech startups

Vietnamese tech startups continue to hold a great deal of potential. A major foreign investment fund from Japan with operations in the US and eight Asian countries and territories and especially active in Vietnam, CAC has now invested in over 25 startups in the internet and technology fields, including popular names such as Foody, Tiki, VNG, and Topica. Bon Angels, meanwhile, has now completed four investments, in VeXeRe, Jamja, Chopp, and V-Leisure. Many others have contributed to the development of Vietnamese tech startups, such as Nextrans and 500 Startups. 

Compared to the region, however, Vietnam is still some way behind Indonesia and Singapore due to the size of the Vietnamese market remaining quite modest, according to CAC’s research. “To catch the attention of investment funds, tech startups must answer questions such as whether the market is sufficiently large, what differentiates your offering from similar products or services already in the market, and what are your competitive advantages?” said Mr. Dung. “Sometimes the decision to invest only takes a week, but meeting the founders can be quite time consuming, taking maybe six months or longer. The founder is the person who built the business, and investment in a startup is long term, perhaps five to ten years, so investment decisions are a decision to accompany that founder.” 

The investment in TheBank.vn from CAC, Mr. Dat said, took more than six months to wrap up. “Each fund has its own criteria for selecting tech startups but there are some basic standards, such as a good profile of the founder, a feasible business model, scalability, and a large potential market,” he added. Mr. Le Hung Viet, CEO of JAMJA, agreed that foreign funds seek local tech startup with products boasting technological depth, rapid scalability, and clear vision.

Weakness in many Vietnamese startups include not having complete teams while others have multiple founders lacking in ability or experience. Mr. Eddie Thai, General Partner at 500 Startups Vietnam, told VET that local startup founders should focus on building a world-class team and continue to develop management talent - CEOs, CTOs, and other leaders - that can strategize and execute the product, the organization, and international expansion.

Meanwhile, Bon Angels is more interested in scalability. “As a venture capital fund, we are always looking for teams that could become a huge company one day,” its representative said. “We’ve seen many companies, however, that overlook scalability and put too much effort into the technology side. Being structured for sufficient scalability is a great strategy to attract capital.”

“The long-term outlook for tech companies is bright because technology will inevitably penetrate into most aspects of life. I believe technology should no longer be considered its own sector, but rather a layer that cuts across most other sectors. There are Vietnamese tech startups that can develop full solutions to common gaps in Vietnam and many other emerging markets, including education and training, financial services, transportation and logistics, and SME productivity.”
Mr. Eddie Thai, General Partner, 500 Startups Vietnam

“In the longer term, I think startups in Vietnam will adopt and lead in advanced technologies such as machine/deep learning, blockchain, AR, and drones. Since the country’s education system emphasizes math and engineering from an early age, many people are interested in technology and apply it to business.”
Mr. Sangmin Hong, Founder and CEO, Nextrans

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