Brian Jeffrey
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| A photograph of Momo e-wallet staff at their office. — Courtesy of VNA/VNS Photo |
The rise in startup activities in Việt Nam has attracted both local and foreign investors. However, experts believe that more measures should be taken to improve startups’ access to capital to help them reach their maximum potential.
Việt Nam currently houses about 3,800 startups, with 11 valued at over US$100 million and three at more than $1 billion each, according to the National Agency for Technology Entrepreneurship and Commercialisation Development.
Funding sources for these startups include state support, investors, both foreign and domestic venture funds, enterprise-established funds, incubation centers, business support organizations, angel investors, and loans.
Data from BambuUP, an all-in-one innovation platform, indicates that there are approximately 210 venture funds investing in Việt Nam startups, with nearly 40 being domestic funds.
The Việt Nam Innovation and Tech Investment Report 2021, released by the National Innovation Centre (NIC), states that Vietnamese startups received $1.4 billion in venture capital in 2021, with around 90% of this coming from foreign venture funds.
A report by Bain & Company mentions that Việt Nam stands at the forefront of Southeast Asia in attracting long-term investors, with an expected 83% increase in investment activities from 2025-2030 compared to the present.
However, international investors face various challenges when operating in the local startup investment sector. Foreign venture funds, acting as regular foreign investors, encounter obstacles in areas such as securing investment licenses, managing investments, withdrawing capital, repatriating profits, and addressing tax concerns.
Due to such hurdles, many foreign investors choose not to directly invest in Vietnamese startups but insist on restructuring and forming parent companies in other countries. This enables them to invest in these parent entities and enjoy foreign incentives, albeit at the cost of additional expenses for consultancy, establishment, and upkeep of legal entities abroad, placing Vietnamese startups at a disadvantage in an unfamiliar legal environment.
ThinkZone Ventures highlights the significant struggles imposed by regulatory issues in investing in Vietnamese startups. To tackle this, there is a critical need to enhance the business environment and establish comprehensive regulations concerning startup investments.
Bùi Thành Đô, ThinkZone Ventures’ founding partner and CEO, stresses the necessity for policies to back investment fund operations and establish a transparent, fair, and stable business environment for funds to invest confidently in Vietnamese startups. He advocates for favorable policies like tax reductions, financial aid, concessional loans, and the creation of special economic zones with advantageous infrastructure and services.
In addition to startups’ own efforts, Nguyễn Hương Quỳnh, CEO of BambuUP, suggests launching more startup support programs to boost the appeal of the Vietnamese startup ecosystem to both local and foreign investors. Enhanced communication efforts are needed to educate investors on Việt Nam’s startup landscape, and a conducive mechanism should be established for foreign investment funds to invest in or divest from local companies.
Quỳnh also stresses the importance of fostering collaboration opportunities between local enterprises and startups as domestic firms’ investment strategies can enhance capital inflows.
Phạm Ngọc Huy, Managing Director of Lotte Ventures Việt Nam, recommends devising a mechanism to incentivize entrepreneurs to establish investment funds for startups, a model believed to be more impactful than business investment funds as it prioritizes long-term societal value over profit.
Investors play a vital role in a robust ecosystem. With a multitude of investors ready to provide assistance, more local and even foreign startups can emerge in Việt Nam. To achieve this, the first step is to create an optimal environment to attract foreign investors and develop a strong capital market, Huy highlighted. — VNS
