Startups attracting funds with M&A

Vietnam Investment Review

Startups attracting funds with M&A

Vietnamese startups are still drawing in local investment capital as they emerge as the most sought-after targets for dealmakers.

In the first three months of 2021, there were 16 deals involving Vietnamese startups compared to 20 deals in 2020 and 30 deals in 2019. Although the number of deals decreased, the total value of the deals (excluding undisclosed funding amounts) reached $150 million, up 34 per cent against last year’s period, according to the latest report by Nextrans Venture Capital Fund.

The report pointed out that seed and Series A remain dominant in the given period, accounting for 70 per cent of deal count. Fintech captured the most attention of investors with four deals.

Investors also focused on key sectors such as logistics, services, property, edtech, and medtech. Some notable deals include $2.6 million in pre-Series A funding for Dat Bike, and $6 million for Got It from VNG as well as $15 million for Duong Minh Logistics.

Commenting on the growing investment value into Vietnamese startups, Nguyen Kim Hoa, senior manager of financial advisory services at Deloitte Vietnam, said that over the past couple of years there have been more and more startup founders who have solid business and technology backgrounds through their time studying, researching, and working overseas. They had opportunities to learn from scalable business models elsewhere as well as gain easier access to foreign capital sources, which means more chances at fundraising.

“Pre-pandemic, it is encouraging to observe that Vietnamese startups are approaching later stages. The number of startups that raised Series C quadrupled in just two years from 2017 alone. The exits, however, are mostly to local acquirers in the range of $20 million.”

“After the pandemic is over, the economic downturn will urge the market to rationalise,” Hoa added. “Most startups are focusing on profitability and sustainability to survive through the pandemic. Business reorganisation, business model refinery, and cost-cutting exercises are among the initiatives that were taken by many startups to weather through the difficult economic downturn.”

In addition, Vietnam also witnessed a sharp increase in investment activities, with nearly 180 Vietnamese-based capital firms in the country. Among the most active are Nextrans, VSV Capital-Vietnam Silicon Valley, Mekong Capital, 500 Startups Vietnam, Vietnam Investment Groups, and IDG Ventures Vietnam. In addition, Japanese and South Korean venture capital firms are also actively looking for potential startups.

Recently established funds have also been very active. Do Ventures was only founded last year but has already raised $50 million for Do Ventures Fund I and has invested in three deals.

Last month Touchstone Partners announced the first close of its inaugural $50 million venture capital fund backed by notable investors including Pavilion Capital, Vulcan Capital, and several other institutional investors and family offices. Its founders are Khanh Tran and serial entrepreneur Tu Ngo, co-founder and chairwoman of YOLA Education.

Lim Boon Chow, coordinator of NINJA Accelerator in Ho Chi Minh City, said that thanks to the government’s timely support policies for small- and medium-sized enterprises, as well as the close support of the startup community, startups in Vietnam still have the opportunity to access appropriate resources during the global health crisis, though it is in terms of capital investment, networking, or capacity training.

Chow added that the field where startups develop ideas is extremely diverse, from the environment and e-commerce to entertainment, education, and media advertising. Shortly, sectors such as healthcare, e-payments, and online real estate are likely to create spikes in fundraising rounds.

“Series A and Series B will attract many investors, because with the economic situation after COVID-19, the sharks will pay more attention to actual data to see how the businesses allocate their capital and how they operate,” Chow said. “They will not invest in vain, and each of their nods has to be carefully considered to ensure the startup in which they are investing can become a high-value business machine.”

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