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August 25, 2023

Develop Vietnamese startups through Vietnam investment fund

Explore how Vietnam investment fund is driving Vietnam’s startup ecosystem. learn about the diverse types of startups, recent growth, and prominent venture capital funds in the country. discover the pros and cons of investing in startups and how they contribute to innovation and economic development in Vietnam. 

What’s a startup

Let's define a startup first. A young firm created by entrepreneurs to offer a distinctive good, service, or solution to the market is referred to as a startup or startup company. Innovative concepts, disruptive behavior, and the possibility for quick development are characteristics of startups. Startup firms, in contrast to more established enterprises, frequently operate in unstable environments and take significant risks to produce something novel and useful that can be used for a variety of audiences and purposes.

Startup formations

Startups frequently begin with the founder's idea for a product; however, some start when the founder has advanced to the proof-of-concept stage.

A startup's founder frequently oversees product development and serves as the company's executive vice president. Before turning a profit, they frequently concentrate on growing the business. Facebook wasn't profitable until 2009, five years after Mark Zuckerberg, a Harvard University student, launched the business. As a result, the valuation given to a business may not always match the actual income it brought in during those early years. Instead, business executives and investors may evaluate a company's prospective value based on the predicted earnings it will produce. Startups with a $1 billion or higher valuation are known as unicorns.

Some entrepreneurs fund the day-to-day operations of their start-up businesses with their own financial resources, whether they are owned or borrowed. Some people start with angel investors before moving on to venture capitalists. Many individuals operate in incubators, which are facilities and offices financed by charitable organizations, the government, and other groups devoted to expanding these kinds of firms. To mentor startup leaders, these support organizations frequently offer seasoned business executives and accomplished entrepreneurs.

When founders and other startup executives sell their businesses to larger corporations, startup investors and other startup leaders frequently make back their initial investments. It's a retreat plan. Taking startups public is an additional tactic. Additionally, startups have the option of going private, utilising the accrued revenues to reinvest in the company and compensate the founders and staff.

Types of startup

Startups can be categorized based on their business structure, industry, or purpose and can be formed with several aims and objectives. When a business is founded, a business structure, or business legal entity, is established to control the business's operations, licensing needs, tax obligations, and legal protections. Businesses can be formed by selecting from a variety of legal structures, depending on the number of owners and demand for liability protection, including:

Small business

Small business startup is a common type of entrepreneurship. These are typically small, locally owned companies like restaurants or shops that wish to turn a profit but don't want to grow or become franchises.

Scalable startup

A startup that aspires to scale up significantly from the original is said to be scalable. Scalable startups are driven to build a profitable company and have faith in the potential of their ideas. They frequently get venture capital funding, with the end goal of becoming public.

A Social Business 

Social companies have objectives besides making money. Their objective is to alter the community or have an influence there. Numerous social companies are nonprofit organizations with clear purposes. Additionally, grants and grants can be used to finance these enterprises.

Startups from a parent company

Large startups utilize creative strategies to advance their businesses. Through a new entity inside the same firm, such as a new product line, the objective is to extend a company's existing well-known brand.

Start up environment in Vietnam

According to the KPMG & HSBC research, Vietnam now has 1,400 more technology-related businesses following two years of the Covid-19 outbreak. There were 1,600 in this number before translation. According to Pham Hong Quat, Director of the Department for Science and Technology Enterprise and Market Development, Vietnam has had over 3,800 start-up companies as of late, including the four unicorns VNG, VNLife, MoMo, and Sky. Mavis) and 11 startups with a combined worth of more than $100 million (Tiki, Topica Edtech).

In actuality, investment activity is slowly improving. By the end of the decade, Southeast Asia will see an increase in startup activity. In the area, more than 300 initial public offerings are anticipated each year. Vietnam's economy is ranked 48/132 in the World Intellectual Property Organization's (WIPO) report on the Global Innovation Index (GII) 2022, which was released on September 30 in the morning (Hanoi time). Vietnam is currently in third place in Southeast Asia, behind Thailand (ranked 43rd) and Singapore (7th), although falling 4 spots from its position in 2021 (when it was rated 44th).

Invest in Vietnam start up through Vietnam investment fund

A popular method to tap into Vietnam investment into startup firms is a venture fund. It is a type of capital commitment made by investors to recently founded businesses. This might be a small or medium-sized business (SMB) or a startup. Although these companies have not yet been listed on the stock exchange, many believe they have a lot of potential. During the height of the Covid-19 epidemic, both the number and the money influx into Vietnamese startups both significantly surged. In particular, 301 million USD were invested in businesses in 2020 when Covid-19 debuted, a slight decline from 330 million USD in 2019. By 2021, when the pandemic was at its worst, the startup market had seen a cumulative inflow of around 1.1 billion USD. The survey said that Vietnamese entrepreneurs garnered $92 million in venture capital, particularly in the first quarter of 2022.

Vietnamese startups have raised more capital than those in Malaysia ($532 million) and Thailand ($532 million), but less than those in Indonesia ($10.8 billion) and Singapore ($8.5 billion). (444,000,000 USD). Following the successes in 2021, a number of Vietnamese start-ups continue to obtain "huge" funding from investment funds in the first half of 2022, despite the depressing flow of venture capital in the rest of the globe. Sky Mavis ($150 million), Con Con ($90 million), OnPoint ($50 million), Entobel ($30 million), Finhay ($25 million), Jio Health ($20 million), Timo ($20 million), POC Pharma ($10.3 million), Mio ($8 million), and OpenCommerce Group ($7 million) are a few of these companies.

Vietnam is a favourite location for 208 active venture capital funds, of which there are approximately 40 investment funds in the water, according to Nextrans Investment Fund's analysis on the startup industry and investment flows in 2021. VSV Capital - Nextrans, Vietnam Silicon Valley, Mekong Capital, 500 Start-up Vietnam, Vietnam Investment Group, IDG Ventures Vietnam, Do Ventures, and Genesia Ventures are some of the well-known and active funds in the industry.

Potential Vietnam investment fund for startups to consider

CyberAgent Ventures (CAV) is one of the most prosperous technology Vietnam investment funds at the moment. Teamobi, CleverAds, Foody, and other well-known businesses have all successfully left CAV under the direction of Mr. Nguyen Manh Dung (shark Dzung). The portfolio of this technological investment fund is expanding right now. excellent in the market, similar to Luxstay, Tiki, etc. The startups that CAV targets frequently have excellent human and technological potential.

IDG Venture Group - USA, which has been investing in Vietnam since 2004. IDG Venture is now in charge of handling 100 million USD in venture capital. The "taste" of this fund often consists of traditional businesses or technological startups that tend to use technology to transform businesses' whole business processes. IDG Venture can be credited for starting the current wave of technology startups in Vietnam.

FPT Venture is collaborating with the leading start-up incubators of today to develop several classes of young entrepreneurs with the objective of 5000 technology enterprises by 2020. Typically, money comes through series and initial funding. If FPT Venture assists, businesses will receive resources in the form of people and technology in addition to financial support. Startups in the fields of technology, mobile, and finance are the focus of FPT Ventures.

Vinacapital Venture - The financial icon Don Lam oversees the $1.8 billion fund, which mostly invests in equities and real estate. Today's most well-known technological initiatives are owned by the Vinacapital Group's technology investment fund. Vinacapital Venture often favors firms that have achieved some level of commercial success, therefore the fund frequently enters subsequent rounds of investing with a sizable stake.

Pros and cons of startup investment

More investing choices: Only investors are offered shares by bigger, more established firms. Startups, however, have more alternatives available, such as buying a convertible note that may be changed into shares in the future.
Methods to reduce your risks: For example, if the firm achieves a given objective, you can invest in a warrant, a contract that defines how much you'll contribute at a specific date. You won't have to invest if the startup fails.
The majority of companies don't need a lot of money: With your investment, you may therefore have substantial authority over a small business, and you might even be given the opportunity to cast a vote on the board of directors.
Broad accessibility: In several markets and sectors, startups exist. Investing in these tiny businesses is a fantastic way to diversify your portfolio across markets and cap sizes, particularly developing markets.
A lot of room for expansion and profit: An innovative concept and effective execution are all that are required for a startup to succeed. In the event that the startup you invested in succeeds, you might receive a sizable return on your money.
Buy-out potential: Larger corporations frequently acquire startups because they want to leverage the technology developed by the startups or because they perceive successful startups as prospective competitors. You should get a strong return on your investment if the small firm you invest in is acquired for a profit.

Nonetheless, investors also need to be aware of the potential risks in investing in startups. Since the company can be quite new and small, detailed information isn't as widely available. In addition, Your investment won't be subject to the same stringent reporting requirements as a publicly traded firm since it will still be a privately held company. As a result, you will have limited access to information on the company's financial situation. It may be challenging to decide whether or whether to invest as a result. Additionally, it may be more difficult to determine whether the firm is being valued appropriately. You should be ready for your money to be invested for a minimum of three to five years. If at all, it can take much longer before you get your money back. Startup capital has to be cautious and have minimal expectations. With that in mind, in the case that you change your investment strategy or you are in need of the cash return sooner, it can be more difficult to get your investment back.

Despite their many benefits, Vietnam investment funds under venture capital funds have certain drawbacks, such as the danger of losing money when investing in start-up enterprises. Startups lose a lot of money if they fail because their methods of operation and administration frequently have several flaws. Investors should thus thoroughly analyze their options before choosing to participate in a Vietnam investment fund.

Read more:

Top investment funds in Vietnam in 2023

Considerations for engaging in investment funds in Vietnam

Exploring Vietnam’s economic potential and Vietnam investment fund

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