Vietnam represents one of the most lively startup ecosystems in Southeast Asia. In 2019, the country’s startups managed to bag USD 861 million in investment from a total of 123 venture deals, according to a new report by early-stage venture capital (VC) firm Do Ventures. The report also noted a 92% year-on-year growth compared to 2018.
However, as the COVID-19 pandemic severely hit the global economy, Do Ventures found that in the first half of 2020, investment proceeds in Vietnam dropped by 22%, from USD 284 million in 2019 to USD 222 million. However, the report also indicates growing investment attention in emerging industries such as human resource (HR) tech and property tech, while retail continues to dominate.
“Plenty of dry powder is waiting to be deployed and many investors are looking for new disruptive businesses built upon the ‘new normal’ after COVID-19. Positive sentiments are recorded around the potential of healthcare, grocery delivery, online education, and entertainment,” as quoted from the report.
Vietnam-based Do Ventures, co-founded by Vy Le and Dzung Nguyen, recently launched a USD 50 million fund for Vietnamese startups backed by companies such as South Korean internet giant Naver, Singaporean VC Vertex Holdings, and internet giant Sea, among others. On October 2, the firm announced its first investment in F99, a Vietnamese fruit-selling platform, which amounted to USD 900,000.
KrASIA recently sat down with Le, who is also the firm’s general partner, to talk about the future of Vietnam’s startup ecosystem and Do Ventures’ plans.
KrASIA (Kr): Many VC firms have adjusted their investment strategy after COVID-19. Can you share how Do Ventures will invest its first fund, based on the report analysis? Can you share your check size?
Vy Le (VL): Currently, Vietnam is a demographic sweet spot with a young population, a fast-growing middle class, and tech-savvy consumers. The consumption market of the country is at its tipping point and ready to be captured by technology companies with innovative products. Notably, the number of Internet users in Vietnam was 64 million in 2019, which gives rise to the speculation that the country is reaching the same inflection point for the growth of its startup ecosystem as Indonesia did seven years ago.
At Do Ventures, we developed a comprehensive investment approach by investing in startups throughout various stages, from seed to Series B. In the process, we aim to lead the seed round investment, then make follow-on investments up to the B round, and at the same time, invite other reputable investors to co-invest in order to add additional value for startups. Regarding the check size, we would invest from USD 500,000 up to USD 5 million per company.
Kr: What kind of startups do you target? What traits or qualities you consider important in the founders/team?
VL: We aim to invest in 2 groups of companies: the first group comprises business-to-consumer platforms that can create an effective ecosystem around young customers, while the second group includes globally-scaled business-to-business platforms.
As we understand that founders play a critical role in the early success of startups, we put a high emphasis on founders’ qualities. In general, we look for pioneers that can form new sectors and initiate new customer behaviors.
Specifically, we place an emphasis on the following traits: perseverance, empathy, and integrity. During periods of uncertainty, founders should maintain their grit and determination to keep going and achieve the highest possible outcomes. At the same time, we believe that in order to succeed, founders should be able to acquire multiple perspectives to develop a profound understanding of the market as well as empathy for customers.
Most importantly, founders should demonstrate a strong ethical code of conduct and maintain absolute honesty. If founders always seek to understand the market and customers, persevere through difficult times, embrace challenges, and maintain strong moral principles, there will be a good chance for these startups to thrive.
Kr: Compared to other countries in Southeast Asia, Vietnam has been fairly quick in recovering from the impact of COVID-19. How will this affect investment in H2, and overall in 2020? Will the trend persist or will we see a refocusing on popular pre-COVID investment sectors like e-payment, fintech, and logistics?
VL: Regarding the startup environment, we think that startups would bounce back soon. According to our recent survey on 50 active funds in the region, Vietnam is the top destination for investment in the next 12 months. Besides, the investment sentiment in Vietnam remains quite positive. Surveyed funds expect to invest in 117 – 200 deals in the next 12 months. Nearly 80% of the investors have planned to deploy 1-5 deals.
COVID-19 has led to fundamental changes in customer behaviors and the acceleration of the digital transformation of enterprises. Therefore, we would expect the emergence of new business models in education, healthcare, and financial services in the upcoming months.
Kr: What are your targets for your first fund?
VL: On October 1, we announced our first investment in F99, an online fruit distribution platform that enables farmers to sell fruits directly to consumers in Vietnam. In the next few months, we expect to announce a few more deals. Overall, Do Ventures intends to back 20-30 companies in total.
Kr: How involved would you be in your portfolio companies?
VL: Since Do Ventures focuses on early-stage companies, besides providing financial resources, we’d like to support startups with our hands-on experience.
We aim to empower startups with a data-driven decision-making approach, to offer in-depth operations support in key areas. To be specific, we would help portfolio companies set up an automatic reporting system that empowers founders to understand the real-time performance of the business, and enables the fund’s investment officers to gain a deeper understanding of the company’s overall operations. From the data collected, we can offer in-depth tailored operations support to each startup’s needs, including product development, supply chain optimization, organizational design, sales and marketing enhancement, talent recruitment, and overseas expansion strategy.
Kr: Both you and your partner are not new players in the Vietnamese startup scene. What do you plan to do differently with Do Ventures? What innovations do you plan to bring?
VL: Having worked together closely for years, Dzung Nguyen and I share common core personal and professional beliefs, as well as a passion for developing early-stage companies. One of our passions is to discover pioneers who can initiate new customer behaviors. Therefore, besides seeking potential startups in existing sectors to invest in, we would also look for highly capable founders and support them to develop new business models that tackle relatively new sectors. In this way, we would be able to nurture the next generation of startups that dare to disrupt the market.
Another unique value we would bring to the table is our C-level mentorship program, where we leverage our network to connect successful CEOs from large-scale startups in Vietnam with our portfolio founders. The program aims to provide young founders with in-depth advice on growth strategies and operational know-how in specific industries.