The new era of Venture Capital in Vietnam? with 500 Startups VN
Published in
6 min readAug 26, 2017
“We believe Vietnam can become a technology hub not just for Southeast Asia but across the emerging world.” - 500 Startups VN
Our current VN generation based in the UK are very excited about Vietnam’s potential and we do not always know of all the interesting developments that are happening in our homeland. The above statement is a bold and ambitious statement about Vietnam and awoke our curiosity about the mission and work of 500 Startups VN.
For this reason, VietStartup and VietPro joined forces to organise a webinar to connect with Hau Ly and Alvin Bui, who are both Investment Associates based in the HCM 500 Startups office to directly hear from their “on the ground” experience.
This Medium’s aim is to summarise the key takeaways from the webinar. To listen to the full event, the recording is available on the link below. Enjoy the read and recording!
To find out more about 500 Startups VN:
1. Intro on 500 VN
- “500 Startups Vietnam is a US$10 million fund to invest in promising Vietnam-connected startups. We provide finance, mentorship, and connections to both global and regional startups. Our startups have gone on to raise capital from such renowned investors as Sequoia, Social Capital, Stanford StartX, Google Launchpad, and more.
We believe Vietnam can become a technology hub not just for Southeast Asia but across the emerging world. We’re working hard — like the talented entrepreneurs we support — to help make that happen.” - Invest in Vietnam-connected startups, i.e., those that satisfy one or more of the following conditions:
- Vietnamese/ overseas Vietnamese founders. Example: ELSA
- Startups targeting the Vietnam market. Example: Leflair (French founders)
- Startups with a significant part of the team based in Vietnam. Example: Sentio (engineers in Vietnam)
- Helped a Fintech portfolio company raised funds from Sequoia
- $50,000 average funding in VN in convertible notes
- Invested in 13 firms in VN as of eomonth 07/2017, planning to do 2 deals per month till end of this year
- 2 general partners: Eddie is Harvard, Yale alum, has been in VN for 5 years, extensive consulting experience for startups. Binh was cofounder of Klout (exited at $200MM+), has been an active investor
2. Key facts on the VN market
- 92–95m population is a big enough market to launch something
- In VN, it’s 1–2 yrs until startups can branch out
- In 2004, IDG was the first in VC and connectivity was low
- Fastest growing market for Apple
- Median age: 31–32
- GDP/capita: $2,100
- Based on official data, there are ~1,600 startups in VN but we estimated there could be 3,000
- VN is good in STEM subjects, consecutive top 10 finishes worldwide in International Math Olympiad in the last 6 years
- 100,000 engineers graduate per year
- Hanoi and HCMC is top outsourcing destination
- Costs are low to start a company
- People are hyped about startups but they are still figuring out how to execute
3. Framework to invest in startups
- Strong team: investing in people
- Solid product solving a painful and big enough problem
- Traction shown in metrics, e.g., no. of active users (looking at the thousand figure), revenue, etc.
- Tackling a potential, large enough market
4. Challenges starting a company in VN
- No clear value proposition for entrepreneurs to start in VN yet
- Hard to bootstrap due to lack of funds
- Lack of internalisation mindset
- Think local vs. SEA vs. world
- People are not willing to work together or share their ideas, want to do it all and think they can do it all → solo founders (500VN prefers investing in a team of 2 or more co-founders)
- Lack of soft skills
- Lack of professionalism
- Its weapon/solution is the Vietnamese diaspora (Viet Kieu)
- Work culture is a problem, not held up to a high standard
- “We can do something about it” mindset not yet in VN
- Need to know how to work in VN
- Cultural shock in terms of work
- VNese studying abroad coming back might have problems
- Discount behaviour (local behaviour)
5. Areas of opportunity
- Fintech
- Payment System would be an important issue to solve!
- Other fintech solutions — credit scoring, KYC, etc.
- B2B/Enterprise solutions
- Logistics solutions
- Logistics, e.g., Last mile delivery
- SaaS for SMEs
- Others, e.g., edtech, agritech, etc. (think solving 3rd world problems)
6. Education
- Public education curriculum is still the same
- Government saying that education has to change
- Still too many promises but not enough actions
- Many students not yet proactive
- Two major problems: Soft skills & English language
- Students and outside organizations, e.g., US Embassy, etc. have been creating opportunities to learn via student organizations / extra-curricular activities
- E.g., Hackathons have been organised
- Technical Product Manager is a sought-after position in VN. It’s BIG!
- Type 1 engineer: very good in theory but not in practice (potential to get to Silicon Valley level with scale, abstraction level)
- Type 2 engineer: very good in practice but lack of theory (app developer)
- However, VN is the top country to send students abroad
- These are the ones that can come back and make things happen in Vietnam
7. Startup funding in Vietnam
- Seed funding investment in Vietnam is still limited. Series A and later still dominate deals
- Total in funding in 2016 was $205m, deals are increasing year by year
- Mekong Capital & CyberAgent did 3 deals each (among which only 1 was seed, the rest were later stage). 500VN alone did 6 seed stage deals in 2016
- Entrepreneurs don’t always understand how funding works
- Lack of education on this area
- E.g., a lot of founders think VC/đầu tư mạo hiểm means we put money in idea-stage companies. That’s very rare. We need to see traction/market validation. Burning money is needed for your startup to hit necessary metrics before you can approach VCs
- It’s a big turn-off for 500 Startups VN when founders don’t know the basics
- Founders don’t look at the big picture in terms of non-monetary values they can get from us, e.g. direct support from the team, access to 500 resources and network of investors, mentors, partners, etc.
- Incorporate startup in a foreign country & have operations in VN , e.g., in Singapore, Hong Kong, US (Delaware)
8. Why go back to VN and start something?
- Willing to take a risk
- It’s about taking a low-cost risk, especially now when you’re still young (vs. when you’re older and have family, etc. — opportunity cost then will be higher)
- Alvin: unpredictable future in VN which is exciting. If Alvin was in the US, he would know his trajectory
- Highly valued skills and experience — English proficiency, international work experience, etc.
- Rapid change and it’s an exciting time
- If you fail, failing in Vietnam is cheaper than failing in the US/Europe, etc.
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