In this time of uncertainty, startups are changing their fundraising strategy to focus on financing risk-bearing debt rather than angel investors.
Bob Koppes – Head of Product & Strategy – PropertyGuru Group
2021 record $1.4 billion of venture capital invested in Vietnamese startups amid market uncertainties and turmoil triggered by COVID-19, according to report from Vietnam National Innovation Center and Do Ventures.
Last year, a Vietnamese-American investor shared her plan to capture Vietnam’s emerging startup ecosystem, boosted by the country’s strategy of promoting no-cash payments. That was where she saw the potential growth in the tech industry in the near future, as well as the next level of Vietnamese fintech. In 2022 she will put this plan on hold.
This year, Vietnamese startups are more cautious about scaling their team quickly. Propzy has sent a notice of dissolution for Propzy Service Company to the Ministry of Planning and Investment of Ho Chi Minh City citing a change in its business plan. The startup has laid off 50% of its employees during a business model restructuring.
Despite the impact of Covid, real estate prices have soared, peaking at 31% in Hanoi in QII 2022, according to Batdongsan. However, some experts noted that rising house prices but low liquidity signaled that the market was in a partial bubble.
But “It’s not so much the market’s problem. Vietnam proptech focuses on local solutions and local developers, while startups in the region look for bigger solutions for bigger developers. Many startups are funded to grow quickly, but funding is drying up.” Bob Koppes – Head of Product & Strategy – PropertyGuru Group comments on the low performance of startups in proptech.
The hedge funds and venture capitalists are limiting their capital. That’s where the problem is for some startups around the world. The big protech players, including non-proptech, are also laying off staff because of the funding shortfall, Bob said.
Delivery e-commerce startups have been contributing to the success of the F&B industry since pre-pandemic. In 2020, Vietnam was the third fastest growing country in Asia in terms of food spending. With GDP expected to start growing strongly, the F&B industry will have significant room for growth, according to the Vero and Decision Lab report.
According to Austrade, food delivery in Southeast Asia grew 183%. According to Aske Østergård, CEO and co-founder of Decision Lab, in recent years Supper apps have helped promote the F&B industry and encourage consumers to use takeout, meal kits and home cooking.
Aske Østergård, CEO and co-founder of Decision Lab.
That didn’t impress the VCs much. Recently, DealStreetAsia reported that Loship – the e-commerce startup that is shifting equity financing plans in its Series C equity financing round in 2021 to debt financing this year.
According to CB Insights, a significant decline is seen in 2022, with global funding falling 19% in QI to USD 144 billion from QI. The days of cheap capital are over. According to The Asset, venture capital activity has grown significantly across the region, especially in key markets such as Singapore, Indonesia, Vietnam and India.
The venture capital shortage in Southeast Asia is a good opportunity for a lending platform like Funding Societies in the Vietnamese market, said Ryan Galloway – Country Director for Funding Societies in Vietnam.
Venture debt has become an integral part of a startup’s fundraising strategy. However, startups need to be smart and tenacious to craft a contract that works for their company to properly leverage venture debt, some experts say.
Although Vietnamese startups still have faith in an investor who funded them for years at 500Startups – Binh Tran. He now leads Ascend Vietnam Ventures and commits to increasing investment in startups in Vietnam, seeding up to USD 2 million in 25 startups next year and then checks for USD 5 million.
“Vietnam’s dynamism, accessibility, low cost of living and abundant high-quality technical talent attract many founders. In addition, many technical solutions built here can address similar challenges and customer behavior in other emerging markets worldwide. Vietnam will continue to be seen as one of the best places to build global or regional market-leading companies.” Binh shares his thoughts on Vietnam’s startup ecosystem.
