Vietnam Innovation & Tech Investment Report FY2020
May 31, 2021
Government support plays a central role in the development of a startup ecosystem. The Covid-19 has put us through a test and at the same time become a catalyst for the Vietnamese Government's innovation ambitions. We are pleased to partner with the Vietnam National Innovation Center (NIC) in this report where we zoom in the Government’s current incentives and legal frameworks that are worth knowing of for both local startups and foreign investors. In terms of investment activities in 2020, these are the key findings from the report:
$451M invested in 2020
As 2020 was a year of turbulence but also of resilience for the global tech investment, the landscape in Vietnam was not an exception. The amount of capital invested decreased by 48% to $451M, mostly due to the absence of outsized deals that were already closed last year by later-stage companies. Nevertheless, the total number of deals fell only slightly by 17% as we recorded 60 deals in H2/2020, virtually equal to the same period in 2019. After the slowdown during the first quarter, venture capital investing began to pick up from the second quarter.
Shrink in larger round sizes
After a swift decline at the onset of the pandemic, early financings began to return to past years’ levels. Investors ultimately closed roughly the same number of pre-A and A deals in 2020 as in 2019. Later-stage investment fell steeply in terms of both deal value and deal number, partly due to the limits on travel that prevented the indispensable in-person due diligence process for large check size deals.
Sector diversification remained
Payment and retail went on being the dominant sectors of large amount funding due to their fundamental roles in the growth of the Internet economy. Employment (HRTech) and real estate (PropTech) continued to see rising interest, while education (EdTech), healthcare (MedTech), and business automation (SaaS) have gently gained favor from drastic changes in consumer and business behavior.
Lasting interest from foreign investors
The interest in the Vietnam market is unwavering, as the number of investors entering the country in 2020 went through only a slight decrease compared to last year. The most active investors came from Vietnam, Korea, and Singapore, while there was a remarkable fall in the number of Japanese investors.
Local funds play a central role
The persistence of early-stage investments is significant to the health of the broader venture capital ecosystem. As more than half of the recorded deals were conducted by local funds, local capital availability in the Vietnam market has proved to be one of the most crucial supports for early-stage entrepreneurs to keep thriving during uncertain times.
Decline in exits
The scarcity of major exits over $20M contributed to the sharp decline of 66% YoY in realized proceeds in 2020. Trade exit and secondary sales continued to play a significant role in liquidity generation. Liquidity from IPO remained limited.
Looking ahead to 2021
Though the Vietnam tech investment landscape experienced an inevitable hit due to the global crisis, Vietnamese entrepreneurs have been doing their best with available resources during an unprecedented time. We believe challenges could always be interpreted as opportunities that welcome the birth of new disruptive business models. Furthermore, the Government’s increasing efforts to foster the Internet economy and create a conducive business environment to attract foreign investors will stand Vietnamese startups in good stead when investment activities progressively resume at the normal pace.