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Underserved and uncompetitive: Why VCs are dropping anchor in Vietnam

By NexChange
Venture Capital

vietnam-boat

Vietnam’s young demographics and increasingly tech-savvy population are making the country a draw for tech investors but the market is still largely underserved, say local venture capitalists (VCs).

500 Startups’ recent decision to add two new venture partners – Binh Tran and Eddie Thai – in Vietnam is the  latest indication that more VCs are interested in the country, The US firm joins a fast-growing VC ecosystem that already includes IDG Ventures, Mekong Capital, DFJ VinaCapital , and Japan’s CyberAgent Ventures.

In its media release, 500 Startups described Vietnam, as “big, fast-growing, and underserved”, a summary echoed by many investors already active in the country.  DFJ Vina Capital – a VC fund associated with local private equity firm VinaCapital and US-based Draper Fisher Jurvetson – estimates two-thirds of Vietnam’s 86 million people are under 35 years old.  

The internet penetration rate meanwhile is at 29%. Vietnam is now the 18th most internet-active country in the world and broadband usage is at 45%. But the opportunity is underexploited.

Dzung Nguyen has been head of Vietnam and Thailand for CyberAgent Ventures since 2009, leading investments in mobile game developer TeaMobi, search engine marketing agency CleverAds, and gourmet media startup Foody. He told NexChange that the lack of VC activity has left Vietnam with a lot of low-hanging fruit:

“There aren’t many VCs in Vietnam, so we have a better startup selection, with more reasonable valuations, when compared with the other Southeast Asian countries. There are so many problems in Vietnam right now that need to be solved. Often founders don’t have to innovate or create new ideas, they just need a good execution team to be a winner.”

Chris Freund, who founded Mekong Capital back in 2001, offers a similar appraisal,. He describes the Vietnam market as very uncompetitive and fragmented where access  to management best practices is low:

“There is a big opportunity for VC and PE firms to invest and help their investee companies to build their management teams and apply international best practices, which often leads to those companies becoming the winners in their sectors.”

Photo: AG Gilmore

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