After booming in 2021 with nearly US$1.54 billion, investment capital in Vietnamese technology startups decreased sharply in 2022 and 2023.
The venture capital market - a critical source of funding for startups - in the first 6 months of 2023 is quite gloomy, with no outstanding investment deals. According to the Ministry of Science and Technology, investment capital in Vietnamese startups in 2022 reached US$634 million, down 56 percent compared to 2021; and in the first 6 months of 2023, it was US$413 million.
Thus, the total venture capital investment for technology startups in Vietnam is still far from 2021 when more investors poured their money into the technology sector with US$1.54 billion. In the context of the sharp drop in capital raising, venture capital funding tightened investment, startup entrepreneurs are facing difficulties in convincing funds to spend money. This will be the time for startup businesses to recognize, reshape themselves, optimize processes, costs, and management, and consolidate resources to welcome breakthrough opportunities in the near future.
Assessing the venture capital flowing into startups in Vietnam, Representative Director of Nextrans Fund (Korea) in Vietnam Le Han Tue Lam said that investment capital for startups in Vietnam has slowed down and will reduced by at least about 20 percent - 30 percent.
Ms. Bui Thi Hoang Diep, co-founder and CEO of EJOY English Learning, analyzed that the lack of customer validation and capital are the biggest difficulties which startup businesses are encountering. For startups that are already operating and growing, how to raise capital to maintain business development is a challenge. This is also an important time to help the market filter out really good startups. If a startup has a good quality product, customers will pay whereas founders of startups that have not yet launched products need to have a more realistic view because currently investors and customers do not pay for unclear things like in the previous stage.
Deputy Minister of Planning and Investment Tran Duy Dong said that at this time, startups need to take careful steps and focus on the major industries while choosing appropriate business methods and investment methods to raise their capital. This is also the time for startups to cooperate with large businesses and corporations to improve management capacity, technology, competitiveness and quality of human resources for accelerating and making breakthroughs.
According to the Global Innovation Index published in October 2023, Vietnam continues to improve its investment ranking in innovation as the Southeast Asian country’s ranking was up 2 places compared to 2022, ranking 46/ 132 countries while maintaining the second position in the group of lower middle-income countries, just behind India. The ranking index of StartupBlink - a startup ecosystem map and research center, also shows that the startup ecosystems of Vietnamese cities such as Hanoi and Ho Chi Minh City witnessed remarkable growth in 2023 bringing Vietnam ranked 58th in the world. Vietnam's startup ecosystem is experiencing rapid growth, fueled by factors such as government support, a young population, and strategic location.
With the program to support innovative start-up projects in the period 2017-2022, the Department of Science and Technology of Ho Chi Minh City received 61 projects. Of 61 projects, 26 projects are likely to receive financial support of a counterpart capital of VND 10.03 billion. Currently, the public sector has a huge potential as the sector needs technology businesses to provide technological solutions for current problems. Incubators and start-up organizations are expected to continue to have solutions for the public sector, said Director of the Ho Chi Minh City Department of Science and Technology Nguyen Viet Dung.
According to Mr. Pham Hong Quat, Director of the Department of Science and Technology Enterprise and Market Development under the Ministry of Science and Technology, the innovation startup ecosystem in Vietnam has had positive development, partly helping startups overcome the difficulties of the past year. He added that innovation startup centers have been promoting their role in connecting and cooperating with experts, and international organizations and even calling for investment.
Currently, more than 20 localities nationwide have been developing a project to form an Innovation Startup Support Center while 60 provinces and cities have issued plans to implement the government’s Project 844 and arranged resources for local implementation. Moreover; 39 provinces and cities have issued Resolutions of the People's Council regulating financial mechanisms for innovative start-up support activities. Along with that, the national innovation startup support network has been developing relatively dynamically and effectively, with the active participation of entities in the ecosystem.
Specifically, Director of the Department of Science and Technology of Da Nang City Le Duc Vien said that the city has determined the role of the innovative startup ecosystem in socio-economic development, sp the city has issued over 20 documents, policies and plans related to the development of the innovative startup ecosystem.
Furthermore, he revealed that the Da Nang City Innovation Startup Support Center has been established. This center has effectively connected and supported the ecosystem development, contributing to building a strong ecosystem to promote the development of the innovation startup community in Da Nang City. Simultaneously, the city has been forming more start-up support organizations and innovation complexes as well as giving legal advice and organizing training programs.
The Innovation Startup Center is considered the nucleus of the innovation startup ecosystem, contributing to the development of the innovation ecosystem in Vietnam and the region, said Mr. Nguyen Viet Dung, Director of Ho Chi Minh City Department of Science and Technology. Ho Chi Minh City aims to build an innovation startup center with full services related to technical infrastructure, workspace, offices for startups, equipment use, and training locations. Currently, the city is racing against the time to put this center into operation in District 3.
