The top 3 Vietnam-focused VC funds amid record ASEAN fundraising

As Vietnam’s venture capital industry matures, more local players are setting up dedicated Vietnam-focused funds

ASEAN-focused fundraising (focused on the region and individual countries) achieved a record $4bn in the year to date, 64% higher than the previous record of $2.4bn raised by 26 funds in 2021 (Fig. 1). This is despite aggregate capital raised declining 14% year to date against 2021’s figure globally. As the venture capital (VC) industry grows and matures in the region, more country-focused VC funds have emerged. 

Indeed, Southeast Asian markets are usually grouped under the term ASEAN (Association of Southeast Asian Nations), rather than discussed individually, but it doesn’t provide full picture. Comparing the five-year periods of 2013 to 2017 and 2018 to 2022 YTD, the number of country-focused funds closed almost doubled, from 26 to 49, with Vietnam recording the highest increase. Between 2018 and 2022 YTD, 13 Vietnam-focused VC funds (excluding those that may have exposure to Vietnam were closed, more than six times that of the previous five-year period (2013 to 2017). In comparison, 61 ASEAN-region-focused funds (not focused on individual countries) closed between 2018 and 2022 YTD, a slower increase of 30% against the previous five-year period (Fig. 2). Most of the Vietnam-focused funds invest in early-stage start-ups, especially those in tech verticals like fintech, edtech, agtech, and blockchain.

Why Vietnam? 
Demand for tech services has increased among Vietnam’s young and tech-savvy population of just under 100 million. The country has also become a major software development hub, with a large and English-speaking engineering talent pool and low labor costs. Heightened geopolitical tensions between China and the US, and China’s ongoing zero-COVID-19 policy, means global companies have been diversifying supply chains to include countries in Southeast Asia, including Vietnam. 

Government support has been crucial in supporting Vietnam’s VC ecosystem. In 2016, Vietnam’s government approved national program Project 844, the “Initiative for Start-up Ecosystem in Vietnam until 2025”, which provides training, investment, and networking opportunities for the start-up community. Decree 38/ND-CP was set up in 2018 to provide a clear legal framework and favorable climate for venture capital funds. Start-up funding also became more accessible through state-backed funds, such as the $520,000SpeedUp program by Ho Chi Minh City Science and Technology Department. 

Vietnam’s economy rebounded after the country eased pandemic restrictions earlier in 2022. The International Monetary Fund (IMF) raised Vietnam’s growth forecast to 7.0% this year, a full percentage point higher than three months earlier. Inflationary pressures have not hit the country as strongly as others. Although the growth projection for 2023 was lowered by 0.5 percentage points to 6.7%, the IMF notes that Vietnam’s growth would still be the fastest pace among Asia’s major economies. 

The 3 largest Vietnam-focused VC funds closed between 2021 and 2022 

1. AVV Alpha ($64mn): Ho Chi Minh City-headquartered VC firm Ascend Vietnam Ventures recently closed its flagship, early-stage venture capital fund AVV Alpha at $64mn in June 2022, exceeding its original target of $50mn. The fund, dedicated to Vietnam will seed up to $2mn into 25 start-ups, in verticals such as blockchain, edtech, fintech, gaming, SaaS, wealth management, and wellness. It’s currently backed by International Finance Corporation, the private sector arm of the World Bank Group, which invests in the developing world. So far, AVV Alpha has invested $2.9mn as seed funding into the agtech company UFO Technology and Trading, which operates an online delivery platform called FoodMap – a platform that connects farmers and producers directly to customers. It also invested $10mn in a UK-based edtech start-up Virtual Internship Partners in September 2022. 

2. ThinkZone Fund II ($60mn): Accelerator and VC firm ThinkZone Ventures raised $60mn in February 2022 purely from Vietnamese LPs; a rare feat during the pandemic, when overseas outreach was extremely challenging due to COVID-19 restrictions. The fund will invest in pre-seed to Series A rounds in fintech, edtech and e-commerce in Vietnam. Its LPs include local conglomerates such as IPA Investments Corporation, Phu Thai Holdings, and Stavian Group.

3. Do Ventures Fund I ($50mn): VC firm Do Ventures raised $50mn in its first fund from Korean internet giant Naver, Sea, the parent company of Garena and Shopee, as well as Singapore-based VC firm Vertex Holdings. The company will invest in B2C and B2B platforms to back early-stage Vietnamese start-ups and help traditional businesses digitalize faster.

While the above funds are set up by local firms headquartered in Vietnam, there are overseas VC firms seeking to set up Vietnam-focused VC funds too. ABB II, a follow-on fund by Singapore-based ABB Private Equity, is on the road with a $100mn target. It’ll invest in small- and medium-sized companies with a focus on social impact. South Korea-based VC firm Nextrans has also recently launched a Vietnam-focused fund with a target size of $50mn, which will invest in sustainability areas such as electric vehicles and solutions that target food waste, as well as tech areas like Proptech and software as a service (SaaS). 

Granted, VC funds dedicated to Vietnam are still relatively small compared to those targeting ASEAN or larger markets in Asia, such as China and India. Plus, local start-ups in the country still face a lack of high-skilled workers and need to look beyond Vietnam’s shores when trying to scale. However, the higher number of dedicated VC funds and an increasing commitment from Vietnamese LPs are signs of a gradually maturing VC ecosystem. 

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