This year, sustainable development and high-quality models will be a springboard for Vietnamese startups to attract venture capital investors amid a tight global investment climate, insiders have said.

Koina, a data-driven farm-to-business agri-tech startup in Vietnam, is a sustainable example that has attracted the attention of venture capital funds after more than two years of operation.

Recently, the startup received a $1 million investment from VinCapital Ventures, a $100 million Vietnam-focused technology investment vehicle of VinaCapital Group. With the latest deal, the venture capital fund expects to work together to improve the weaknesses of Vietnamese farmers by helping the startup provide farmers with access to new farming techniques and agricultural inputs at lower prices, towards sustainable living.

According to Director of VinaCapital Ventures Richard Han, led by a team of former executives from Grab, VinID [a super app], and Giaohangnhanh [a logistics service provider], Koina has the potential to reduce wastage and damaged goods while increasing the overall productivity of Vietnamese farmers.

Aiming to create more sustainable agriculture, Koina has signed agreements with 80 farmer households with a total farming area of more than 50ha and distributes to thousands of traders in many provinces and cities, including Ho Chi Minh City and Hanoi.

Co-Founder and Chairman of Koina Investment Group Nguyen Tran Thi said: "After a year of learning a lot from the market and customers, 2023 is a great opportunity to strengthen our capabilities and prepare for future growth.”

“In 2023, we aim to optimize and increase efficiency, so the main goal will be to be profitable in some areas. Cooperate with many localities and cooperatives to bring Koina Farmer Platform to 50,000 farmers by the end of the year,” he underlined.

He added, with the current situation of the market, investors' perspective will be more cautious (investing in companies with less risk, not burning much to get market share and being able to operate in the long term without having to depend on external capital) and towards more sustainable business models.

The Koina’s co-founder believes there are many potential and quality startups in Vietnam. Southeast Asia in general and the Vietnamese market, in particular, remain promising and have great potential: young population, rapid application of technology, Vietnam's startup community has also grown over the years, and many business support policies and ecosystems have also been developed.

He predicted that by the end of the year (Q4 2023), the market will see an increase in the number of investment deals. This is because the main problem is not the lack of liquidity to invest, but rather investors are more cautious and focus on sustainable and efficient startups.

"My assessment is that startups in Vietnam are very adaptable, and one year is enough for companies to make adjustments," he told The Hanoi Times.

Koina also needs to make many adjustments to adapt to the market: not to focus on rapid growth, but on efficient results, he stressed.

Medici Vietnam, an insurtech and healthtech platform, is on the “Asia 100 to Watch” list in 2022 by Forbes. Photo: Medici

Tightening belts

Le Hoang Uyen Vy, Co-founder and General Partner of Do Ventures [the Singapore-based venture capital fund] said that 2023 is expected to be a difficult year for Vietnamese startups, but also an opportunity for those who adjust their business models in a slower but sustainable direction.

She added, this year, short-term revenue growth of investee companies will no longer be a priority for venture capitalists. Instead of spending a lot of human and financial resources on rapid growth, startups need to focus more on products that meet market needs.

Le Huynh Kim Ngan, Director of ThinkZone Ventures, said that in 2023, lean and efficient factors will be the main criteria to evaluate and select startups for investment in the context of limited capital like today.

Yinglan Tan, Founding Managing Partner of Insignia Ventures Partners, a Singapore-based venture capital firm specializing in early-stage technology, emphasized: "The drivers for this are global, with the downturn in the public markets forcing private investors to adjust pricing and expectations, which in turn forces startups to rethink fundraising prospects and reduce burn to extend runways."

He believes there will only be a number of deals between high-quality startups and investors in 2023.

"The flight to quality that we are seeing globally is also happening in Vietnam, with an increased focus on startups with healthy gross profits, robust governance, and capital efficiency, and investors tightening their belts to save for these quality startups and support their existing portfolio companies," he told The Hanoi Times.

Finhay and Medici Vietnam, listed in Forbes' Asia 100 to Watch in 2022, are Vietnamese startups invested in by Insignia Ventures Partners.

Potential industries for 2023

Koina launches the first Collection Center in Vinh Long Province. Photo: Koina

Venture capital into Vietnamese tech startups has reached new heights over the past three years. In 2022, it is estimated that a record $2 billion will be invested in Vietnamese startups, with completed deals such as Sky Mavis with $150 million, OnPoint ($50 million), and Timo ($20 million).  In 2021, investment in Vietnamese startups reached $1.3 billion, four times compared to 2020.

Filippo Bortoletti, Director of Dezan Shira and Associates Vietnam, a multi-disciplinary professional services firm, said that, during the pandemic, investment in the technology sector skyrocketed in relation to a very specific set of conditions, namely: people were stuck at home and their computers were their only connection to the outside world. 

“The hyper-investment we saw during the pandemic was an anomaly, what we are experiencing now is a shift back to something more normal,” he told The Hanoi Times.

He emphasized, "To be clear, most investors still have money, they are just more cautious about how they spend it.

Commenting on potential sectors, he added that some sectors are much more resilient to global turmoil than others. Food delivery apps, dark kitchens and grocery shopping apps should continue to do well through 2023.

In addition, banking and financial services also tend to perform well amid economic uncertainty. Startups offering payment gateways, digital banking services, and investment capabilities are likely to do well through 2023. Vietnamese financial technology companies have been very successful in attracting international funding.

"This is a high-growth sector that is likely to continue growing in the near future," he said.

Domestic experts said that in the coming period, tech startups around the world will focus on digital transformation (AI, 5G, IoT...), automation technology (big data, 3D printing), and healthcare technology, in which Vietnam has many advantages.

Yinglan Tan of Singapore-based Insignia Ventures Partners said AI is still quite nascent in Southeast Asia, even in Vietnam, but with the increased interest in the vertical due to the focus on ChatGPT and similar engines through use cases, combined with Vietnam's pool of developer talent, there are opportunities for the local ecosystem to be a source for building AI-focused companies.

"We have seen the success of our fintech portfolio companies in Vietnam, such as Finhay in wealth management and Medici in insurance. The current market is an advantageous time for companies like them that have already established a competitive position and moat in the market," he added.

He stressed that opportunities in Vietnam have not diminished under the current market conditions, but remain resilient in 2023. With the reopening of China and economic tensions across the Pacific, the company expects increased cross-border economic activity in Vietnam as supply chains continue to diversify in the country.

The Vietnamese government also continues to support and prioritize digitalization in an economy that is forecast to grow at over 6% and keep inflation below 5% (relatively better than its regional peers), he said.