Decoding preferences of investors in tech startups

In the current market context, how have investment preferences changed?

Hung Truong, senior investment director at SK Vietnam, and judge for the KPMG Global Tech Innovator 2023

In the current market, investors are shifting their preferences towards innovative tech-driven startups in Vietnam. Sectors like AI, fintech, e-commerce, healthtech, agritech, and digital solutions are gaining interest.

Investors seek companies leveraging advanced technologies to disrupt industries and drive growth. They prioritise market traction, revenue models, and profitability. Environmental, social, and governance considerations are also important, with investors looking for sustainability and social impact.

In the private equity tech innovator competition, showcasing innovative solutions, scalability, market potential, and alignment with the aforementioned principles is crucial. Startups should emphasise addressing market gaps and unique value propositions to attract investors.

What are the projections for the inflow of capital into Vietnamese enterprises, tech startups, and small- and medium-sized enterprises in the near future?

Positive projections indicate a promising inflow of investment capital into Vietnamese enterprises and tech startups. The country’s supportive government policies and initiatives have generated significant interest from both domestic and international investors. Vietnam’s rapid economic growth and better conditions for startups have established it as an appealing investment destination in Southeast Asia.

The thriving ecosystem, driven by entrepreneurship and innovation, has attracted a steady stream of investors. Tech startups, in particular, are expected to receive substantial investment due to advancements in technology and digitalisation across industries. Vietnam’s talented workforce and tech-savvy population further contribute to its appeal as an investment hub.

Given Vietnam’s strategic location and its integration into the global economy, the country is poised to attract more investment capital. However, competition among neighbouring countries for investment is intensifying. To stand out and secure investments, entrepreneurs and startups must continuously enhance their value propositions, demonstrate scalability, and differentiate themselves in the market.

Will they face any intense competition from other countries in the region, and what do experts think about the recent drop in valuations of tech firms?

Vietnamese enterprises, including tech startups, face fierce competition from other countries in the Southeast Asian region. Singapore, Indonesia, Malaysia, and Thailand have established thriving startup ecosystems with strong support systems and access to capital.

While Vietnam has made progress, it’s essential to recognise the competitive landscape and the advantages other countries offer, such as developed infrastructure and larger consumer markets.

Regarding recent technology company valuations, the downturn is likely a temporary market correction rather than a permanent setback. Technology valuations are volatile and influenced by factors like market sentiment and economic conditions. Despite short-term declines, the long-term potential of tech companies remains strong.

This situation presents opportunities for investors to identify undervalued companies with solid growth prospects. This downturn can also serve as a reality check, prompting companies to focus on sustainable growth, profitability, and building robust business models.

What do you consider to be the greatest challenges facing startups today, and what measures can they adopt to help them?

Startups face significant challenges in today’s business landscape. Funding is a major concern, as economic downturns heighten investor caution and reduce confidence. Attracting and retaining top talent is difficult due to limited resources for competitive compensation. Market uncertainty during downturns can disrupt consumer spending patterns and decrease confidence.

Startups must be agile and adaptable to navigate these challenges. Access to essential resources and support networks, such as incubators and mentorship programmes, may be limited during downturns, hindering growth and partnerships. The multifaceted challenges facing startups escalate further in economic downturns.

Tech startups can overcome challenges by taking several measures. Building a strong network with mentors, advisors, and potential investors is of utmost importance. Networking events, incubator programmes, and competitions offer opportunities for valuable connections and guidance. Innovation and differentiation are crucial for standing out in the competitive market.

A robust business plan showcasing growth and profitability potential is vital for attracting investors, and participation in competitions provides exposure and validation. Strategic partnerships with established companies enhance credibility.

Demonstrating market traction and customer adoption is important for investor interest, and cultivating a culture of continuous learning and adaptability is key. Flexibility and agility are strengths in the evolving business environment.

What advice would you give to companies who will participate in competitions such as the KPMG Global Tech Innovator?

Participating in competitions can provide valuable opportunities for companies to showcase their innovations and attract potential investors. Here are some pieces of advice for companies participating in such competitions:

Clearly define your value proposition: Articulate your unique value proposition and how your technology innovation addresses a specific problem or meets a market need. Highlight the key benefits and advantages of your solution compared to existing alternatives.

Focus on market validation: Demonstrate market validation by showcasing evidence of customer interest, pilot projects, partnerships, or early adopters. This validates the demand for your solution and helps increase the confidence of potential investors.

Develop a strong pitch: Craft a compelling and concise pitch that effectively communicates your vision, market opportunity, business model, and growth potential. Emphasise the scalability and long-term sustainability of your solution.

Showcase traction and achievements: Highlight any achievements, milestones, or traction you have achieved so far. This can include customer acquisitions, revenue growth, product enhancements, or successful deployments. It demonstrates that your innovation is not just a concept, but has real-world applicability and potential.

Build a strong team: Investors often consider the capabilities and expertise of the team behind the innovation. Showcase your team’s qualifications, relevant experience, and track record in successfully executing projects or ventures. Investors want to see a team that can deliver results.

Understand the competitive landscape: Conduct a thorough analysis of the competitive landscape and demonstrate your understanding of competitors and how your solution differentiates itself. Showcase any barriers to entry or intellectual property protection that give you a competitive advantage.

Articulate your growth strategy: Present a clear and well-defined growth strategy that outlines how you plan to scale your business and capture a significant market share. Discuss your go-to-market strategy, distribution channels, and potential partnerships.

Demonstrate a strong business model: Clearly explain your revenue model, pricing strategy, and potential for generating sustainable revenue streams. Provide insights into your cost structure, customer acquisition costs, and profitability projections.

Leverage networking opportunities: Take advantage of the networking opportunities provided by the competition to connect with industry experts, potential investors, and mentors. Build relationships that can provide valuable guidance, support, and potential partnerships beyond the competition.

Be open to feedback and learning: Be receptive to feedback from judges, mentors, and other participants. Use the competition as a learning opportunity to refine your business strategy, pitch, and value proposition. Adapt and iterate based on the insights gained throughout the competition journey.

In overall, participating in competitions is not only about winning but also about gaining exposure, building relationships, and refining your business proposition. Leverage the experience to enhance your visibility in the industry and attract potential investors and partners.

KPMG propels businesses in Vietnam towards sustainable excellence Private enterprises (PEs) encounter myriad obstacles encompassing economic fluctuations, technological progress, talent procurement, tax complexities, and the growing necessity for sustainable practices. In an exclusive interview with VIR's Celine Luu, Johnathan Lavender, global chairman of KPMG Private Enterprise, elaborated on how KPMG's extensive array of specialised services, tailored guidance, and profound expertise is dedicated to empowering PEs.