Vietnam is expected to be on fire with emerging startups and innovative technologies as 2023 unfolds. Herston Elton Powers, managing partner of 1982 Ventures, discussed with VIR’s Luu Huong on how to build an appropriate setting for the tech ecosystem, and several trends that are more likely to catch on this year.
How do you assess the startup scene in Vietnam and what are the challenges for Vietnam’s businesses and startups?
|Herston Elton Powers, managing partner of 1982 Ventures |
Vietnam’s startup opportunity has reached an inflection point and is poised for significant growth as GDP grew 8.02 per cent in 2022, the fastest expansion in 25 years. In 2023, we expect Vietnam to come to the forefront regarding tech investment for early-stage startups in Southeast Asia.
The fintech sector will see the strongest growth, as the Vietnamese market has lagged Singapore and Indonesia in terms of development. The push for digital financial services, especially in payments, will create more opportunities to build home-grown fintech champions. These startups will also be able to import proven business models built by Vietnamese for Vietnam.
The country has some of the strongest technical talent in Southeast Asia, however, we would like to see even more people launching new companies. There is plenty of venture capital (VC) that wants to invest in Vietnam. Potential founders should view 2023 to start building the next set of Southeast Asian tech unicorns.
Recent years witnessed the explosion of NFT, blockchain, crypto companies. Could you elaborate on the future trends for 2023, particularly for Vietnam’s startups?
The recent downturn in crypto markets has made investors much more selective. We avoided much of the hype in this sector and have always been focused on infrastructure plays. We aim to help institutionalise the crypto market while ensuring regulatory compliance. Now is a great time to build if you are working on solving real problems now in a sustainable way.
We expect VC investment in Vietnam to increase significantly in 2023. Recently, over 40 funds committed to investing $1.5 billion in Vietnamese startups. 1982 Ventures is already one of the most active Southeast Asian VC funds in Vietnam and welcomes new investors to the market. We plan to expand into Vietnam by hiring a local Vietnamese team member in early 2023.
What is your take on a potential sandbox model for Vietnam’s blossoming startups?
We are incredibly bullish on the potential sandbox model for Vietnam’s startups, especially for fintech. In our view, regulation is good for fintech. Unlike other sectors, financial services are highly regulated to protect individuals and the broader financial ecosystem.
An open and progressive regulatory sandbox will increase innovation around digital financial services in Vietnam.
The sandbox will allow fintech startups to test and develop new products and services while still being subject to some level of oversight and regulation. We are hopeful that the startup community and the regulators will work together to ensure the sandbox is fit for purpose and promotes innovation and financial inclusion in Vietnam.
How can a sweet spot be found to maintain the balance between user growth working in tandem with revenue growth?
Investing in unsustainable business models is a losing proposition in any market. Many investors and founders learned this lesson over the past 9-12 months. We are a VC fund that is focused on investing mostly in startups. The very definition of a startup is a company that is designed to grow fast. We look for sustainable business models with a clear path to strong profitability.
It is essential that these startups most have the potential to achieve hyper-growth in all key metrics in massive markets. This is why finding a product market fit is critical.
Otherwise, startups and investors end up burning cash to pump vanity metrics to hide weak and unsustainable business models.
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