Startups attract US seed capital

April 26, 2016 | 13:16
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The Vietnamese startup scene has picked up the pace in recent years, catching the attention of venture capital funds from the US. During the Invest ASEAN conference held in Singapore by Maybank Kim Eng last week, Khailee Ng, Southeast Asia managing partner of 500 Startups, spoke with VIR’s Nam Phuong about this exciting trend.

Can you describe how 500 Startups works, and how Vietnam fits into your overall investment strategy?

500 Startups is an early-stage venture fund headquartered in California in the US. So far, we’ve invested $250 million in 1,600 companies in 50 countries via a series of micro-funds focusing on specific markets or industries. One of our earliest investees in Southeast Asia is GrabTaxi, a popular taxi-hailing app from Malaysia.

In March, we launched a $10-million fund for Vietnamese startups, with each investment ranging from $100,000 to $250,000. This new fund will be managed by our Vietnam-based venture partners. As the most active Silicon Valley seed-stage venture capital firm in Vietnam, we hope to build on pioneering efforts by IDG Ventures and DFJ VinaCapital.

500 Startups is excited about Vietnam because we can see great growth potential in the country, with a tech-savvy young population and a range of promising startups. To be honest, a few years ago American investors used to be a bit sceptical about Vietnam as a startup market. However, things have changed drastically as Vietnam becomes more open to the world, and American investors understand that if they hesitate to join this dynamic scene, they’ll be missing out.

US-based 500 Startups is seeking early seed investment prospects in local enterprises
Photo: Le Toan

What are some criteria that 500 Startups apply when looking for Vietnamese firms?

We see opportunities everywhere, in all shapes and forms, as diversity is what we’re striving for. However, we do have some criteria in mind when choosing startups. Firstly, we like firms that have a potential for fast growth. For example, the number of a startup’s customers should grow from 10 to 100 in two-to-three years. Obviously, it may differ from case to case, but overall we’re looking for aggressive startups with quick actions in mind.

Secondly, the startup must be able to attract and retain customers. It shouldn’t be a once-off purchase and this requires commitment and perseverance from the startup owners. Thirdly, the firm’s current valuation should be cheap, as we’re an early-stage investor and don’t want to pour capital into an expensive startup. Generally, we look for at least a three-fold growth potential from the time we invest.

Overall, my advice is that when approaching early-seed investors like us, Vietnamese startups should put their best foot forward. What is the best aspect of their firm? If it’s a brilliant team with loads of experience, contacts, and skills, flaunt it. If it’s a ground-breaking idea or new technology, please tell us right away. Likewise, if your startup is growing at breakneck speed, that is a major advantage.

Will 500 Startups’ Vietnam fund focus only on the trendy sectors of e-commerce and financial technology?

It’s indeed true that many Vietnamese startups nowadays are in e-commerce or financial technology, such as online stores, payment platforms, or personal finance. At 500 Startups, we’ve always paid a lot of attention to startups in these areas, and many Vietnamese firms have proven to be promising.

However, it’s notable that technology is a very broad term, covering various smaller areas. We’d also like to see more unique startups that use technology as a basis for their service. One sector that we’re eager to know more about is food – not just the usual restaurants and cafés, but alternative ways to eat and drink that are enabled by technology.

The traditional business community often thinks of startups as threats. What is your opinion on this matter?

I believe that rather than competing against more established firms, Vietnamese startups should collaborate with traditional businesses. This is a win-win situation, as startups can gain support and network while businesses get access to new ideas and talents.

I’m actually quite excited about all the trade agreements that Vietnam has signed, most notably the Trans-Pacific Partnership, because increased trade and lower taxes will benefit both big companies and startups. With this in mind, 500 Startups will continue to keep a close eye on Vietnam.

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