Startups ponder moves during fundraising scarcity

Startups ponder moves during fundraising scarcity, illustration photo/ Source: freepik.com

Hoang Bao Long, CEO of tech development startup LacBird, admitted that the economic downturn has affected investors, partners, and customers of businesses.

“Three investment funds have committed to support LacBird up to $500,000, but we have not received any disbursement so far this year,” Long said.

This is in contrast from 2022 when the company quickly received disbursement from three investors as well as a venture capital fund.

Vietnam’s technology startup ecosystem ranks third in Southeast Asia in terms of attracting investment, but it is moving in a downward direction.

According to data tracking platform Tracxn in mid-July, total investment in tech startups in Vietnam in the first half of 2023 fell by 82 per cent on-year, from $372 million to $66 million.

Funding for tech startups at seed level saw the biggest decline when they raised only $7.3 million over the course of six months, down 81 per cent on-year. Most of the successful fundraising deals took place in the first quarter, with only $8.5 million successfully raised in Q2.

According to Tracxn, the decline stems from fluctuations in the global economy and rising inflation rates, which has made many investors more cautious.

“It is not easy to maintain a team of 500 engineers in this difficult context,” said CEO of ZSolution, Tran Quang Chau. ZSolution has been providing solutions to increase sales revenue and business administration since 2020, and is aiming to become a unicorn within the next two years.

Bui Diep, co-founder of the eJoy startup project in educational technology and the champion of Startup Vietnam 2022, said, “It is very difficult to convince people to invest in this period, especially for projects that do not yet have a product because customers are no longer willing to pay for things that are unclear like previously.”

Nevertheless, some investors are still willing to make a move if they can see the attractiveness and long-term development potential of a project.

“I can invest in a scalable startup that demonstrates the founder’s vision for the next decade. Startups need to verify the suitability of their products to the market and find a growth model that can generate sustainable profits,” said Hoang Thi Kim Dung, country director at Genesia Ventures Vietnam.

According to Tracxn, venture capital flows in the first half of this year tended to pour into healthtech, fintech, and enterprise applications. Healthtech successfully raised $53.5 million, up 118 per cent on-year, while fintech and enterprise applications successfully attracted $6.2 million and $5.1 million, respectively.

Blockchain infrastructure, meanwhile, remains a high-potential area as it continues to lead in terms of venture capital, with 20 private transactions and over $493 million in funding. This was followed by DeFi with $144 million and Web3 with $107 million, according to global statistics from CoinTelegraph Research Venture Capital.

In this country, the Vietnam Blockchain Association (VBA) in July launched the SwitchUp accelerator programme with the goal of solving the problem of interaction between investment funds and startups.

VBA vice president Phan Duc Trung said, “We are a non-profit professional social organisation, but we remain committed to promoting the development of the tech market by incubating capital sources to promote venture activities through connection with financial institutions.”

The main feature of the project is an investment committee that combines traditional financial investors and international investment funds with digital assets, Trung added.

With investment from more than 50 funds and international organisations, SwitchUp is committed to supporting startup projects throughout Vietnam and the wider region to raise capital and develop sustainably in the blockchain ecosystem.

Fintech startups urged to think for long term While tech businesses around the world struggle to raise funds, some fintech companies in Southeast Asia continue to receive large sums.

Scale Vietnam launched to support health-tech startups On April 14, VMED Group launched Scale Vietnam as a platform to support health-tech startups, enabling them to grow and solve existing health problems.

Decoding preferences of investors in tech startups In an exclusive interview, VIR’s Luu Huong explored Vietnam’s vibrant startup ecosystem with Hung Truong, senior investment director at SK Vietnam and judge for the KPMG Global Tech Innovator 2023, discussing investor preferences, regional competition, and strategies for startups.