Funding in Vietnamese tech startups continued to see a decline in 2024 reflecting broader macro trends and a cautious approach among investors.
Several experts DealStreetAsia spoke to indicated that the country’s overall tech investment scene has mirrored the downturn across Southeast Asia.
“We have not seen any large deal in 2024. We estimate the total investment value into tech startups in Vietnam will be 30-40% lower than 2023,” said Quang Pham, Executive IC Member at Asia Business Builders (ABB) and member of Vietnam Private Capital Agency.
“In addition, we now see an emphasis on profitability, operational efficiency, and scalability as VCs and investors adopt a more cautious investment approach,” he added.
Regional startups recorded 134 equity deals in Q3 to raise a total of $979 million in the July-September quarter, according to the SE Asia Deal Review: Q3 2024. This is the first time since 2019 that quarterly proceeds have fallen below the $1-billion mark.
Focus sectors
In terms of top trends, Pham predicts more PE-type deals in tech-enabled businesses, robust interest in education and healthcare sectors, and cross-border e-commerce deal activity.
According to Khoi Nguyen, VPCA Member & CEO of Koru Capital, half of their resources are spent on healthcare deals thanks to growing interest from investors.
Nguyen indicated that the healthcare sector has even attracted investors who have not traditionally operated in the space.
“If you notice, there is no local champion that dominates the private healthcare sector in Vietnam yet (like Masan in the consumer sector and Vinhomes in real estate), unlike neighboring countries. Therefore, there is a case for investors to find and back a strong player to become the local champion,” he added.
“Investment in health tech has surged, reflecting strong post-pandemic demand. Startups offering scalable digital solutions in telemedicine, and health data analytics are of interest,” said Trung Hoang, Partner, VinaCapital Ventures.
ABB, meanwhile, prefers to invest in proven SME business models in consumer demand-driven sectors.
“In 2024, we focused on investment areas where business models can be tech-enabled to scale. For example, we have invested in both the education and pharma industries where we see the opportunity for technology to disrupt traditional business models driving down costs for Vietnamese consumers,” Pham added.
Per the report, healthcare, education, and e-commerce accounted for the major share of deal volume in 2024.
Some notable deals in edtech include Prep’s Series A funding round co-led by Cercano Management and Northstar Ventures; NativeX’s $4-million seed round co-anchored by Ansible Ventures and Blueprint Ventures; and Excelsior Capital Vietnam Partners’s investment in the English language training company Kapla Vietnam.
In the healthcare sector, several startups such as Heli Care, Nhi Dong 315, and WeCare 247 secured funding. Meanwhile, TrueDoc announced its merger with healthcare app AiHealth and also raised a pre-seed funding round from TNB Aura.
In terms of the valuation environment, assets are affordably priced, according to Trinh Nguyen, Investment Manager at local VC firm AiViet Ventures.
Downrounds are happening, but they do not pose significant concerns. Some funds are strategically leaving 50% for follow-on investments, convertible notes, or bridge rounds, and several startups have managed to access short-term bank credit. Many founders are also choosing not to raise funds to maintain their company’s value.
“The current market conditions are generally slow, not just in Vietnam. However, local support for the market is active, and technology startups must originate from the technology itself,” she added.
Tighter scrutiny
The regulatory environment continues to be a significant consideration for investors. 2024 saw a government investigation into the country’s first unicorn, VNG, and PE-backed lender F88.
“Investors are more cautious obviously, especially since there is little news about the investigations. Unfortunately, many investors have to rely on “rumours” or “unofficial news on the ground” to try to grasp a sense of what is going on. It is understandable that some investors would adopt the “wait-and-see” approach, for the dust to settle before making any decision,” Nguyen of Koru said.
Fintech will face heightened scrutiny while other tech-enabled manufacturing sectors might experience a lesser degree of inspection, according to the expert.
Hoang of VinaCapital Ventures said efforts in real estate, banking, and securities have reduced corruption and fraud, increasing investor confidence in market stability.
However, he also indicated that high-profile investigations, particularly in real estate and banking, have led to project delays and concerns regarding regulatory unpredictability. Additionally, enhanced scrutiny of environmental impacts has slowed project approvals in energy and infrastructure.
Exit strategies
While an IPO market turnaround might take time, focusing on profitability and exploring trade sales remain crucial, Nguyen of Koru said. Profitable portfolio companies have positioned Koru Capital to weather adverse scenarios.
Pham’s focus centers on identifying clear paths to strategic exits via regional corporate acquirers, while also exploring IPO possibilities as the market in Vietnam anticipates upgrading to an emerging market status.
Cashless payments, digital banking, e-commerce/live commerce, data centres, and AI adoption continue to pose a strong outlook in 2025.
“We expect a comeback of private capital in the tech industry, hopefully rebounding to the 2022 level. However, we expect there are more large deals to be completed,” said Pham of ABB.
“One notable challenge we’ve encountered is the difficulty in finding tech companies with the scale necessary for larger investments. Many tech products and SaaS businesses in Vietnam struggle to reach $10 million in annual revenue, which makes it challenging to identify opportunities that align with our fund’s investment criteria,” he added.
2025 outlook
Moving into 2025, Vietnam’s tech industry is at a pivotal juncture. Opportunities abound in digital transformation, fueled by government initiatives to elevate the tech sector’s contribution to GDP.
Strategic foreign direct investments from firms like NVIDIA and Intel are expected to boost AI, semiconductor, and software sectors. Muller Ngo, Managing Director at ITI Fund, notes growth potential in smart cities through IoT and AI integration.
However, challenges persist. Apart from macroeconomic hurdles, regulatory uncertainties, evolving laws on AI, data privacy and cybersecurity and talent shortage pose significant barriers.
Nguyen of Koru anticipates 2025 to present a diverse set of scenarios where some sectors will thrive, boosted by the government’s digital push, while others may struggle due to global economic pressures.
He suggests a balanced approach to seizing opportunities while protecting against downside risks. Pham recommends that tech firms strengthen business models with a focus on sustainable profitability.
