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How Vietnamese startups coping with the new situation during the coronavirus pandemic

by Vietnam Insider

The novel Covid-19 pandemic is hitting Vietnamese businesses hard. Many startups are facing investment shortfall, the need to quickly overhaul business plans and substantial workplace changes. Yet, some have managed to bounce back and even emerge from the crisis.

The Covid-19 is here to stay for a foreseeable future. In Vietnam, in the second half of 2020, the number of newly infected cases continues to rise, sparking the third pandemic wave. Yet again, the country has successfully put the outbreak under control with stringent measures from the government. Having reported only 1,451 Covid-19 cases and 35 deaths by the end of 2020, Vietnam is considered one of the world’s lesser impacted countries.

Plus, as the US-China trade war shows no sign of cooling down, foreign companies have found it pertinent to look for alternative markets. Vietnam, whose 2020 GDP growth among the world’s highest (2.91%, according to the General Statistics Office of Vietnam), has become a logical choice in the eyes of investors.

Funding did slow down, but then it came roaring back.

Emerging from the pandemic while other regions are still in the midst of crisis gives Vietnam an advantage. The level of investment in the first 6 months fell 22% year-on-year due to the pandemic’s adverse impacts; however, it has shown signs of recovery in the second half of the year. According to a report from Do Ventures, among six major economies in Southeast Asia, Vietnam accounted for 16% of the latest investment pledges, ranking third behind Singapore (37%) and Indonesia (30%).

Put merely, restrictions on movement and travel have slowed down the FDI inflows in Vietnam. Yet, many venture capital funds still regarded the country as the top priority market in the South East Asia region.

Some found themselves in a stronger position.

The fact that several Vietnamese startups continue to raise capital amid Covid-19 suggests investment funds remain confident in the business models, the creativity and the potentials of domestic startups. The truth is capable, well-modelled startups are still able to call for capital, and that a pandemic can be a blessing in disguise.

Vietnam’s one-hour-delivery e-commerce startup Loship has recently raised a bridge round of financing led by Singapore-based Vulpes Investment Management, Saudi Arabia-based DAAL Ventures and Wealth Well. “If you have a good company, a good product-market fit, and good growth, you can raise money even in this turbulent environment,” Loship CEO Trung Hoang Nguyen told Vietnam Insider.

Vietnamese fintech startup Wee Digital has also successfully raised a seven-digit undisclosed amount from South Korean VC firm InterVest and existing backer VinaCapital Ventures. Similarly, e-commerce solution company OnPoint has raised $8 million from South Korean, Japanese, and Vietnamese investors in its Series A funding. These are shreds of evidence that Vietnam’s fundraising market and startup ecosystem is still flourishing. And it appears that investors are willing to spend money on any business that can survive the pandemic.

Speaking of his experiences in calling for investment, Loship CEO Trung Hoang Nguyen said: “It has understandably become tough to raise capital in times of crisis. We had to change our fundraising plans completely. Instead of calling for large rounds of capital, we divided into small deals, and all fundraising activities have been taking place online via Zoom due to travel restrictions.

For huge deals, investors will be cautious and want to appraise investment by direct contact, so the possibility of delay is high, leading to slow capital turnover in the market. Therefore, the division to call for smaller rounds of capital is reasonable in this turbulent time, making it easier for investors to make investment decisions.”

The Singapore-based health-tech startup, Doctor Anywhere, is another company seeing the light at the end of the tunnel. It has recently announced a hefty $30 million Series B financing, whose significant portion is earmarked for Vietnam’s beefing up operations.

“The pandemic, while unfortunate, has brought to light the need for telehealth as a tool and additional means to deliver healthcare services. While Doctor Anywhere has always ensured that we operate with sound unit economics, the Covid-19 situation does reinforce the need for us to continue to use capital wisely and sustainably, and to ensure that we continue to generate economies of scale and remain profitable per transaction,” said the CEO of Doctor Anywhere.

Speaking of the Vietnam market’s investment potential, Field Pickering, Head of Venture Investing at Vulpes Investment Management, VCs that invested in Loship in the last bridge round, said “We see Vietnam as the most intriguing market in South East Asia in the coming years. And we couldn’t think of a better way to play the Vietnam growth story than by investing in the most innovative logistics company in the country which delivers over 100,000 deliveries a day and is led by an incredibly entrepreneurial and commercial young team.”

Outlook for 2021

Despite an unprecedented year in terms of changes and challenges, Vietnamese startups are regaining their momentum for 2021. With more government initiatives, seed investments, and a positive outlook, local businesses can be positioned to flourish in ways not seen before.

By My Duyen

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