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How does the COVID-19 pandemic affect startup investment activities of businesses in general and ThinkZone Venture in particular?
In the first half of 2021, Vietnam as well as other countries in Southeast Asia were heavily affected by the COVID-19 pandemic. In that volatile socio-economic context, investors often tend to follow startups, watching how the founders manage the company to overcome difficulties. Therefore, the amount of money invested in Vietnamese startups in 2021 tends to decrease compared to previous years.
Newly released data from Cento Venture shows that, in the first half of 2021, the amount of venture capital entering Vietnam decreased by more than 40% compared to the same period last year - marking the lowest level in more than 2 years.
Also according to Cento Venture, in the first 6 months of 2021, Vietnamese technology startups only attracted about 130 million USD in investment, accounting for 3% of the capital value structure of 6 Southeast Asian countries (including Indonesia, Singapore, Malaysia, Thailand, Vietnam and the Philippines). This is the lowest level since 2019 - when Vietnam at one time accounted for more than 30% of capital value.
However, Vietnamese startups have shown their ability to adapt and develop very well in recent times. That is also the reason I believe that in the second half of this year there will be many large-scale investment deals announced.
The decline in the first half of this year does not represent a downtrend of the market but is only a short-term decline due to objective factors. Vietnam is still a venture capital market that attracts a lot of attention from domestic and foreign investors.
The COVID-19 pandemic is also a factor that helps promote changes in user behavior as well as the digital transformation process at businesses. This is a very beneficial factor for technology startups.
ThinkZone as well as other investment funds in the region are still very actively looking for investment opportunities in Vietnam, especially companies with sustainable business models and good growth rates in recent times.
In the context of banks not lending to invest in startups due to collateral security conditions. So what do you think is the solution to make it easier to mobilize capital for investment in startups and innovation?
Currently, besides direct investment capital, there are also many other sources of support capital from international organizations specifically for startups such as grants or startup debt. As for startups, founders can learn about different capital mobilization models to be proactive in their plans instead of just following one direct capital mobilization option.
In addition, to promote investment in innovative startups, Vietnam also needs to remove tax issues and investment and divestment procedures so that domestic and foreign investment funds can operate more effectively, investing directly in legal entities in Vietnam.
Besides, there also needs to be more connection programs and seminars to help connect Vietnamese technology startups with foreign investors interested in the Vietnamese market.
The problem of raising capital for startups has been proposed by many experts. Among them, is there a proposal to promulgate a Venture Investment Law? What are your views on this issue?
The Venture Capital Law is one of many proposals to promote startup and investment activities in Vietnam. However, the problems that investment funds encounter today are not only in the legal aspects of domestic and foreign investment funds, administrative procedures, but also in the tax mechanism when divesting capital.
To solve these problems, it is necessary to coordinate between ministries, departments and branches to have a comprehensive regulation, avoiding overlapping regulations between legal documents of units, causing difficulties for practical implementation activities.
It should also be noted that venture capital funds are only one component of the innovative startup ecosystem. Therefore, to have a strong and developed ecosystem, Vietnam also needs more guiding documents and incentives to support the development of components in that ecosystem.
As an enterprise specializing in investing in ambitious founders, while the pandemic significantly affects startups as well as capital investment and start-up businesses, what is ThinkZone's recommendation to the State management agency?
ThinkZone is one of the few domestic investment funds operating in Vietnam recently. Domestic investment funds are often more flexible in disbursing funds to startups in both time and disbursement method. This has shown its advantage in recent times, in the context of the COVID-19 epidemic, which still has unpredictable developments in Vietnam.
In addition to financial support, the domestic fund also has knowledge and expertise about the domestic market as well as a network of domestic corporate and company partners to connect and support startups in the process of developing their company. This is especially important for startups in the early stages of development.
Startup investment activities have a much higher level of risk than other traditional investment activities. Therefore, I hope that in the coming time, the authorities will have mechanisms to support the operations of domestic investment funds, create preferential tax policies for domestic funds, so that domestic funds can confidently operate and invest in legal entities in Vietnam.
Besides, startups will often develop new business models or technologies that are not regulated in traditional business types. Therefore, I also really hope that Vietnam can develop sandbox models in managing the operations of startups, removing legal and regulatory barriers for these new business models so that companies can develop, and at the same time, it is also easier for State agencies to manage the business activities of startups.
Chelsea Nguyen - Investment Manager, ThinkZone Ventures.
Readers can read this article on Vietnam Enterprise Newspaper here