Funding in Vietnamese startups hit record high, fintech crowned hottest sector

Vietnamese startups are starting to come of age, as the diversity of investors and funding rounds has boosted the ecosystem to a new high.

Some 50+ deals were recorded in the startup space last year, totaling $205 million, Topica Founder Institute (TFI) released a funding landscape report as an annual practice. While the number of transactions fell down from 67 in 2015, deal value altogether increased 46 per cent y-o-y, indicating bigger later stage funding rounds.

There were 7 investments in excess of $10 million.

The 7 largest deals totaled a value of $153 million

Last year, corporate M&A was one of the highlights in the funding landscape, which had conventionally seen a more active role of angel investors and VC firms. Acquisitions peaked at $110 million, with major deals in payment, e-commerce and O2O real estate services.

I had earlier posted a report on M&A among startups for DEALSTREETASIA here.

Breaking down by sector, fintech was the star of the year, representing 63 per cent of the total investment value.

E-commerce continued to be the busiest segment with 12 deals closed in the year. However, the value reached only $34.7 million.

Fintech is creating buzz

Fintech is becoming hotter in Vietnam, having attracted $129 million investment in 2016.

The total funding into the fintech segment alone was larger than the combined transaction value of all other sectors, the TFI report said.

Fintech in 2016 became the new destination for private equity money in Vietnam, which had been traditionally flowing to the consumer discretionary sector.

In March, e-wallet MoMo announced the landmark $28 million investment by Standard Chartered Private Equity and Goldman Sachs, while Mekong Capital later closed an eight-digit funding for tech-leveraged pawn services provider F88.

Major deals are in the fintech sector

M&A activity was also vibrant in this sector, with NTT Data’s acquisition of Payoo and UTC Investment’s acquisition of VNPT E-Pay being the most two prominent M&A deals.

“The fintech ecosystem is progressing,” said Christian Konig, founder of Fintechnews.sg. “However, the deal flow here is not really representative as it is biased from the MoMo deal,” he added.

While payment still accounts for the largest pool of fintech startups, there have not been any insurtech, wealttech and regtech companies in Vietnam.

Payment acted as the strongest vertical of fintech in 2016, according to Bobby Liu, director at TFI.

“In the next five years we’ll be seeing lots more local retailers going online and naturally payment gateway is an integral part of this transition. This is also fueled by continued interest in e-commerce platforms of new startups and for any other e-commerce players to come to Vietnam, it needs a payment gateway to handle local transactions.”

Other than payment, Liu said the availability of more choices will help other traditionally offline businesses easier transition to online platforms, and predicted that future will not be too far away for Vietnam.

The country has even set up a steering committee on fintech led by the central bank. The committee will be tasked with advising the State Bank of Vietnam Governor on how to complete and grow the fintech ecosystem.

“My prediction is that the regulators will actively start to support the fintech industry and will announce a Fintech Sandbox and clearer guidelines for fintech startups,” said Konig.

More and more foreign companies are also active in this market, he added, including GoBear, Matchmove, OKLink and Transferwise.

With acquisitions happening in the payment space, given last year’s deals of Payoo and VNPT E-Pay, Konig’s other prediction is that there will be consolidation in mobile payment startups as seen in other markets.

“Fintech is potentially the biggest form of disruption across all sectors. While it may take many years, the banking industry is never going to be the same as we know it. Almost every aspect of banking services can be democratized, from peer-to-peer to core banking integration,” TFI’s Liu added.

Related Posts __

Leave a Reply

Your email address will not be published. Required fields are marked *