A Brief History of Startups in Vietnam: Unpacked 2024

In 2018 startup funding in Vietnam exploded, reaching US$286.5 million, which was more than the five years before it combined, according to data collated by DoVentures and the National Innovation Centre.

This, however, was only the beginning of a roller coaster ride for funding for Vietnam’s startup scene.

Specifically, in 2019 startup funding climbed to US$798 million, only to dip in 2020 to just US$334 million, only to surge once more in 2021, higher than ever, reaching US$1.44 billion in the year the COVID-19 pandemic peaked.

Digital payments services providers VNPay and MoMo were two of the biggest funding recipients in that year alongside home-grown e-commerce marketplace Tiki, receiving US$250 million, US$200 million, and US$258 million, respectively.

But perhaps the most well-documented was Sky Mavis, maker of the video game Axie Infinity which saw cartoon axolotls battle each other for Smooth Love Potions, a cryptocurrency that could be converted into real-world cash. In its series B round of funding it secured US$152 million valuing the company at an estimated US$1.5 billion. This was all over the news and saw a huge surge in interest in Vietnam’s startup scene both at home and abroad. This was further compounded by lockdowns with millions of people  confined to their homes with little else to do but try and find ways to secure an income online.

But then, at the end of 2021 pandemic lockdowns started to come to an end and people could once again venture out into the world to work more traditional jobs. The manufacturing sector in Vietnam, for example, had huge backlogs to be cleared. Subsequently, many temporary COVID-entrepreneurs put down their laptops and returned to their sewing machines and production lines.

Furthermore, the start of 2022 saw Russia invade Ukraine and create a whole world of economic problems as it did. This created broad economic uncertainty and saw investors become much more risk-averse toward industries across the board, not least of which was tech startups.

As a result, in 2022, start-up funding went into free fall all over the world including in Vietnam where it fell 56 percent over 2021 to US$635.2 million. It then went on to fall again in 2023 to US$530 million which was still significant but much lower than its 2021 peak.

Startup funding 2013 to 2023

Source: Vietnam Innovation and Tech Investment Report 2023

Funding, however, was not just coming down, it was also being re-routed to different fields.

Whereas in 2021 payments-related startups had accounted for the lion’s share of funding in Vietnam, in 2023 they received a grand total of nothing at all.

This looks to have been driven by these payments platforms, in large part, being usurped by the traditional banking establishment–by 2023 most banks were providing QR code, no fee, instant payment services which had been the bread and butter of firms like Momo and VN Pay.

As for retailers like Tiki, not only had the ability to leave the house alleviated the need to shop online, but Tik-Tok shop had launched in Vietnam in April of 2022. This online marketplace had proved incredibly popular, gobbling up a huge portion of Vietnam’s e-commerce market share in a matter of months. Furthermore, as broader problems gripped the economy including rising interest rates and the burst of the local housing bubble, consumers were starting to tighten their belts. This was further compounded by more well-cashed-up foreign competitors like Lazada and Shoppee which had more diversified consumer bases and were better prepared to weather the storm.

As a result, the spotlight on retail startups began to fade out with only US$33 million invested in the sector in 2023, just 7 percent of the funding it had received in 2021.

But where retail and payments were seeing a decline, financial services, healthcare, and to a lesser extent education were all beginning to see funding rise.

For example, pay-day loans provider F88 secured US$50 million from Vietnam-Oman Investment and Mekong Capital; Thuoc Si, an online marketplace for wholesale pharmaceuticals was able to secure US$51.5 million in Series B funding from UOB and a couple of others; and online course provider Vui Hoc received US$6 million from Vulpes Ventures et. al.

It’s also worth noting that in 2023 the funds flowing into any one individual project had also come down significantly. In 2021, startups that received funding on average collected US$8.84 million. In 2023, however, that number had fallen to US$4.3 million per startup.

This could be related to risk mitigation or perhaps the broader downturn in the economy, or what’s more likely, a combination of both.

And moving forward these trends look set to continue.

So far this year, three of the biggest deals have been ride-sharing app Be Group securing funding in the amount of US$31.2 million from VPBank Securities, rooftop solar firm Nami Energy pocketing US$10 million from Singapore-based SEACEF, and test preparation platform PREP receiving US$7 million from Northstar Ventures and four others, according to startup funding tracker Tracxn.

These funding rounds, while providing proof that the start-up scene in Vietnam is still alive and well, also serve to support the thesis that the heady days of the pandemic and hundreds and millions of dollars pouring into single startups may be a thing of the past. But this is not necessarily a bad thing, with greater competition among startups foreign investors may find themselves able to realise better investment deals and startup founders may get a helpful boost in motivation to really innovate something unique and valuable.

That said, the startup scene can be fickle and Vietnam’s economy is already very dynamic and prone to change quickly. With this in mind, to keep up with the latest developments in Vietnam’s technology sector and start-up scene, foreign firms and startup operators should make sure to subscribe to the-shiv.