Tracxn, a leading global SaaS-based market intelligence platform, has released its Vietnam Tech Semi-Annual Funding Report - H1 2023. The report, based on Tracxn’s extensive database, provides insights into the Vietnam Tech space.
The Vietnamese tech startup ecosystem has emerged as the third-highest funded startup ecosystem in the Southeast Asia region to date. However, this space has seen a rapid decline in funding in recent years, presenting challenges for the local entrepreneurial landscape.
In the first half of 2023, the Vietnamese tech startup ecosystem raised a total of $66 million. It marks a significant decline compared with previous periods, indicating a funding winter in the region. The decline can be attributed to unfavourable macroeconomic conditions, uneven recovery from the COVID-19 pandemic, increasing inflation rates, and uncertain global events, which have made investors more cautious about funding startups.
A total of $66 million was raised by Vietnamese tech startups in H1 2023, a drop of 41% from $113 million in H2 2022 and a drop of 82% from $372 million in H1 2022. Despite the decline in funding, early-stage startups accounted for 88% of the total funding in H1 2023, amounting to $58.6 million. However, this represents a 33% drop compared to H2 2022 and an 81% decrease compared to H1 2022. Seed-stage funding experienced the sharpest decline, with only $7.3 million raised in H1 2023, reflecting a 71% drop from H2 2022 and an 81% decrease compared with H1 2022.
In the first half of 2023, the funds raised were predominantly from Q1, accounting for nearly 89% of the total. Funds worth $58.6 million were raised in Q1 alone, a sharp contrast from $8.5 million raised in Q2 2023 and a plunge of 97% from $289 million in Q2 2022.
The funding landscape in H1 2023 was dominated by the HealthTech, FinTech, and Enterprise Applications sectors. Notably, the HealthTech sector achieved record-breaking funding of $53.5 million, showing a remarkable 259% increase from H2 2022 and a 118% increase from H1 2022. Thuocsi, a leading marketplace provider for pharmacies, raised an impressive $51 million.
However, the FinTech and Enterprise Applications sectors received minimal funding, worth $6.2 million and $5.1 million, respectively. Despite the downward trend, the Vietnam startup ecosystem holds significant potential for growth, thanks to government support measures such as tax exemptions for IT companies and land rent concessions. Furthermore, the government's commitment to establishing a cashless economy will contribute to the development of the FinTech ecosystem in the region.
Notably, H1 2023 did not witness the emergence of any unicorns or initial public offerings (IPOs), with the last unicorn emerging in the first half of 2022. Only one company from the Vietnam Tech space has gone public till date.
Four acquisitions were recorded in H1 2023, representing a 33% increase compared with three in H2 2022 but 20% fewer than five in H1 2022. M Class, VLeisure, CrewFire, and Duelist King were the four companies that were successfully acquired.
In terms of funding distribution, Ho Chi Minh City, Hanoi, and Binh Thanh attracted the maximum investments, highlighting their prominence in the Vietnamese tech startup ecosystem.
Touchstone Partners, TNB Aura, and ThinkZone emerged as the most investors in the Vietnam Tech space, while ThinkZone, East Ventures, and YCombinators took the lead in seed-stage investments. Smile Gate Investments, UOB, and Pavilion Capital Partners were the most active investors in the early stage.
According to the International Monetary Fund (IMF), Vietnam's economy grew at a rate from 8% in 2022 to 4.7% in the current year. However, there are optimistic prospects for the second half of 2023 as the State Bank of Vietnam has implemented measures such as interest rate cuts to boost the economy.
To stimulate activity within the startup ecosystem, the Vietnamese government has taken several initiatives. These include the establishment of Assistance Policies for the National Innovative Startup Ecosystem, which provides funding and creates a national startup ecosystem portal. Moreover, the government is setting up a National Innovation Center that collaborates with prominent tech companies like Google and Amazon to offer training and support for young entrepreneurs. Additionally, efforts are being made to support women entrepreneurs and promote student entrepreneurship.
In the face of the declining funding trend, the tech startup ecosystem in Vietnam remains poised for growth, backed by government initiatives
