The goal of this article is to represent the main framework of venture capital funds and specific target location – Viet Nam, where has some actual major innovations for business since early mid-2016.
Venture capital firms (VCs) are limited partnerships that specialize in raising money to invest in private equity of young firms that have business models in high technology such as biotechnology or IT to achieve extraordinary investment returns. They also take active role in managing the ventures, advising strategic targets, sharing business knowledge and providing crucial business contacts to managers of the young companies. The crucial feature of VCs is international investment, through the survey of Deloitte and the National Capital Venture Association (2009), 52% of the total 700 VCs interviewed invest outside their home countries. Hortense Tarrade in his book “Cross Border Capital Investment” points out that UK and Germany-based VC firms have made about half of their investment outside their own nations over the past 20 years. The explanation is that the VCs look for the advantages of growing markets with higher returns. Particularly, portfolio companies can benefit from distance investment via knowledge transfer by general partners.
Vietnam – the economic geographic background
With a strategic geographic location on the international sea route connecting Pacific Ocean and Indian Ocean, Viet Nam is the optimal cross-road for business ships as it has long seashore and secured bays without typhoon and cyclone as these are blocked by land of Philippines in the east. More importantly, it is closer to Hong Kong, South Korea, and Japan than Singapore which is further in the south of Asia. From the central location in Asia of Viet Nam, every ship can be toward to everywhere in Asia easier such as countries in South East Asia or North East Asia; therefore, this saves amount of costs for international business. This is also the reason why since 16th century, numerous western merchant ships has come to Viet Nam rather than other places in Asia, along with these were catholic monks from Spain, France, Italy and Portugal who created Vietnamese language, which is the only Latin-root language in Asia nowadays. In 20th century, realizing the advantages of economic geography of Viet Nam, French and American have chosen it as a destination in Asia rather than other countries here, this gave Viet Nam the harmonization among Asian tradition, continental European culture and Anglo-Saxon culture which have still influenced to its society until now.
The business environment background of Viet Nam
In early mid-2016, there has been a political innovation in Viet Nam leading to many changes which are advantageous to business and international business. As a result, managing director of IMF, madame Christine Lagarde came to Viet Nam in March 2016 as a signal to support Viet Nam state in policy-making procedure. After that, managing director of World Economic Forum (WEF), MR Philipp Rosler who is a Vietnamese-German as well as former Vice – Chancellor of Germany came to Viet Nam in April to discuss about new wave of start-up that he described as 4th industrial revolution over the world.
Venture Capital in Viet Nam
There has been a new trend of start-up in Viet Nam at the present time, along with this is VCs supporting money and experience to these new firms. The new legal requires only three days for setting up a new VC fund, and the government has motivation to support the trend, as stated before, the innovation in political system makes business more fluent with the meeting of the head of government with Eurocham, Amcham… as well as international corporations on 26th April 2016, which has not happened before.
The popular VC firm currently in Viet Nam is IDG venture, established in 2004 with $100 million under management, but the presence of IDG came back to 1992, when American billionaire founder IDG Patrick McGovern had made trips to Viet Nam to launch: PC World Viet Nam. At the present, IDG Viet Nam is focusing on 4 active tech-sectors:
Information and communications technology
Media and entertainment
Each section has investment in common and popular companies. Typically, in portfolio “Information and communication technology” has VC Corp, which is a big company concentrating on online advertising, e-commerce, and game online with connections to 20 online newspapers and 200 websites attracting 31 millions subscriptions, approximately 90 % Internet users in Viet Nam. Another company in the same section is Apollo Viet Nam-English teaching school, member of International House-UK, has branches in 19 major cities of Viet Nam, established since 1994.
Otherwise, in “Media and entertainment”, one of investments is FBNC, a professional financial and business news channel, broadcasting directly from Ha Noi and Ho Chi Minh trading centers, and it has the same modern management system as Bloomberg and CNBC. In “Tech-enabled business”, it is composed of “hocmai.vn” which is a e-learning website or “OTC Viet Nam”, the biggest OTC securities trading platform of Viet Nam.
As an interview has been done with founder Patrick McGovern, growth of IDG Viet Nam is 30-40 % per year in average, and the portfolio of investments in 40 companies contributes to IDG Viet Nam the profit 75 times.
The biggest fund currently in Viet Nam is “Dragon Capital” with total assets $1.5 billion (2015), established in Viet Nam since 1994 and has office in Ho Chi Minh, Ha Noi, UK, Hong Kong and Bangkok. This fund invests not only in venture but also in others as below.
Beside these funds, there are other venture capital firms with smaller scale as Mekong Capital, Vina Capital, Japan Asia MB Capital.etc..
Conclusion: All signals at the present time are toward positive opportunities to invest in Viet Nam with political mechanism as well as economic mechanism. This article only summarizes the main features of an economy, a country with many changes in history. However, the shortage of investing from continental Europe is a missing part of a big picture because western European had a long historical relationship with Vietnamese in the past until mid-20th century, but now dominantly investing has been done by Anglo-Saxon firms.