Vietnam is well poised to emerge as a leading tech hub in Southeast Asia amid rapid strides in innovation but faces persistent challenges including limited infrastructure, shortage of talent, lack of sustainable business models, and liquidity constraints, according to industry experts.
The potential for AI-driven innovation is also immense in emerging markets like Vietnam where outdated infrastructure can be replaced with cutting-edge technology, said panellists at the Vietnam Innovation and Private Capital Summit in Hanoi on April 22.
According to Nicolas El Baze, Partner at Tekton Ventures and Partech Partners, Vietnam is particularly well-positioned to seize this opportunity as the country produces three times more engineers per capita than the US—offering a robust talent pool ready to tackle global technology challenges.
This was echoed by other panellists at the summit, including Yinglan Tan, Founding Managing Partner, Insignia Ventures; Trung Hoang, Partner, VinaCapital Ventures; and Trung Nguyen, Founder and CEO, Sky Mavis.
According to Hoang, Vietnam is primarily an agricultural country, contributing about 4% of its GDP through supply chains, food production, and related sectors. However, a closer look reveals numerous opportunities for growth. The potential is vast, particularly if technological limitations are addressed, opening up a wide range of possibilities.
VinaCapital Ventures sees significant opportunities to invest in Vietnam’s agricultural sector by integrating advanced technology and is eager to pursue them.
Tan from Insignia Ventures also discussed the expanding influence of software-driven businesses (‘bits’) compared to traditional models (‘atoms’). While local businesses may benefit from established methods, software innovation offers a path to greater globalisation. Vietnamese startups creating globally appealing applications are already apparent, making strides despite intense international competition.
Fintech is one such sector that is poised for exponential growth. Tan pointed out that while the financial industry in Vietnam is currently dominated by large banks, fintech innovations are starting to bypass traditional barriers, offering solutions to the unbanked population and enhancing financial accessibility.
“There is data showing that 60% of the population is banked, while 40% remains unbanked, indicating vast untapped opportunities in the financial sector, especially as individuals look to invest in stocks,” he said.
Moreover, Vietnam is gaining recognition as a strong engineering hub. One of Tan’s portfolio companies, with impressive revenues of half a billion and a net profit of $60 million, underscores the importance of engineering talent in expanding technological capabilities.
This development, coupled with Vietnam’s increasing need to diversify capital sources, remittance systems, international payment networks, and production engineering, suggests the nation is poised to become a key player on the global tech stage. The shift towards this diversification is crucial amid the current global instability and uncertainty.
Vietnam’s private capital flow in 2024
Vietnam’s private capital market (including venture capital and private equity) contracted 35% in 2024 to $2.3 billion across 141 deals. While capital deployment slowed, deal count remained relatively stable in both PE and VC, underscoring investors’ continued confidence in the country’s long-term fundamentals and market potential, according to the Vietnam Innovation and Private Capital Report co-launched by National Innovation Centre, Vietnam Private Capital Agency, and Boston Consulting Group.
In 2024, private capital activity in Vietnam was heavily driven by buyout transactions, which contributed $1.7 billion.
This reflects a clear investor preference for more mature, cash-generating businesses amid a cautious investment environment.
Meanwhile, growth equity funding shrank sharply to just $163 million—the lowest level in over a decade, indicating reduced appetite for expansion-stage companies.
In terms of venture capital, in 2024, total capital invested dropped to $398 million, marking a 24.7% decline from 2023. The number of deals also fell to 118, continuing the downward trend from previous years. This suggests a more cautious investment landscape, possibly due to global economic uncertainty, with investors focusing on selective deals rather than broad funding.
In 2024, $500k or smaller deals rebounded, with deal count increasing to 57 after a dip in 2023, showing a bounceback of early-size ticket. The $3-50 million deal bracket remained stable, signalling that early-stage deals from previous years successfully raised follow-on funding.
In 2024, business automation dominated deal value, soaring to $84 million—a remarkable 562% surge. Agriculture emerged as the second-most invested sector, growing 857%. Financial services followed as the third-most invested sector but saw a sharp 61% decline, likely due to market saturation and shifting investor focus.
Regarding private equity, in 2024, the market recorded $1.9 billion in capital deployed, maintaining a steady level of activity. The average deal size remained stable at $116 million, reflecting investors’ focus on sizeable opportunities.
Challenges in sustaining tech innovation
Sustaining a competitive edge against global markets requires not only leveraging talent but also cultivating it. Vietnamese startups face fierce global competition from enterprises where the labour force is highly skilled in software engineering and technical innovation. The educational system needs to evolve to nurture talents adept at running tech-driven businesses and fluent in the nuances of the global tech industry.
Finally, establishing a sustainable business model is critical. Hoang of VinaCapital Ventures said, “Many startups replicate rather than innovate. While technology enhancement is commendable, it’s imperative that Vietnamese entrepreneurs push for breakthroughs that set their offerings apart from the rest of the world.”
Enacting targeted policy changes could further boost Vietnam’s tech innovation journey. The panellists emphasised the importance of allowing foreign acquisitions, suggesting that the ability for external companies to acquire local tech firms could encourage market liquidity, infuse valuable knowledge, and stimulate an evolving competitive landscape.
Tekton Ventures’s Baze added: “Lessons from Europe highlight the importance of facilitating easy acquisitions by foreign entities, which can help grow the local tech ecosystem. Allowing foreign acquisitions provides much-needed exits, fostering further investment.”
Additionally, drawing on successful models from other countries, as highlighted by Insignia’s Tan, such as Singapore’s strategic co-management of foreign and local capital, could attract significant investments tailored to fostering local economic innovation.
