10 Mar THE ASCENT vol. 3 – The future of fintech in Vietnam
Above: First workshops of AVV’s SHINE fundraising bootcamp for women founders
We are back after a highly anticipated Tet (Lunar New Year) holiday. Tet marks the end of the holiday season in Vietnam when the real work of the year begins. As the country pushes for an economic rebound in 2022, we have seen several macro changes set in motion in the last 1+ months. The manufacturing sector saw a strong recovery in January with the highest growth in output and new orders in the last nine months. Domestic tourism hit $1B+ in revenue during roughly one week of Tet, while total reopening of international tourism is planned for the end of this quarter, starting with the lifting of all COVID-related restrictions on international flights on Feb 15th. Still, with the daily tally of new COVID cases continuously climbing, the quest to return to normalcy is, as expected, not without challenges.
Regardless, we see a lot of positive progress in the local startup scene with lively early-stage deal activity as well as exciting ‘next moves’ from later-stage players (see more in Vietnam Tech in the News.) On the latter, in the Spotlight section, we will zoom in on e-wallet MoMo’s Series E, what lies ahead for them, and our observations of the fintech space. In the midst of early 2022 developments, we continue to seek opportunities to champion founders in Vietnam – take a quick glimpse of our activities in this volume’s AVV in Action.
Happy Year of the Tiger,
Vietnam Tech in the News
1. Lively early-stage deal activity with participation from both local & international funds. Some of the notable deals that we have seen in the last month or so involve notable investors both in and outside of Vietnam. Earable (in-ear sleep tracker device and 500VN portfolio company) recently closed a round led by Founders Fund. Infina (retail investment app and another 500VN portfolio company) extended its seed round to $6M with participation of Sequoia Surge, YC, Saison Capital, and others. Social commerce and quick commerce are also heating up with startups like Rino, Selly, and Mio raising their seed, pre-Series A, and Series A respectively from a wide array of VCs.
2. Big traditional game producers & publishers want pieces of the blockchain gaming pie. The likes of VNG, Appota, and Funtap have been gearing up, both in-house and via strategic investments and partnerships, to get into GameFi. While these large players have deeper industry experience and more abundant resources to leverage, they face similar challenges as smaller startups do as they try to navigate the blockchain gaming evolution, separate the long-term signal from the short-term noise, and recruit the right talent to build the right thing.
3. Payment unicorn MoMo stepping on the gas to expand fintech offerings. Following their recent Series-E funding, MoMo is pushing ahead with its plan to become a superapp. Other than partnering with their latest investor, Mizuho Bank, MoMo also recently acquired an MSME online sales management platform and partnered up with local bank TPBank as well as the consumer lending arm of EVN (largest power company in Vietnam) to expand their services. Care to learn about our view on this and the broader fintech scene? Check out the Spotlight section below.
Spotlight: MoMo and the Future of Fintech in Vietnam
In 2021, Vietnam further solidified its position as the next battleground for fintech in Southeast Asia. Currently, Vietnam ranks 3rd in Southeast Asia in attracting funding for fintech, only coming behind Singapore and Indonesia. In the past year, we have seen a number of large to mega deals in the space, the latest of which was the $200M Series E of MoMo, the e-wallet company that is now a unicorn. Speaking about MoMo’s fundraise in a recent interview with The Ken, our GP Eddie Thai remarks that this “signals the next stage of competition for share of mind and share of wallet of Vietnamese consumers.”
For context, MoMo already has 31M users, a 50% increase from its reported 20M users in 2019, claiming 60% of the mobile payments market and $14B in annualized transaction volume. However, “several well-capitalized players are now vying for the top spot… This will mean continued discounting and more innovation,” says Thai.
Payments are only the tip of the fintech iceberg here, and Thai believes MoMo and other players will inevitably move to do more, as payments are relatively commoditized and potential economic profit should largely be competed away over time. While one can expect cashless payments to continue to increase share against cash payments (driven by both payments-focused players like MoMo and VNPay, super-apps like Grab and Zalo, and credit card penetration), Thai believes there will be substantial market consolidation in the next 3-5 years, with 2-4 leaders eventually accounting for 70%+ of cashless transaction volume, long-tail players being acquired or going dormant, and foreign players facing challenges while attempting to enter Vietnam and gain meaningful share.
The long game is that payments are an entry point or foundation to other services. On the consumer side, these could include retail banking services, customer loyalty (i.e. earning and using points across vendors), credit (e.g. Buy Now Pay Later), investment (e.g. robo-advisory), and more. On the enterprise side, these could include MSME financing, marketplace, fulfillment, etc.
Thai highlights two major challenges as fintech players expand their product offerings, “The first is the complicated dance between spending money on customer acquisition & retention vs. new service development, while competitors are also raising capital to do the same thing. The second is the challenge of figuring out how to do the new services well – not just better than payments competitors but also better than ‘niche’ competitors who are solely focused on particular services.” In Momo’s case, they are addressing these challenges by developing in-house innovation capabilities (case in point – “MoMo City”) and increasing strategic partnerships, corporate VC & acquisition activity (as demonstrated by their collaboration with investor Mizuho Bank and the acquisition of Pique [500VN portfolio company] and Nhanh.vn.)
If anything is clear, the future of fintech is plural. On its journey to serve more consumers and businesses, MoMo will continue facing competition from players like Grab (SEA superapp), Timo (first digital bank in Vietnam), Cake (digital bank by VP Bank and ride-hailer Be Group), NextPay (payment & digital transformation enablement solutions for 100K+ SMEs), and Funding Societies (regional SME lender backed by SoftBank, VNG, and others.) Not one app or company can address all financial services needs in the market, but MoMo will and certainly must try to remain indispensable to the everyday lives of Vietnamese people.
AVV in Action
1. All eyes are (still) on Vietnam. GP Binh Tran appears in Tech in Asia’s Startup Frontier: Vietnam series to reiterate the potential of Vietnamese startups. “Vietnam’s tech ecosystem has spent the past decade building its foundation… I do think that it is an interesting time, more than ever, to be involved over the next five to ten years.” In that same vein, GP Eddie Thai observes that there is increasing LP interest in Vietnam. “More LPs realize the potential. They have started believing that coming to Vietnam now is better than coming too late,” says Thai to DealStreetAsia.
2. Supporting women founders on multiple fronts. On Feb 15-16, our associate Minh Ta returned to Cocoon Capital’s Female Founders Mentoring Hours as a second-time mentor on pitch decks, fundraising, and investor insights. On Feb 24-25, Le Nguyen and Thao Nguyen of our investment team also made appearances as a speaker and a Demo Day judge respectively at SheDisrupts Vietnam. Last but not least, in early March, we kicked off the SHINE fundraising bootcamp with the participation of 17 women founders from early-stage startups across Vietnam. One of the founders, Meg Le, observed after our very first sessions, “We have fantastic program leaders and coaches, and the vibe is supportive, collaborative, and focused.” More updates on SHINE here.
3. Leveling up on gender-lens investing. In late January, our whole team participated in a Gender Lens Investing 101 training session by Value for Women, a technical assistance partner of Investing in Women. The training was a great opportunity for us to systemize our understanding of GLI and start brainstorming ideas for developing a formal firm-wide gender strategy. We are excited to carry out more gender initiatives going forward!