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Funding Plunge Hits Vietnam’s Tech Startup Ecosystem
Total funding for Vietnam’s tech startups plummeted by 82 percent to $66 million in the first half of 2023, compared to $372 million in the same period of 2022, signaling a funding winter in the region, according to Tracxn Technologies Ltd. The decline can be attributed to unfavorable macroeconomic conditions, an uneven recovery from the COVID-19 pandemic, increasing inflation rates, and uncertain global events that have made investors more cautious.
Declining Trend Presents Challenges for Vietnam’s Entrepreneurial Landscape
Despite the Vietnamese tech startup ecosystem’s previous position as the third-highest funded ecosystem in Southeast Asia, it has experienced a rapid decline in funding in recent years. This decline poses significant challenges for the local entrepreneurial landscape. In the first half of 2023, early-stage startups accounted for 88 percent of the total funding, amounting to $58.6 million. However, this still represents a significant drop compared to previous periods.
Seed-Stage Funding Takes the Hardest Hit
Among the different stages of funding, seed-stage funding experienced the sharpest decline. Only $7.3 million was raised in the first half of 2023, reflecting a 71 percent drop compared to the second half of 2022 and an 81 percent decrease compared to the first half of 2022. The majority of funds raised in the first half of 2023 were concentrated in the first quarter, accounting for nearly 89 percent of the total funding.
HealthTech Sector Shines Despite Funding Decline
The funding landscape in the first half of 2023 was dominated by the HealthTech, FinTech, and enterprise applications sectors. The HealthTech sector achieved record-breaking funding of $53.5 million, showing a remarkable 259 percent increase from the second half of 2022 and a 118 percent increase from the first half of 2022. Notably, Thuocsi, a marketplace provider for pharmacies, raised an impressive $51 million. However, the FinTech and enterprise applications sectors received minimal funding.
Government Support and Potential for Growth
Tracxn highlights that despite the funding decline, Vietnam’s startup ecosystem holds significant potential for growth. The government has implemented support measures such as tax exemptions for IT companies and land rent concessions. Additionally, the government’s commitment to establishing a cashless economy is expected to contribute to the development of the FinTech ecosystem in the region. Several initiatives have been taken to stimulate activity within the startup ecosystem, including funding programs and the establishment of a National Innovation Center in collaboration with tech giants like Google and Amazon.
Prospects for the Future
Although the first half of 2023 did not witness the emergence of any unicorns or IPOs, Tracxn remains optimistic about the prospects for the second half of the year. The State Bank of Vietnam has implemented measures such as interest rate cuts to boost the economy.
Furthermore, the government’s initiatives to support the startup ecosystem, including funding, training, and support for young entrepreneurs, indicate a positive outlook. Despite the challenges, Vietnam’s tech startup ecosystem is poised for growth with continued government support.