In a sign of the maturing venture capital market in Vietnam, VinaCapital plans to raise a technology-focused fund—just the second such fund in the country’s history.
VinaCapital has soft commitments for two-thirds of the fund, which has a target of $50 million, says Louis Nguyen, a managing director with the firm.
Nguyen joined VinaCapital in 2004 after launching IDG Ventures in Vietnam. Prior to that, he spent a decade at various San Francisco Bay Area-based venture firms, such as as Osprey Ventures and Intelligent Capital. Nguyen expcts a final close by the end of September.
Fund-raising has been a bit slow, even though VinaCapital successfully raised $76 million for its $245 million AIM-listed Vietnam Opportunity Fund and had a quick close on its $205 million VinaLand Fund.
Nguyen says the market is “a bit soft” because so many Asian funds are in the market.
VinaCapital isn’t the only firm that has faced a tough sell. Chris Freund, founder of Vietnam venture firm Mekong Capital, says it took him months to raise a second fund of $50 million, despite a strong track record with his first fund.
LPs may be a little worried that VinaCapital will compete with IDG Ventures, the country’s only other VC fund focused on technology. No need to worry, says Nguyen. His fund will focus on late stage companies, not the early stage companies that IDG Ventures prefers, he says. VinaCapital is nearing a close on its first investment. It is looking at investing in a community Internet portal based in Ho Chi Minh City (formerly Saigon). It also is in discussions with two other companies.
Nguyen adds that VinaCapital is more likely to syndicate deals with IDG Ventures than compete with it. “The market is too small here and there are no other tech funds,” he says. VinaCapital will target two kinds of investments—companies that are trying to create Vietnamese knockoffs of successful U.S. Internet companies and state-owned enterprises looking to go private.
Nguyen says that Vietnam’s technology investment landscape is attractive because the country has high Internet and wireless penetration, a large young population, and the fastest growing economy in Southeast Asia.
He notes that Vietnam’s Internet market is so new that it doesn’t have local equivalents to U.S. mainstays, such as eBay and Yahoo. Nguyen says VinaCapital will invest from $500,000 to $3 million over two rounds in those sorts of companies. It also expects to have majority control and a board seat.
The Vietnamese market isn’t without its challenges. One of the biggest is the lack of middle and upper levels of management. Nguyen hopes to get around that problem by tapping into big pools of engineering and management talent in San Jose, Calif., and Orange County, Calif. He hopes to lure them back to work in Vietnam. —Jerry Borrell