Doing Business

How Can Singaporean Firms Raise Funding in Vietnam?

Nora Setiawan

July 13, 2020

Doing Business

How Can Singaporean Firms Raise Funding in Vietnam?

Nora Setiawan

July 13, 2020

In the last few years, Vietnam’s economy has enjoyed significant growth and attracted substantial foreign investment funding in many sectors, such as procession and manufacturing, real estate and wholesale trade.

According to data by the World Bank, Vietnam’s GDP grew by about 7% in 2019, and it is close to the rate that was reported in 2018, and also one of the fastest growth rates in the region. Even with the pandemic hit, the International Monetary Fund has forecast Vietnam’s GDP to grow at 2.7% this year, it is higher than of its regional peers. It would strongly rebound to 7% in 2021.

Vietnam also has a huge population of 92 million with a fast-growing middle class. It will create opportunities for foreign countries, especially Singapore to invest into a business in Vietnam. The increasingly-sophisticated Vietnamese consumer is open to new and foreign brands too. To add more fact, Vietnam’s retail scene is vibrant, with the development of numerous new malls.

The total Foreign Direct Investments (FDI) into Vietnam in 2019 is a 7.2% year-on-year increase compared to 2018. Additionally, Vietnam’s economy is increasingly open. Up to May 2019, Vietnam has engaged in 12 Free Trade Agreements (FTAs) and 7 more upcoming or in under negotiation.

Another reason why Vietnam became an attractive country to do some business is, Vietnam has a rapidly-growing technology community that attracted a wave of foreign investors, including venture capital funding and co-working space providers.

With this fast-growing startup ecosystem, Singapore technology companies and startups can tap on the vibrant ecosystem to find partners, co-innovate and offer solutions. That is why Singapore firms set up businesses in Vietnam.

In addition, the innovation and start-up funding and ecosystem in Vietnam is growing, even though it’s still very young as it’s only 3 years old. But, Vietnam’s 3000 startups have been boosted with investment every year, and keep increasing every year.

In 2017, there are around 92 startups that received investments worth US$291 million. The most attractive investment industries are e-commerce, then followed by FoodTech and FinTech.

Therefore, Vietnam has become an attractive market for foreign entrepreneurs, especially for Singapore to set up some businesses there. You probably consider Vietnam as one of your future markets to have a business. If so, let’s learn how to raise money for foreign firms in Vietnam!

Raise Funds From Venture Capital

According to Bain & Company, over the past 5 years, Vietnam generated 20% of the region’s private equity deal value, and the percentage is likely to grow. The recent survey also showed nearly 90% of investors said that the hottest Southeast Asia market outside of Singapore in 2018 and 2019, is Vietnam.

The Vietnam Venture Summit 2019 that was held in Hanoi on June 10, the numerous venture capital funds have pledged to inject an accumulated $425 million into local startups over the next 3 years.

The announcement has been made by the European Chamber of Commerce in Vietnam (EuroCham) at the Vietnam Venture Summit 2019, that together with the committed fund, early-stage companies and firms in Vietnam can further count on the EUR 3 billion fund designated to support the startups worldwide.

It will be a strong reason why Vietnam is still suitable for foreign businesses. There are some Singaporean firms that raised funds through Venture Capital in Vietnam, such as Smartly Pte Ltd (VinaCapital), one of the first robo-advisory investment platforms from Singapore. The other firm is YOYO HOLDINGS (CyberAgent Ventures), a Singaporean tech company and also one of the leading mobile advertising startups in Southeast Asia.

How To Apply For Venture Capital Funding?

  1. Evaluate How Much The Business Is Worth

Do some financial projections to show the return on investment, including any liabilities and equity you have already issued. For instance, your sales, marketing, and business model, historic revenues, balance sheets and operating budget, your cost of customer acquisition and customer lifetime value.

  1. Figure Out How Much The Business Needs To Raise

Determine your total needed amount by considering how much capital you can use immediately and effectively. Also, to know how far along your business is and how much control you are willing to give up to new investors are necessary things to do too.

  1. Get In Touch with a Venture Capital Firm

Before meeting with a Venture Capitalist, you need to make sure to prepare yourself, because some of them get thousands of requests for financial assistance each year. So, you need to define your company’s business model and why it is unique and worthy for their investments.

  1. Decide How Much Ownership You Can Give to Venture Capital

It depends on the ownership structure and the number of rounds of funding a business needs. You might approach a different financial institution or need to merge with a competitor, and see what’s next.

Raise Funding From Issuing Bonds

The corporate bonds issuance in Vietnam has increased by 25% to VND 280.14 trillion ($12.12 billion) in 2019. According to the Top Brokerage SSI Securities Corporation (SSI) report, It was 11.26% of GDP, up from 9.01% in 2018.

Vietnam’s bond market has been growing in recent years, but the money raised remains small compared to other sources. The economy somehow still depends on the bank credit, which was 138.4% of GDP at the end of 2019.

Steps To Issue Bonds in Vietnam

Steps to issue bond funding in Vietnam
  1. The issuer offering securities to the public has to register with the SSC.
  2. Within 30 days from the date of receipt of the valid dossier, the SSC shall examine and grant the certificate for Public Securities Offering.
  3. The Certificate for Public Securities Offering granted by the SSC is a document certifying that the public securities offering the registration dossier. All the procedures are provided by law.
  4. Within 7 days from the date the Certificate for Public Securities Offering, the issuer shall publish the Announcement of Offering in one electronic newspaper or written newspaper.
  5. The securities shall only be offered to the public after the announcement has been made.
  6. Distribution of securities shall only be conducted after the issuer ensures that securities buyers can access the prospectus in the public securities offering the registration dossier.
  7. The issuer, underwriter, or issuing agency must distribute securities in a fair and public manner. Also, ensure the time limit for registration of buying securities applicable to investors is at least 20 days. 
  8. In case the amount of securities registered to buy exceeds the amount of securities permitted to be issued. In addition, the issuer shall distribute the securities permitted to be issued to the investors with their purchase registration rate.
  9. The money paid for securities shall be transferred into a blocked bank account until the issue is completed and reported to the SSC.

These are the information that you need to gather and learn when you want to expand the business in Vietnam. Preparation is the key to successfully building a foreign company in Vietnam and get funding, as it will be an interesting market in Southeast Asia. Viettonkin Consulting able to help you prepare for your company’s expansion in South East Asia region.

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