Vietnam’s tech unicorns seem to be in no rush to get listed in the current market environment. At Tech In Asia’s Saigon Summit on Thursday, prominent names such as VNG and VNLIFE emphasised a well-prepared and sustainable path to public listing rather than pursuing an initial public offering (IPO) at any cost.
VNG withdrew its IPO registration in the US earlier this year, while VNLIFE has no listing plans in these challenging market conditions.
Le Hong Minh, VNG’s founder and CEO, emphasised the importance of thorough preparation before embarking on the IPO journey. He highlighted the complexities involved in transitioning a technology company like VNG to a publicly listed entity, mentioning the need for meticulous organisational restructuring and operational optimisation.
Asked about its IPO timeline Minh said: “I don’t know”, adding that despite being technically ready for an IPO, timing is crucial, and rushing into the process amid unfavourable market conditions may not yield the desired outcome.
VNLIFE group CEO and board member Niraan De Silva, meanwhile, shed light on the challenges faced by Vietnamese tech companies in going public abroad, especially in terms of attracting interest from US investors.
“There is genuinely a lack of interest. When we look at the US market, with $300 billion listed companies, there are IPOs that are raising $2-3 billion. A lot of them don’t really care too much about emerging Vietnamese technology companies. As a technology company, I think those are challenges,” Silva said.
While he did not disclose too much, it seems that the complexities of a local IPO may not align with VNLIFE’s current goals. “I believe that liquidity will come from selling to somebody bigger and more long-term,” he added.
Regulations related to local IPOs present significant challenges for technology companies. Firstly, there is a lack of awareness among potential investors about technology-based businesses. Secondly, even with a strong local investor base, many retail investors may lack the expertise to comprehend the intricacies of such companies compared to more traditional investment options like real estate or healthcare.
Communicating the long-term vision and potential of technology companies to investors is often met with scepticism, especially when immediate profitability is not guaranteed. Thus, even a local IPO comes with its own set of obstacles.
Even as deals in the tech startup space have been bleak, Vietnam is anticipated to see an uptick in exit activity driven by higher M&A interest from both foreign and local investors.
“As the market matures, local players have shifted from passive participants to pivotal architects of the M&A landscape, actively enhancing tech capabilities and market presence through strategic deals,” said the report, a joint publication of local venture capital firm Do Ventures and the National Innovation Centre.
In addition to inbound deals like Sea Limited’s acquisitions of Foody and Giao Hang Tiet Kiem, PropertyGuru’s acquisition of Batdongsan.vn, and Ant Financial acquiring eMonkey, Vietnamese companies have also bought startups in recent years. Not only have mature tech companies like FPT and MoMo invested in smaller startups, but local conglomerates Vingroup, Masan Group and Sovico Holdings have also strengthened their technology and digital capabilities through M&As.
One of the largest acquisitions was Masan’s control investment in credit-credit-scoring company Trusting Social.
In 2021, Vietnam-based VNLIFE Corporation, the parent firm of payment unicorn VNPAY, raised over $250 million in a Series B funding round led by General Atlantic and Dragoneer Investment Group, with participation from PayPal Ventures; and EDBI, the corporate investment arm of Singapore’s Economic Development Board. Singapore sovereign wealth fund GIC and SoftBank Vision Fund 1, both existing investors, also participated.
Riding Vietnam’s growth
Silva believes that the entrepreneurial spirit of the Vietnamese people is a driving force behind the country’s growth, especially in the thriving fintech market. Unlike other Southeast Asian countries where there is a noted lack of productivity and focus, Vietnam stands out with its dynamic and bustling streets filled with individuals actively contributing to the nation’s progress.
VNLIFE, which started as an SMS solutions provider, went on to develop comprehensive on-channel banking solutions that cater to the changing needs of the market.
The 20-year-old VNG has also seized opportunities to transform and adapt to the shifting paradigms of the digital age. Founded with a vision to capitalise on Vietnam’s burgeoning Internet user base, it underwent a strategic evolution that propelled it to the forefront of the country’s tech ecosystem.
The core business of VNG is currently experiencing global expansion. Minh said that VNG’s recent foray into the digital business landscape includes the creation of enterprise platforms and software, reflecting its long-term ambition to nurture and advance this sector.
MoMo, meanwhile, is a fintech super app. It is the largest payment platform in Vietnam with 30 million users, 50,000 partners, and 300,000 payment points across 63 provinces.
MoMo executive vice chairman and CEO Nguyen Manh Tuong said that scaling a company and leading the market requires strong leadership and strategic decision-making. MoMo’s emphasis on building a strong company culture and empowering its employees to take ownership has been instrumental in driving growth and maintaining a competitive edge.
In 2021, Vietnamese payment app MoMo raised $200-million Series E funding led by Japanese bank Mizuho. Other investors participating in the round included Hong Kong-based Ward Ferry Management, and Series D backers Goodwater Capital and Kora Management.
The challenges
The evolving regulatory environment is one of the biggest challenges for fintech companies, which are already operating within a highly regulated framework. Compliance with new policies can be cumbersome and hinder scalability for startups like VNLIFE.
In addition to changes in payment regulations, fintech startups also face regulatory challenges related to data protection. Firms like VNLIFE, which process vast amounts of transactions and serve a large user and merchant base, must prioritise data security and management. With local data protection regulations becoming more stringent, the onus is on fintech companies to safeguard sensitive information and uphold data privacy standards to avoid severe consequences, including criminal liability and hefty fines amounting to 5% of their revenue, according to Silva.
Failure to adhere to data privacy laws could lead to substantial penalties, making it a daunting prospect not only for fintech companies but for businesses across various sectors operating in Vietnam.
In a rapidly evolving sector, staying compliant and adapting to changing regulations is critical for sustained growth and credibility, said MoMo’s Tuong.