Venture funds, who are they?

DFJV, belonging to the joint venture between VinaCapital and the US Draper Fisher Jurvetson proves to be the best-known venture fund in Vietnam because it was one of the first funds established in the country. Besides, the Japanese CyberAgent fund, IDG Ventures Vietnam (IDGVV) are also the well-known names.

IDGVV has been known for the investment portfolio mostly targeting four important business fields of the Vietnam’s national economy, including e-commerce infrastructure, information and communication, technology and entertainment media.

IDGVV also considers jumping into other business fields, such as clean energy, retailing, healthcare and education. It is raising the second fund, about $150 million, to make investment in the above said fields, which is expected to begin the disbursement by mid 2013.

IDGVV has succeeded with its investment deals, with one or two successful affair in every business field. Its investments in VC Corp, the owner of Bamboo, CafeF, and in PeaceSoft, which runs NganLuong.vn and ChoDienTu.vn both have brought relatively high internal rates of return, above 30 percent. The two companies are operating in the fields of information – communication and technology trade.

It has also succeeded in entertainment media and e-commerce infrastructure when injecting money in the two firms which are dominating the domestic market – VinaGame and DiaDiem JSC, the founder of NhomMua.com.

Nguyen Hong Truong, Deputy President of IDGVV, said the fund makes investments in the information and communication based fields, because these prove to be potential fields.

There are two reasons Truong has cited to prove that these are the potential fields. First, more and more businesses in Vietnam tend to shift to use online and mobile services in order to optimize their production costs and business effectiveness.

Second, Vietnam now witnesses the strong development of the digital content services following the development of Internet and mobile devices, especially in entertainment, music, education, games, mobile content and social communications.

While IDGVV is ready to inject money in the projects it believes have great potentials, DFJV always keeps cautious about its investment decisions.

Than Trong Phuc, Managing Director of DFJV, said DFJV seeks the businesses which are on the rise, not the start ups or fledgling businesses with vague business ideas.

Facing big challenges

Phuc has admitted that of the operational venture funds in Vietnam, IDGVV is the only fund which is really “adventurous,” while his DFJV is not. This has been explained by the fact that the Vietnamese market still does not have enough good conditions for venture funds to operate successfully.

In the eyes of investors, South East Asia, not including Singapore and Indonesia, venture funds meet higher risks in their investments, because while there are good and original ideas, the infrastructure and supporting factors remain limited. 

Therefore, Phuc said, DFJV dares not pour money largely into small investment deals. He also said that though DFJV also considers pouring money into e-commerce, it would only be ready to make disbursement in some more years. It is because high risks still exist in e-commerce development in Vietnam. 

E-commerce businesses still cannot build up their prestige among consumers, while people’s consumption habit shows that Vietnam has yet ready for a real e-commerce model like eBay or Amazon.

vietnamnet