Daehyun Kim, Partner at TheVentures ⓒPlatum
Vietnam is one of the most active overseas markets for Korean companies. Korean conglomerates such as Samsung, LG, and Lotte have already invested heavily in the country, and the growing preference for Korean products and culture is encouraging more Korean startups and individual entrepreneurs to enter the country.
TheVentures, a Korean early-stage startup investment firm, established its Vietnam office in 2015 to invest in local startups and help existing Korean investments enter Vietnam. Daehyun Kim, a partner at TheVentures Vietnam, previously founded ‘SELLIT,’ a concierge company for second-hand trade, in 2014. Recognizing its potential, the company was acquired by K Venture Group (now Kakao Investment) in 2015, just one year and two months after its establishment, and merged with Quicket, which operates the mobile secondary market Bungaejangter, in 2017. At Bungaejangter, Mr. Kim served as Chief Commerce Officer and led the B2C commerce business. We caught up with Daehyun Kim to find out why TheVentures is focusing on Vietnam, and what he thinks of trends in the local startup ecosystem.
-TheVentures had an early presence in Vietnam. Can you give us some background on that?
TheVentures have achieved significant results in Korea to date. Looking ahead 5 to 10 years and exploring emerging markets where new ventures are possible, Vietnam and India were identified as markets where Koreans can leverage their advantages. Among them, Vietnam is experiencing a startup boom, with most startups focused on solving social problems. Startups are filling the lack of social infrastructure, so many investment opportunities exist. We also felt that Vietnam was psychologically familiar and that we could fully utilize our experience.
– Your family is also moving to Vietnam in July. I guess that means you’re just as focused on Vietnam.
I think if you’re going to invest locally, you have to be there to get to know the local entrepreneurs and get a better understanding of the country. For my family, it was a no-brainer to make the move because it’s the best country for us in so many ways.
-TheVentures Vietnam has a strong focus on investment in local companies.
Yes, we do. We prioritize local companies. But we also look at categories where Korean startups can have an advantage.
-What categories of startups do you invest in? As a foreign VC, it must be difficult to invest according to local laws and regulations.
Many Vietnamese startups have parent companies in Singapore. Since they are subsidiaries in Vietnam, we can invest according to Singapore laws. Before making an investment, we carefully examine the relationship between the Singaporean entity and the Vietnamese entity. It is important to note that the Vietnamese market has specific licensing requirements depending on the type of business, some of which may not be available to foreigners.
We focus on education and commerce. The fact that our investment partners specialize in the consumer sector may be a factor. We are cautious about government-regulated or sensitive industries. For example, payments, especially foreign exchange, is a risky business for foreign VCs. But there are many other areas in which to invest in.
-Is it fair to say that there are great opportunities in education and commerce?
General shopping malls like Shopee and Tiki are already established in Vietnam. But there is still plenty of room for category-killer stores. In South Korea, people used to buy furniture in general malls, but now they go to Today’s House or Hanssem Mall. Vietnam is also entering this era. For such a business to be successful, it must go hand in hand with content, and we are trying to find startups that are good at that.
– What is the most important thing you look for when investing in a Vietnamese startup?
When TheVentures makes seed investments in Korea, the team is the most important thing. Vietnamese startups are no different, but one thing is essential: they must have a product. That is why we invest locally from the pre-Series A round. We invest a minimum of $300,000 and a maximum of $1 million. So, our portfolio companies in Vietnam are companies that have a product and are generating revenue and traffic.
And because we’re coming in at pre-A, we often come in where the company has existing investors. So, we also look at which investors are shareholders. This is to determine if the company is really credible. We also do due diligence with a local law firm. Usually when people invest in a startup, they don’t do a lot of due diligence. But we do at least 70% due diligence before we commit.
-I’ve heard that TheVentures favours co-founders. Is there a specific reason for that?
TheVentures is a VC made up of founders, so it’s based on experience. When I started my own company, I had five co-founders, which may seem like a lot, but it was a great support in a lonely and difficult situation. In fact, starting a company means facing a lot of challenges. At the end of the day, I think the power of co-founders is the reason why people can stick it out and get results like pivots and expansions. That is why we only invest in teams with two or more co-founders.
-Do you have any memorable stories about teams you have invested in?
One of the local Vietnamese companies we invested in was called ‘Airkitchen’. The founder was optimized for online business and had strong financial skills. However, since there was only one founder, we were initially hesitant to invest. We explained our investment principles and the next time we met, he brought in a co-founder with more than 10 years of F&B experience based in Hanoi. He also brought in a proven CTO. The combination of an online-optimized CEO, a co-founder with strengths in offline F&B operations, and a technology-optimized CTO was optimal, so we invested in March 2022. The company was doing about $30,000 in monthly transactions when we invested and is now doing about $400,000 in revenue, including local. The team is disrupting the online F&B delivery market in Vietnam.
– Vietnam is known as a country with a fast-growing entrepreneurship ecosystem. What do you think will happen in the future?
As a country, Vietnam’s growth is likely to continue for the foreseeable future. Many manufacturing companies are coming to Vietnam due to various global issues. The consumer market is also growing rapidly. This means that the rising income level of the population is creating a variety of opportunities. As the income level rises, the demand for quality services tends to increase. This trend is an opportunity for start-ups.
The quality of the talent pool is also improving. Especially in the US and other countries, more and more people are studying abroad and returning to Vietnam to start their own businesses. One of Vietnam’s strengths is its large pool of software engineers. The country graduates 80,000 developers every year. I think this combination will drive the startup market in Vietnam.
It’s also an opportunity for VCs like us. We are confident that the teams we invest in will lead Vietnam’s digital generation in five or ten years.
However, the opportunities in Vietnam’s startup investment market will not be endless. It will be valid for the next few years, but after that, it won’t be easy. Later, Vietnamese startups will grow a lot, and you may not have the opportunity to invest in them. I think the next 24 months or so will be the best time to invest in early-stage companies in Vietnam.
-Vietnam is often mentioned in the IT outsourcing space. What is the quality of the local developer pool?
Vietnam used to be the seventh-largest outsourcing market in the world, but due to the Ukraine-Russia war, it is now ranked fifth. To take advantage of this, large companies such as LG and Samsung are opening IT centers in Vietnam. It is also a time when engineers who have built up their skills through outsourced development are coming out one by one to be at the forefront of entrepreneurship. They are expected to lead the local online market.
-You’ve met a lot of Vietnamese founders regardless of investment. How would you characterize Vietnamese founders and startups?
There are two things I’ve noticed, one is the ability to persevere. For example, there is a hotel management startup called ‘House’ that we invested in. It specializes in one- to two-star hotels, and it was in danger of going out of business right after the pandemic hit. But the company survived the pandemic period, got back in business, and now operates 34 hotels. The founders of the company sold their houses, sold their cars, and lived with their families in the hotels they managed during the hard times. As an investor, I’m very grateful that they persevered and got back on their feet. Not just House, but Vietnamese founders in general are patient.
They are also problem solvers. When they encounter a problem, they have a very strong will to solve it, especially if they see a need that the country or society can’t fill. We think that’s a good thing about local startups.
-Many startups see Vietnam as a target market. What types of startups are likely to succeed in Vietnam?
I think a model like VENDYS, which provides mobile food vouchers and various social services, has a good chance of succeeding in Vietnam. In Vietnam, start-ups as well as top companies are focusing on HR to prevent employee turnover. Solutions like VENDYS will be in high demand as it touches on the welfare sector. Vietnamese youth are very receptive to mobile services.
Vietnam also has a strong F&B industry, but there is no reservation solution at all. Even if you find them on Google Maps and call them, it’s often frustrating because you can’t understand each other. So, I think a model like Catchtable, a restaurant reservation and customer management platform in Korea, will work well.
-There is an argument to be made for approaching the Vietnamese market in a roundabout way rather than the normal way.
I don’t think it’s a good idea to generalize from a few extreme cases. There are many companies that do well with a normal approach of hiring well, paying well, and providing good benefits. Sure, some companies may need a fast track, but Vietnam is changing rapidly. The biggest issue in Vietnam right now is the fight against corruption. I think society is self-correcting very quickly. In the near future, doing things by the book will be the norm.
-Both domestically and internationally, people are saying that we are in an investment winter. When do you expect the thaw to come?
Being in Vietnam, I don’t feel like I’m experiencing an investment winter. Vietnam is a domestic market, and it is dynamic. I can’t say that there is no downturn in the manufacturing industry, but there are many demands from the market and young people are eager to solve them.
Personally, I think the third or fourth quarter of this year will be better than now. However, I think the direction of VC investment will change a bit. I think we’ll see a shift from investing in developed markets to emerging markets that are growing. From that perspective, I think investing in Vietnamese digital startups is a good opportunity.
-You have made the transition from entrepreneur to investor. You exited a startup with significant success, but why did you choose to invest instead of starting over as a founder?
Having been a founder, I wanted to try my hand at investing. Based on my experience as a founder, I realized that investing is best done at an early stage, and TheVentures is the best place to do it. I was also motivated to support the growth of local Vietnamese startups through my investment. I want to share my experience with startup founders so that they don’t have to go through the same trials and tribulations I went through. It is rewarding to see TheVentures’ assets being used in a meaningful way.
-Startup VCs do more than just make financial investments. What do you think is the essence of the VC business?
It’s all about trust. I think that’s true of any business, not just VCs.
-Is there anything different about being an investor now than when you were a founder?
I think the difference is being an observer and taking a step or two back. I try to tell them what I see from an objective point of view. As an aside, the number one thing I tell startup founders is to take a break. A lot of founders get caught up in FOMO (fear of missing out). They focus on the value and the essence of what the company is trying to do. Don’t lose sight of how focused you are on your customers.
-Finally, what are the short- and long-term plans for TheVentures Vietnam?
TheVentures plans to invest in at least 5 Vietnamese startups in the second half of this year. The ultimate goal is to proactively discover and invest in startups that will lead the Vietnamese digital market and become a partner in their journey.
We also want to create a meeting point between the Korean and Vietnamese startup ecosystems. So far, the connections between Korea and Vietnam have been in manufacturing or real estate. We believe that the two countries can build stronger connections between ventures, startups and technology companies. We believe that the experience and know-how of successful Korean entrepreneurs can be transferred to Vietnamese startups. We will serve as a bridge between the two entrepreneurial ecosystems.
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