‘Vietnam can be an excellent launchpad for regional, global startups’: says Eddie Thai

It was an investment in Sky Mavis (Axie Infinity) that turned the spotlight on Ascend Vietnam Ventures, a new VC kid on the block. The early-stage VC firm, launched by former 500 Vietnam Partners Eddie Thai and Binh Tran in May 2021, made several successful bets after this investment, including in Kilo and Virtual Internships.

Recently, Ascend Vietnam announced that its early-stage fund, AVV Alpha, exceeded the US$50 million target amidst the funding winter, which has affected growth-stage startups globally. Against this backdrop, e27 sat with Eddie Thai for an interview. He touched upon the funding winter, the Vietnamese startup sector and the local Web3 industry.

Edited excerpts:

The world is gripped by a funding winter. How is the Vietnamese startup sector faring amidst the global downturn?

It has been pretty okay so far.

Part of it is probably a lagging effect. [As the startup world is undergoing a winter], public markets are going south and growth equity and early-stage capital are pulling back. However, it didn’t impact Vietnam much because the local startup scene is a bit younger than others; there are more early-stage startups and fewer late-stage startups.

The second reason is probably gravity. Whereas valuations in markets like the US were often untethered from fundamentals, valuations in Vietnam were probably less inflated by comparison. In other words, the bigger they are, the harder they fall.

Also Read: 500 Startups’s top execs set up new seed-stage VC firm Ascend Vietnam Ventures

But I think Vietnam’s relative insulation from the global downturn is more a factor of the positive forward opportunity. As per the International Monetary Fund’s latest World Economic Outlook (even though it was released in April after a bunch of headwinds hit the global economy), Vietnam’s GDP is forecast to grow at least 5 per cent this year and 7 per cent next year. And within that growth, technology is going to be a significant component.

How does Ascend Vietnam Ventures look at the overall investment scene in Vietnam?

Vietnamese founders have endured harder times before. Not long ago, Vietnam received only 0.3 per cent of all venture capital worldwide. Since then, the digital economy and startup scene have changed dramatically. More and more entrepreneurs worldwide are discovering that Vietnam can be an excellent launchpad for their regional or global businesses. It has great tech talent, affordable startup costs, and a relatively accessible local market.

Due to the winter, many high-growth companies, including unicorns, fired employees en masse as they could not raise follow-on- funding. What does this indicate? Will the turn of events force growth-stage companies to go slow on their growth plans and focus on profitability?

I have indeed heard of companies in the US and elsewhere laying off many employees. As I understand, it’s not that these firms have not been unable to raise follow-on funding. Instead, for many companies, it has been pre-emptive cost-cutting in anticipation of a tougher fundraising climate and slower growth in the near term.

For most founders, this is the hardest thing to do. But it may be the difference between running out of runway vs survival and long-term success.

A tougher fundraising environment in the near term means many companies will have to step off the growth gas and work on their unit economics. But we have seen in past downturns that the best companies (and especially the ones that already have excellent unit economics) will continue to attract capital.

Globally, there are hundreds of unicorns, but most are non-profitable and don’t have a clear profitability path. For example, in India, only 25 per cent of the 100+ unicorns are profitable. The rest are burning cash. So do you think we should really celebrate unicorns?

Surely, the ultimate celebration should be for companies that achieve sustainable impact at scale. Yet the entrepreneurial journey to get there can be long and hard, so it’s important for founders to be able to celebrate intermediate wins when they have them.

Most of the entrepreneurs I have worked with only take a brief moment to do so before they turn back to their work. With each successive milestone, they feel more and more pressure.

Ascend seems to be very bullish about Web3. Does it have plans to back more Web3 companies from AVV Alpha? What is Web3’s future in the country?

We believe in the long-term potential of Web3 and the paradigms it enables to solve problems and create experiences in unique ways. It’s a reason we have hired our friend and former colleague Edith Yeung (one of the most influential people in crypto) as advisor of AVV Alpha.

Also Read: The 27 Vietnam startups that have grabbed our attention this year

We want to continue to be thoughtful about how we approach the space (we invested in only two Web3 companies with our prior fund). We need to know that each project will do what it purports to do in a way that’s genuinely better than other approaches. And of course, we will want to see the project led by a strong team with a long-term perspective and proper incentive alignment.

Crypto winter is tough on folks, but the silver lining is that it will clear out some of the hype and noise and allow stronger teams to emerge. So we expect to invest in a handful of companies out of AVV Alpha, perhaps three to five out of over 25 companies.

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