Though Singapore has long ruled the region's booming venture capital and private equity investment market, new players, including Vietnam, are emerging and could take its crown.
Warburg Pincus is investing US$370 million in Techcombank. Photo: Internet
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Though Singapore remains Southeast Asia’s investment hub, vibrant start-up ecosystems are emerging across the region, the survey states, adding that together, Indonesia and Vietnam generated 20 percent of the region’s private equity deal value over the past five years, and that percentage is likely to grow.
According to the survey, governments’ initiatives throughout Southeast Asia have played an important role supporting venture capital and vibrant start-up centers. In 2016, the Vietnamese government announced it would offer legal and financial support to 2,600 start-ups over the next 10 years through its accelerator, Vietnam Silicon Valley.
What is abundantly clear is that the pie is growing fast with deal value set to soar to US$70 billion over the next five years, double that of the previous five years, the survey showed, predicting that the region will produce at least 10 new start-ups that rapidly achieve market valuations of US$1 billion or more by 2024.
According to the survey, scores of new investors have been pouring into the region, attracted by strong macroeconomic fundamentals, the chance to invest in emerging regional champions and a deepening secondary market for deals of all sizes. The mix includes a combination of local venture capital funds and private equity operators, sovereign wealth funds and global funds.
Huge opportunities
Vietnam has so far also lured many big private equity investors such as Warburg Pincus, KKR, TPG and Mekong Capital.
Warburg Pincus is investing more than US$1 billion in Vietnam, of which US$370 million is in Vietnam Technological and Commercial Joint Stock Bank (Techcombank).
Jeffrey Perlman, Southeast Asia chief of Warburg Pincus, said that Warburg Pincus is relishing its opportunities in Vietnam as the economy grows and capital markets develop. "It's a market that we think there's a lot of opportunity in," he said.
Meanwhile, Mekong Capital’s Mekong Enterprise Fund II has recently successfully divested 100 percent of its final remaining investment in Vietnam, resulting in the fund achieving a net return multiple of 4.5 times and net internal rate of return of 22.5 percent for its investors. This marked it as one of the most successful funds in the Asian private equity scene.
According to a report on private equity in Vietnam released by Mekong Capital, there are many drivers to the growing interest in Vietnam including a stable political backdrop, a GDP growth hovering around 6 percent, and the increasing number of large-sized companies.
“Part of this has been driven by liberalization of the Investment Law and the Enterprise Law,” the report says. “The changes make it easier for funds to structure their investments and to invest in more sectors with greater certainty.”
Besides, Brahmal Vasudevan, founder of Malaysia-based investment fund Creador, which plans to spend as much as 15 percent of its upcoming US$500 million Creator IV fund on Vietnam-based private equity over the next three years, said: “We see tremendous opportunities for growth capital along the lines of emerging companies, but also the Vietnamese government continues divestment of state-owned enterprises.”
According to the Ministry of Finance’s plans, the number of state-owned enterprises in Vietnam will be reduced from the current 583 to around 120 by 2020 as the government is looking to speed up the divestment process.
