It has been a remarkable month with a number of exciting developments in the local market, from new investments in the ride-hailing sector to new partnerships on the fintech scene. The most anticipated event of the month was the US - ASEAN business mission that saw over 50 US companies, including major tech players such as SpaceX, Netflix, and Boeing, visit Vietnam to explore investment and sale opportunities here. (Check out the “Vietnam Tech in the News” section for more).
In contrast, March was incredibly turbulent for the global banking sector. An unprecedented number of major banks, including Silvergate Bank, Signature Bank, and Silicon Valley Bank (SVB), failed, while others such as First Republic and Credit Suisse teetered on the brink. The collapse of these banks, in particular SVB, will have a great impact on the tech ecosystem globally, as many VCs and startups rely on these institutions for financial services and support. Check out the Spotlight section where we go into greater detail and also offer a personal recount of the event itself.
Last but not least, our team at AVV continues to be busy in our quest to support the local startup ecosystem, from organizing a workshop for women founders to building relationships with entrepreneurs via local events. See what we have been up to in the “AVV in Action” section.
Until next time,
Vietnam Tech in the News
Pham Nhat Vuong, VinFast owner, set up a new company called Green and Smart Mobility (GSM) that will supply electric motorbikes and cars and also invest in Be, a rival of Grab and Gojek in Vietnam. Meanwhile, Be will be working with its banking partner, Vietnam Prosperity Bank, to provide drivers with preferential policies to buy or lease Vinfast EVs at affordable prices.
With the added capital, Medigo plans to strengthen its services and develop a healthcare ecosystem that includes remote doctor consultation, 24/7 quick medicine delivery, and home testing services in Vietnam.
The mission, led by former U.S. Ambassador Ted Osius - an advisor of AVV, aims to explore investment and sales opportunities in Vietnam, a rapidly growing Southeast Asian nation. Prominent companies such as SpaceX, Netflix, and Boeing are among the participants, indicating a rising interest in Vietnam as a global manufacturing hub.
The partnership with MoMo gives Western Union increased access to a major remittance market, which is expected to hit $19.6 billion this year, accounting for 2.5% of total global remittance inflow. On the other hand, this deal allows Momo to expand its value proposition and solidify its standing within the local fintech sector.
The Collapse of SVB and Its Repercussion
Silicon Valley Bank (SVB) was once the go-to bank for technology companies around the world. However, a series of ill-fated investment decisions led to its collapse. The bank invested heavily in long-dated US government bonds, including mortgage-backed securities, which were considered safe at the time. But when the Federal Reserve started to rapidly hike rates to combat inflation, SVB’s bond portfolio began to lose significant value. As economic conditions soured over the last year, with tech companies particularly affected, many of the bank’s customers started drawing on their deposits. This forced SVB to quickly sell its bond portfolio at a loss to raise funds. However, the very public and sudden sale triggered a panic attack in the market, leading to a run on the bank.
The US government's quick response in guaranteeing all deposits of the bank's customers contained immediate concerns of widespread contagion. However, there are longer-term questions about whether SVB’s vulnerability to rising interest rates is comparable to other banks through an over-exposure to falling bond prices. To counter the risk, the Federal Reserve has unveiled a new program that allows banks to borrow funds backed by government securities to meet demands from deposit customers. This is designed to prevent banks from being forced to sell government bonds that have been losing value due to rising rates.
While it is still quite early to evaluate the full repercussions of the collapse of SVB, it is expected to have a major impact on the venture debt market, giving rise to lower valuations for start-ups in an already tough funding environment. SVB was the pioneer and linchpin of a venture debt market that offered start-ups an alternative source of funding without sacrificing equity stakes or swallowing a lower valuation. The bank accounted for around 60% of all venture debt deals in California, and roughly 10% of all deals in the US. Access to venture debt is a lifeline for many startups who are now relying on debt in larger numbers as interest rates rise and equity funding dwindles. With SVB currently being auctioned off by regulators, founders are anxious that access to venture debt will dry up, and existing loans may come under pressure, potentially causing a ripple effect on the ecosystem, resulting in many high-value startups going out of business.
A Personal Perspective from AVV
Here is how Binh Tran, a General Partner of AVV, recounted the event.
On Friday, March 10, at 2:06 am Vietnam time (or Thursday, March 9, 11:06 am Pacific time), I received, unread, a cryptic Slack message from Eddie. Just a link, no small talk:
I couldn't help but wonder if it was Eddie's 2-year-old running a sleep deprivation experiment on him or the explosion of messages from our US-based VC friends on WhatsApp keeping him alert. Either way, Eddie’s vigilance was commendable.
Fast-forward to 6:21 am, when I rolled out of bed, squinted at my phone, started to process what happened and responded, "Hey, we need to chat. Wire cutoff in 10 min."
Allow me to share the unfolding of that rather eventful day:
- 7:29 am: We submitted payroll wires with the utmost urgency
- 7:55 am: Received an earnest email from one of our institutional LPs, suggesting we "reduce exposure to the bank for all accounts to under USD 250,000."
- 8:09 am: Consulted our LP advisory council regarding our plan to distance ourselves from SVB
- 8:39 am: Gathered the team to discuss the SVB situation, examined our exposure, and started checking in with our portfolio company founders
- 11:58 am: Initiated banking conversations with Wells Fargo and JP Morgan
The next day, SVB found itself placed into receivership.
In a fortuitous turn of events, the Federal Reserve issued a statement the following day, assuring that all deposits were fully guaranteed:
That news brought us a collective sigh of relief and allowed us some breathing room to develop a treasury policy that ensures our funds are fully insured. It also gave us time to identify bank partners who can provide the same level of service that SVB had provided to the tech community.
Crisis reveals character, and we are grateful for our exceptional team and sophisticated LPs who have supported us through this challenging period.
AVV in Action
1. Women Leaders Forum 2023
Earlier this week, we hosted the highly-anticipated Women Leaders Forum 2023 in collaboration with Amazon Web Services (AWS) and TechX. The highlight of the event was an interactive workshop conducted by AWS, enabling attendees to learn practical strategies to navigate the fundraising landscape. Participants also had the unique opportunity to engage with industry thought leaders from top-tier venture capital firms, discussing different aspects of building a startup in a roundtable format. AVV's very own Senior Investment Managers, Thao Nguyen and Sohun Bae, also joined the lineup of thought leaders to share their valuable expertise on valuation and people management.
2. Study Trips
AVV recently welcomed several MBA student groups touring Vietnam, including MIT Sloan School of Management, Northwestern Kellogg School of Management, and Stanford Graduate School of Business. For each group an AVV colleague shared insights about the startup ecosystem of Vietnam.
3. AVV Founders & Friends Podcast
We've just released the latest episode of AVV Founders & Friends Podcast, featuring Jason Kan, COO of Virtual Internships, who shares his insights on the challenges of building a strong team when your team is distributed worldwide. Jason has been working at Virtual Internships for over 3 years and he has helped design and scale the org from 3 to 130+ people. Tune in to the latest episode to hear his tips on how to build a successful remote team culture and make your processes work for you.
4. Solana Hacker House
Earlier this month, Eddie Thai, AVV General Partner, and Thao Nguyen, AVV Senior Investment Manager, participated as moderators in the Solana Hacker House event organized in Ho Chi Minh City. They led two panels, one focused on the evolution of the gaming business and the other on fundraising in a bear market. Their expertise in these areas allowed them to ask insightful questions and facilitate engaging discussions among the panelists and audience.