In 2022, at the Vietnam Venture Summit, forty one funds stood up and pledged one and a half billion dollars for Vietnamese startups. The pledge covered the three years from 2023 to 2025.
Through May of this year, Vietnamese founders raised twenty eight point eight million dollars. Ten rounds.
And next month, on the twenty first of September, FTSE Russell reclassifies Vietnam from a frontier market to a secondary emerging market. FTSE’s own estimate is that about six billion dollars of passive index money follows it in.
Six billion dollars, arriving on a scheduled date, into the stock exchange. Twenty eight point eight million, across five months, into companies.
So I do not want to hear that Vietnam has a funding problem. Vietnam is about to be soaked in money. It is just the wrong money.
I will defend this next line anywhere. Vietnam has the best engineering talent base in Southeast Asia. It also spent recent years being told it was the next China, then the next India, then the next Indonesia, then whatever the next thing was that year. Every one of those labels pulled in capital. Not one of them pulled in the kind of capital that funds a company and then hangs around for eight or ten years to find out whether it worked.
This is not about how much money there is. It is about what kind. The amount was never the problem.
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One. Four taps, and the one that is off
There are four ways money flows into Vietnam right now. Three of them are running hard. One has been turned off. Almost every story you read about the country confuses them.
Tap one is venture capital, and that is the one that is off. Through May, Vietnamese startups raised twenty eight point eight million dollars across ten equity rounds. In the same period last year it was two hundred and twenty seven million across fifteen rounds. Deal count barely moved. Deal value fell about eighty seven percent. Those are Tracxn numbers and they run through May, not through the full year, and I am going to keep saying that, because a five month figure is not a year.
Let me be fair about the baseline, because this is where people overcook the story. Vietnam was never a billion dollar a year venture market. Full year 2024 was four hundred and ninety four million dollars across sixty eight deals. So this is not a collapse from a great height. It is something more boring and more serious. Sixty eight deals a year became ten deals in five months. That is roughly one venture round every two weeks, in a country of a hundred million people, with the deepest engineering talent pool in the region.
And Vietnam is not alone in it. Across Southeast Asia the first half was thin. The regional dollar totals held up because people keep stuffing them with data centre deals that should never have been in a startup funding report in the first place. Strip those out and it is down across the board. Vietnam is the sharpest version of a regional problem, not a Vietnamese peculiarity.
Tap two is index money, and it is running hard. In April, FTSE Russell confirmed the upgrade, effective the twenty first of September and phased into the global index series through next year. FTSE estimates about six billion dollars of inflows from passive trackers. The World Bank puts near term flows at about five billion and says the long term potential could reach twenty five billion by 2030. Those are their numbers, not mine, and both institutions have an interest in the story being good, so hold them loosely. Even at half those figures it is the largest single capital event in Vietnam’s modern financial history.
Here is the part nobody says out loud. Ask what passive money actually does.
It buys the index by a pre-designed weighting. It does not read a deck. It does not take a meeting. It does not care who the founder is or what the product does. It buys the listed companies in proportion to their weight, which in Vietnam means banks, property and retail. And when it leaves, it leaves the same way, by weight, on a rebalance date, regardless of how good your quarter was.
Not one dollar of that six billion is available to a founder with a working product and eighteen months of runway. Not one. It is not that kind of money.
Tap three is borrowed retail money, and it is running very hard. Margin lending at Vietnamese brokerages hit about four hundred and forty five trillion dong at the end of the second quarter, roughly sixteen point nine billion dollars. At the start of 2023 it was one hundred and twenty five trillion. Three and a half times more borrowed money in three years.
This is the bit that should make you sit up. That borrowed money is now the main thing absorbing foreign selling. When overseas funds sell Vietnamese stocks, it is domestic retail investors, on credit, taking the other side.
The counterargument is a real one. The prevailing view among Vietnamese analysts is that this is not yet a problem: brokerages have strengthened their buffers, July’s margin calls were localised, forced selling did not spread. That is the majority position, held by people who know that market far better than I do.
My read is simpler. When the buyer holding your market up is borrowing to do it, your market is not deep. It is propped. Contained and safe are different words, and the gap between them is where people lose money. Borrowed positions unwind faster than anyone models them.
Tap four is public listings, and it is reopening hard. Four Vietnamese IPOs raised more than eight hundred and thirty million dollars in the first half of this year, at a combined market value just under seven billion. I am going to hold that one, because tap four tells you the most and it deserves its own section.
Put the four side by side. Vietnam has built a functioning machine for turning domestic savings into listed equity. It has built almost nothing for turning savings into new companies. Both get called a capital market. Only one of them compounds into industries that did not exist before.
Think about what that does to a talented twenty seven year old in Hanoi who wants to build something. The shortest path to capital is not a seed round, because there are ten of those a year. It is a salaried job at a multinational, a role inside a listed group, or a family business with a balance sheet. Every one of those choices is rational. Individually they are all the right call. Collectively they are how you end up with a country that has world class engineers and no company anyone outside the country can name.
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Two. The world found Vietnam’s engineers and decided to rent them
Vietnam has more than eighteen thousand four hundred specialised AI engineers, the largest pool in Southeast Asia. Demand for them is running at about two and a half times where it was in 2023. On technical and system design assessments, the top tier score within about eight percent of their American peers, at sixty to eighty percent lower cost.
Disclosure on those figures, because it matters. Most of them come from recruitment firms and offshore advisory shops, which are businesses that exist to sell you a Vietnamese engineering team. Take the direction as real and the decimal places as marketing. Even discounted heavily the picture holds. This is a deep, cheap, genuinely excellent engineering base, and the world knows it. Vietnam is an exporter of talent.
Look at what the world is doing with it. Nvidia has been expanding its hiring in Vietnam across manufacturing and operations roles tied to high end GPUs, with Foxconn reported as a possible partner, and it keeps AI model development roles in Hanoi and Ho Chi Minh City.
Be careful here, because this is exactly the kind of story that gets inflated in a group chat by Friday. Nvidia has not announced a factory in Vietnam. What is reported is hiring, in roles consistent with more advanced work. That is a signal, not an announcement. But take the signal seriously, because it tells you the whole story in one move. The world found Vietnam’s engineers, and it decided to rent them.
Nobody in this story is the villain. Nvidia hiring hundreds of engineers in Hanoi is good for Hanoi and good for those engineers. Hard currency, frontier work, none of the risk. A twenty nine year old with a mortgage and a kid who takes that job over a startup salary is making the correct choice, given the options in front of them.
The failure is that nobody local ever put a competing offer on the table.
And I want to be even handed about whose fault that is, because it is not only the money’s fault. Investors in this region got risk averse and clustered around whatever was already working, which is how you get ten rounds in five months. Founders own a piece of it too. Plenty of Vietnamese founders spent the last few years priced for a market that stopped existing in 2022, holding out for a valuation that was available once and is not available now. A round that closes is worth more than a valuation you are still defending. That is not investor propaganda. That is arithmetic about runway.
The reporting around Vietnam’s funding reset names constraints that are unglamorous and real: reluctance to hire foreign expertise, language barriers, and legal and foreign exchange rules that make a Vietnamese entity harder to fund than a Singapore one. Some of that is business culture and takes a generation. Some of it is paperwork and could be fixed inside a year. In fairness, the government has made real moves on the rules, and the direction of travel is good.
But underneath all of it sits one sentence, and it is the sentence I would put on the wall of every ministry in the region, and every university.
A salary is not ownership.
When an engineer in Hanoi builds something excellent on an offshore contract, the value of what they built shows up on somebody else’s cap table, in somebody else’s currency, in a company listed on somebody else’s exchange. They get a good wage, which is not nothing, especially if you remember what a good wage in Vietnam bought fifteen years ago. They do not get the asset.
There is a serious counterargument to all of this and it is called India. India’s services industry created enormous wealth, built a professional middle class, and produced the management layer that now runs a large share of global technology. Some of the people who left came back to fund the next generation through angel networks. Nobody should sneer at that.
But look at the shape of it. That wealth accrued slowly and mostly to a handful of very large firms. The product companies came a generation later, out of a domestic market big enough to fund them. Vietnam is being offered the same deal thirty years later, with a smaller domestic market, and with AI compressing the window in which cheap excellent engineering is a durable advantage.
I invest at seed across this region, and I will tell you what I actually see in the pipeline. Vietnamese technical teams are frequently the strongest engineering we look at. What is missing is not ability. It is that fewer of them are choosing to own the outcome, because the local machinery for owning an outcome barely exists.
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Three. Sixty funds for a chain of electronics shops
At this point somebody tells me the money is simply gone. Hard market everywhere, rates are what they are, nobody is writing cheques. That is not false, but it is not fully true either. And you do not need to leave Vietnam to prove it.
Go back to tap four. Four Vietnamese IPOs in the first half of this year, more than eight hundred and thirty million dollars raised, a combined market value just under seven billion.
The one to look at is Dien May Xanh. Its offering raised about five hundred and forty five million dollars. Ninety three percent of the shares on offer were taken up. Around sixty domestic and foreign investment funds turned up for the book. It has been cleared to list and starts trading in Ho Chi Minh City, aiming at a market value of roughly three point eight billion dollars.
What is Dien May Xanh? It is a chain of electronics shops. It is the retail arm of Mobile World Group, which is itself already listed in Ho Chi Minh City.
Sixty investment funds, for a chain of electronics shops carved out of a company that was already public. Ten venture rounds, for the whole country, in five months.
Same city. Same year. Substantially overlapping pools of money.
There is a cheap version of this section and I am not writing it. Dien May Xanh is a real business with stores, revenue and staff. It deserves to be able to raise capital. A working IPO market in Vietnam is good news, and it is good news for venture too, because a functioning exchange is the exit that makes venture possible at all.
But look at the shape of what got funded. An established business, attached to a listed parent, with audited revenue and a decade of trading history, at the very safest end of the risk curve. That is where Vietnamese capital showed up in size, and it showed up in numbers that would fund the country’s entire startup base for the next fifteen years.
So here is the whole argument in one paragraph. Vietnamese savers will put sixteen point nine billion dollars of borrowed money into buying existing shares. Vietnamese and foreign funds will put five hundred and forty five million into one carve-out of a listed retailer. Passive index funds will put six billion into the exchange next month because a committee in London changed a classification. And the total that went into new Vietnamese companies, over five months, was twenty eight point eight million dollars.
Nobody in that chain is doing anything wrong. Every one of those decisions is defensible on its own. Collectively they add up to a country that will fund almost anything except a founder.
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Four. The Singapore number, and an honest caveat about it
There is one more number that explains the gap. Of the venture deals that do get done in Vietnam, Singapore based investors account for about thirty nine percent. Domestic Vietnamese investors account for just under twenty percent.
Now the caveat, because I do not think that figure means quite what it looks like. A Singapore domicile is often just a legal jurisdiction. Most venture funds in this region are domiciled in Singapore because there are only a handful of jurisdictions that are globally recognised and acceptable to institutional backers. Unless you are a government vehicle or a corporate arm, that is where the fund gets set up. So the Singapore share is probably inflated by structure rather than by geography.
What I take from it is different. The domestic number is small enough that whatever genuine local participation exists is likely concentrated in emerging managers, seed and pre-seed funds, and angel networks. That is exactly the layer a country needs to be thick, and in Vietnam it is thin.
So the risk capital that reaches a Vietnamese founder is mostly foreign and mostly arrives through Singapore, while the domestic capital, which is vast, stays parked at the safe end. Which means Vietnamese founders get judged against foreign comparables, on Singapore timelines, in Singapore governance formats, by people flying in. And the most common piece of advice those founders receive is to reincorporate in Singapore. As long as the operations and the founders stay put, a holding company on top is mostly a tax and fundability structure rather than an exit from the country. But it does slowly move where the value sits.
Nobody in that arrangement is paid to be first. And being first is the entire job of seed capital.
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Five. Four things I would actually do about it
If you are building in Vietnam right now, and you have been reading me describe your funding market as a set of taps pointed somewhere else, here is what I would do with this. None of it is comfortable.
One. Assume there is no local lead investor coming. Not as pessimism, as planning. Ten rounds in five months means the odds of a domestic lead finding you in time are close to zero. Build to the point where a foreign cheque is a decision somebody makes on numbers, rather than a favour somebody does you after an introduction.
Two. Price to close, not to signal. A five hundred thousand dollar round that closes in March beats a ten million dollar valuation you are still explaining in November. Your valuation is not your scoreboard. Your runway is.
Three. If you take state money, read carefully what the milestone actually measures. If it measures customers, revenue or retention, take it and be glad. If it measures headcount, local presence or filings submitted, you have been handed targets that have nothing to do with whether anyone wants your product. Not a reason to refuse it, because money is money and you need it to survive. A reason to keep two sets of numbers: the ones the grant wants, and the ones that tell you the truth.
Four. On the reincorporate in Singapore advice, which you will get from every investor you meet. It is often the right call, and it is often the right call across most of Southeast Asia. Just be clear-eyed about what it does. The company becomes fundable, and over time the brand and the value start to detach from Vietnam. Do it because it solves a real problem for you, not because somebody told you it is what serious founders do.
And to be fair to the money for a second, none of this is unique to Vietnam. I would say most of it in Kuala Lumpur, Manila or Bangkok.
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Six. When private capital thins out, the state sets the price
So what fills the hole? The same thing that always fills it.
Ho Chi Minh City is setting up a municipal venture fund, roughly sixty percent private capital and forty percent state, with target allocations across semiconductors, AI, biotech, green technology and robotics. Credit where it is due: the state money only pays in after the private contributions are complete. To be eligible, a company has to be established in Vietnam and commit to operating in the city for at least five years. Alongside it, Vietnam has stood up an International Financial Centre, inaugurated in Da Nang in January and in Ho Chi Minh City in February.
Last week I made almost exactly this argument about Malaysia. Different country, same quarter, same conclusion. I am not apologising for the repetition, because the repetition is the story. Across Southeast Asia right now, private venture is thin enough that the state has become the marginal buyer of startup equity. When that happens the state sets the price, and whoever sets the price sets the behaviour.
The design here is better than most. State money following private money instead of leading it is the correct way round, and somebody in that department understood the problem. The open question is who runs it and what they have actually done before, because we have watched that part go wrong elsewhere in the region.
Two places I would push back. First, the five year local presence requirement. I understand why a city asks for it, and it is still a constraint on a company that needs to go and live where its customers are. Second, and this is the trap I flagged in the Malaysian numbers, an allocation is a target, not deployed capital. A budget line is not money in a founder’s account.
There is a quieter risk that nobody puts in a press release. When the state is the buyer of last resort for equity, companies reorganise themselves around milestones instead of customers. You can hear it in a pitch when it happens. The deck starts answering a scoring rubric. The roadmap starts matching a sector allocation. And a company built to satisfy a rubric is very hard to turn back into a company built to satisfy a market.
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What all of this says together
Vietnam was the next China. Then the next India. Then the next Indonesia. It should be allowed to be the next Vietnam.
Every one of those labels brought in money that wanted the story. Hot money came in, hot money went out, and every time the story got difficult it left faster than it arrived. The talent survived all of it, which tells you the talent was never the problem.
So here is the test, and I think it is a fair one. Six billion dollars of index money arrives in September. A state backed fund is being assembled in Ho Chi Minh City. Ask again next August whether any of it produced one company that somebody outside Vietnam can name.
If the answer is no, we can stop calling this a funding gap. The money was here. It was just never designed for founders.
If you are a Vietnamese founder who has raised in the last twelve months, I want to hear who actually wrote the cheque, and where they were sitting when they wrote it.
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This piece accompanies this week’s episode of SEA of Startups. Real. Raw. Relatable. Listen on Spotify (
or YouTube (https://www.youtube.com/@SEAofStartups), and subscribe to the newsletter at seaofstartups.substack.com.
