CyberAgent Ventures Inc, a subsidiary of Japanese leading internet group CyberAgent Inc, set up their first office in Vietnam in 2009. First headquartered in the capital city of Hanoi, and then moved to Ho Chi Minh City, last month Hanoi office was re-opened due to the fact that internet business has been showing tremendous growth while number of technopreneurs is growing rapidly. Both offices deliver investment, incubation and operational activities.
The investment made in Vietnam has reached seven companies focusing on internet service industry: VietNam Price Joint Stock Company (E-Commerce Services), VNG Corp (Online game and Social Networking Service), GMC (Mobile Game Developer), Clever Advertising Corporation (Internet Advertising Agency), VMG Media Joint Stock Company (Mobile Content Provider), BaoKim (Online Payment) and VGame (Browser online game). With the newly re-opened Hanoi office, their investment and incubation activities in Vietnam continue. This month three more deals will be closed and it will bring their portfolio to ten companies.
Fully utilizing experiences and expertise gained from their global operation to help portfolio companies’ businesses expanded and grow further is one of their strengths.
After getting the approval from their legal department and Chief Representative Officer on having further information below disclosed, e27 was able to interview Nguyen Manh Dung, Head of Ho Chi Minh Office who is in charge for companies they invested in (VGame, VietNam Price JSC, GMC, Baokim and CleverAds) as the Director to hear the story about their investment in Vietnam.
Why did CyberAgent Ventures (CAV) decided to expand by investing in Vietnamese companies? What opportunities do you see?
We started investing in Japan since 2004, in China since 2006. So we decided to expand to other Asian countries which have high potential market of internet business, and Vietnam is of such markets. Vietnam has a high population with a higher percentage of young and active citizens. Those citizens make the Vietnamese market a potential market which is likely more open to new Internet services. Moreover, some successful internet business models in the United States, Japan, or China have not existed in Vietnam. Last but not least, Vietnam has a large number of entrepreneurs and well-educated IT engineers. Thus, we strongly believe that good local internet services will emerge, either localizing a success-proven model or basing on a brand new ideal in the coming time. In the long term, some of those startups can even go globally; VNG is one of the cases.
As mentioned earlier, CAV has already invested in seven firms in Vietnam so far. The fields vary ranging from online games, mobile content, mobile games, online payments, online advertisements, to e-Commerce. And the series are too. May we have the details of each investment?
Later investment (Maturing Phase) for VNG, formerly known as Vinagame and VMG, Series B for Vatgia, Series A for GMC, VGame, CleverAds and BaoKim. CleverAds is our latest investment made last May. The company has just set up its branch in Indonesia.
How many staff do you have in each office, Hanoi and Ho Chi Minh (HCMC) in the early stage anad now?
We set up our first office in Hanoi with one representative officer in the end of 2008, then the number increase to two after one year. We set up HCM City office in the beginning of 2010. Now we have four personnel, two at HCM City and two at Hanoi. We outsource legal and admin related activities.
We are actively recruiting new associates for our offices in Vietnam; but finding a competent and enthusiastic-in-Internet one is not easy.
Any specific industries targeted by CyberAgent when investing in Vietnam? Please share the priority from the highest to the lowest.
We have no priority for any specific field as long as the fields are internet related service; among industries that we are interested in such as: e-Commerce, mobile games, social games (for both mobile & PC), online advertising, social network services, online media just to name a few. However, we prefer to invest in the Business-To-Consumer (B2C) business models. This means we highly evaluate the internet service to end-users.
When investing in a company, which valuation method do you implement? Do you use any third-party service provider?
We do not use third party service provider. We use our own methods: the bottom-up and top-down.
In bottom-up approach, we evaluate startups’ values via detail business plans which are built by ourselves with KPI collected from startups, or in reference to startups’ own business plans.
In top-down approach, we evaluate startups values base on the market size of the field those startups operate in or on the value of same-industry listed companies. From the total market size, we estimate the startup value in many scenarios base on how much market share they can take.
Finally, we compare the two results from both approaches to get the most accurate and reasonable values.
Would you mind sharing details of four deals that will be closed in the near future?
We cannot disclose at the moment, but four will be joining our portfolio in the next three months. The investees are operating in E-Commerce, Smartphone Application Development, and Online media.
How about amount of funds allocated for the investment each year? How much it is budgeted for next year? And which industries are you targeting next year?
We do not have either budget limit or number of deals limit. Thus, we will invest in as many firms as possible as they meet our criteria. The targeting industries may be fields that we do not have in our portfolio, but not limit to these fields only.
What are the challenges when targeting, short listing, pitching, approaching and investing in Vietnamese companies, if any?
For targeting & short listing, in a way, there are so many startups. But most of them are just starting up without visions, for fun only, or they just follow a hot trend, or just an individual business. For instance, you may find a lot of E-Commerce sites in Vietnam; let’s say more than 100. Then we must shortlist them to thirty for a first visit, and further talk with even a smaller number of firms. This is a painstaking process as we do not want to leave any good company in that huge pool behind.
Laws governing internet businesses in Vietnam still do not keep up with the development pace of this Industry. Thus, sometimes license and legal issues can be big problem for startup operating in some emerging internet fields that are governed by no direct laws. Consequently, many startups do not disclose their contact information and keep it as confident as possible.
Many startups in Vietnam still do not have any idea about venture capital or what venture capital investment means. Hence, many of them hesitate to talk with us. They do not understand what added values that a venture fund can offer besides financing: mentoring, networking, business strategy. Hence they sometimes prefer financing from individual, their family or relatives.
As Vietnam laws on Venture Investment & Internet Industry are evolving, we sometimes have difficulties and take time in carrying our investment processes. Obstacles, just to name a few, are getting investment license, raising capital registration, and supporting and solving legal issues of our portfolio. But we believe that the matters will be solved in the near future, and we commit to expand our business in Vietnam as we strongly believe in Internet Industry and the potential of Vietnamese Internet Market.