Vietnam's start-up sector is closing the gap with regional leaders Indonesia and Singapore with new investment, according to a Nikkei Asian Review article.

(Illustrative photo: VNA)

The article cited a joint research by Ho Chi Minh City-based venture capital ESP Capital and Singapore's Cento Ventures which showed start-up investment in Vietnam hit 246 million USD this year through June on 56 deals.

It added that investment is expected to top 800 million USD by the end of the year, which would represent a rise of at least 80 percent over last year's 444 million USD.

The article said a total of about 5.9 billion USD was invested in Southeast Asian start-ups in the first half of 2019. When it comes to the investments that can be tracked to a destination country, Vietnam accounted for 17 percent of start-up investments in the region, up from 5 percent for all of 2018, following Indonesia at 48 percent and Singapore at 25 percent.

Start-up investment in Vietnam began to rise last year, with the online retail, payments and education sectors attracting huge capital injections.

The article reported that among start-ups that raised the lion's share of funding last year was e-payment app Momo, which pulled in about 100 million USD from American private equity company Warburg Pincus, making it one of the largest single rounds ever raised by a Vietnamese start-up.

This year, e-commerce platform Tiki received a large injection of funds, according to research by ESP-Cento, though the company has yet to disclose the funding. Tiki was reportedly set to raise 75 million USD in March from investors led by Singaporean private equity company Northstar Group.

In addition, payment solution company VNPay raised 50 million USD from Singaporean state fund GIC, while gaming operator VNG received 29 million USD from Temasek Holdings.

The article continued that smaller Vietnamese startups are also being established. Luxstay, a room sharing start-up like Airbnb, raised 4.5 million USD in May and point-of-sale system operator KiotViet received 6 million USD in August, according to start-up database Crunchbase.

Backed by a large population of some 96 million and a healthy economic growth rate of 6.7 percent in this year’s second quarter, more overseas investors are paying attention to Vietnam. Home-grown tech-driven services in sectors, such as e-payments, ride-hailing, e-commerce and logistics, are booming.

The joint report of ESP Capital and Singapore's Cento Ventures noted that Vietnam is in an important period when key components of a strong digital economy are beginning to shape up.

It said that Vietnam’s digital economy will benefit from its young population, of which 60 percent are aged under 35, and a still-growing mobile and internet penetration rate. The research said that over 10 million more consumers will go online by 2023.

The article affirmed that Vietnam also has a highly educated workforce. The country's pupils ranked eighth globally in the PISA international science test, higher than Hong Kong's and Republic of Korea's. Coupled with a relatively low labour cost, Vietnam has long been a software outsourcing hub in Asia, producing large homegrown IT companies such as FPT.

Overseas-educated entrepreneurs are also helping to shape the start-up ecosystem in Vietnam. Silicon Valley-based education startup Elsa, run by Stanford-graduate Vietnamese CEO Vu Van, has about half of its 40 staff in HCM City to grow its English-learning app business in Vietnam.

Government support, through accelerator and incubator programs, has also been contributing to the country's start-up ecosystem, ESP Capital's general partner Le Vy was quoted as saying.