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US tech fund to seed young Vietnam IT firms

HANOI: A US venture capital fund that has targeted $100 million for investments in emerging Vietnam information technology companies expects to announce its first candidates for the money by the middle of this year.

IDG Ventures Vietnam, the first fund of its kind to operate in the communist country, said it has zeroed in on about 30 companies in areas including software, telecommunications, network management and the Internet.

“Vietnam will be the next China,” said Patrick McGovern, chairman of International Data Group, in an interview with Reuters on Tuesday. He said the country is poised to mimic China’s explosive growth in high-tech.

An IDG fund has reaped annual returns of 50 percent from its Chinese investments, said McGovern, whose company publishes research and technology magazines and hosts industry events.

“We find entrepreneurs at an early stage, give them a lot of operational advice and support and introduce them to international partners,” said McGovern, on a visit to meet funding candidates and Vietnam officials. “I think the first investments will be in May or June.”

The IDG fund expects to invest up to $3.5 million in each privately-held Vietnam company and may take an equity stake of between 10 and 30 percent, which it would typically divest later.

Vietnam has no listed high-tech stocks, and its tiny bourse with 23 members has a value of around $240 million. It is not a major high-tech products maker like Malaysia or Taiwan and struggles to enforce intellectual property protections.

Nonetheless, McGovern says Hanoi is making the right reforms to encourage the growth of the IT sector and promoting foreign investment in the private sector.

After a glut of production in the late 1990s, the global IT industry is also on the cusp of further expansion, he said. Growth for the industry should average between seven and nine percent a year for the next decade, he said.

“It’s an excellent time to create new companies.” —Reuters

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