Vietnam’s Startup Ecosystem: An Unmissable Opportunity
The startup scene in Southeast Asia has been remarkably dynamic, with Vietnam emerging as a hotbed for innovation and investment. This is not just another trend; Vietnam’s startup ecosystem is one that demands attention.
During a recent business field trip organized by True Incube’s Incubation & ScaleUp Program Batch 5, five Thai startups—ChangTrixget, DRX, Fling, Kooup, and ShopJJ—explored Vietnam’s vibrant ecosystem. They engaged with experts, received invaluable feedback on their business models, and got insights from key players like Tiki.vn, Circo, CP Vietnam, and the Saigon Innovation Hub. But before diving into this exciting landscape, let’s get to know Vietnam a little better.
A Snapshot of Vietnam
Vietnam, situated in the heart of Southeast Asia, boasts one of the region’s fastest-growing economies. Covering an area of 329,569 square kilometers, the country comprises 64 provinces and municipalities and is home to approximately 95 million people. Vietnam’s GDP saw an impressive leap—from an average of 68.78 billion USD from 1985-2017 to a record high of 223.86 billion USD in 2017, showcasing its economic potential.
The Startup Landscape in Vietnam
Vietnam’s startup ecosystem is still in its infancy, having recently celebrated its third anniversary. Emerging from a basic activation stage, the ecosystem is now transitioning into a phase focused on globalization. Currently, there are about 3,000 startups, with a third exploring technological avenues while the rest cater to consumer needs.
The roots of Vietnam’s startup culture can be traced back to the early 2000s, but it was in 2016 that all critical components came together. Factors such as robust telecommunications, widespread internet coverage, and the return of “Viet Kieu” (Vietnamese expatriates who studied abroad) significantly propelled this growth. Investment in startups has surged, with 92 companies attracting 291 million USD in investment in 2017 alone. The most lucrative sectors include e-commerce, FoodTech, and FinTech, illustrating a diverse landscape ripe with opportunity.
Strengths Behind Vietnam’s Tech Startup Ecosystem
- A Young Workforce: Over 60% of Vietnam’s population is under 45, fostering resilience and tech savviness among the youth, who are quick to adopt innovation.
- Internet Accessibility: With internet penetration exceeding 52%, connectivity is a cornerstone of Vietnam’s digital growth. Mobile internet usage has skyrocketed to over 152%.
- A Developer Hub: Vietnam is becoming renowned for high-quality software development, making it a desirable location for IT companies due to its cost-effective living and operational expenses.
- Welcoming Foreign Investment: Vietnam encourages foreign business ownership, offering up to 100% ownership in many sectors, which attracts international investors seeking expansion.
Understanding Vietnamese Consumer Behavior
- Cash Dominance: Despite technological advancements, cash remains king in Vietnam. Many e-commerce transactions still prefer cash payments.
- Preferred Payment Methods: Vietnamese consumers lean towards linking their bank accounts for online payments as opposed to credit or debit cards.
- Local Preferences: Homegrown apps like Zalo dominate the mobile space, providing communication, music, and content sharing all in one platform.
- Rapid Growth of Ride-Hailing: The rise of ride-hailing apps like Grab and Go-Jek is transforming urban transport, making it the go-to choice for many users.
- Media Influence: Local media plays a crucial role in educating the public about startups, effectively familiarizing the community with emerging trends and innovations.
Emergent Tech Companies and Startups
- VNG: Founded in 2004, VNG operates popular messenger app Zalo and has an estimated value of over 1 billion USD.
- Tiki.vn: Initially an online bookstore, Tiki.vn has evolved into a significant e-commerce platform known for its prompt two-hour delivery service.
- Foody.vn: This leading food platform was acquired for 68 million USD, showcasing the potential in Vietnam’s food tech sector.
- Momo Mobile Money: As a burgeoning Fintech startup, Momo facilitates over 100 transactions across domestic banks, drawing in substantial investments.
- Yeah1 Network: This digital media platform caters to teenagers and boasts over 90 million registered users while preparing for an IPO in Hong Kong.
- The Gioi Di Dong: A leading e-Commerce site, it had its IPO in 2014 and is now valued at 1.5 billion USD.
- Jamja: A competitive online marketplace, Jamja focuses on providing discounts and recently secured seed investments.
- Topica Edtech Group: This educational technology startup is gearing up for its Series D investment and has gained significant traction in the education space.
- Appota: Specializing in mobile solutions, Appota is a standout provider with a strong focus on gaming and advertising.
Capital Sources: VC, CVC, and Angel Investors
The financial lifeblood of Vietnam’s startups largely comes from foreign venture capitalists rather than local funding. Corporate Venture Capital (CVC) is also notable, especially from transnational corporations and state-owned enterprises.
Active Venture Capital Firms to Watch
- IDG Ventures Vietnam: This pioneer in tech investing, which invested in VNG back in 2005, continues to play a significant role.
- Monk’s Hill Ventures: A proactive Singaporean VC, it’s recognized for its active investment in Vietnam.
- 500 Startups: A micro-fund focusing specifically on tech startups, dedicating efforts in Vietnam.
- Dragon Capital: This firm has been invested in Vietnam since 1994 and has now broadened its focus to include startups.
Noteworthy Corporate Venture Capital Units
- Viettel: As a key mobile service provider, Viettel is invested in innovation through CVC initiatives.
- FPT Venture (Pre-Seed): This mobile operator focuses heavily on private CVC investments.
Incubator and Accelerator Programs
The support for startups comes from both local and international incubators and accelerators.
- Vietnam Silicon Valley: Founded to act both as an accelerator and investor bootcamp, producing over 52 alumni since its inception.
- VIISA: Supported by Dragon Capital and FPT Ventures, VIISA is a philanthropic player in seed-stage investing.
- Hatch! Ventures excels in running accelerator programs, tapping into partnerships with organizations like UNDP.
- Topica Founder Institute: Part of a global network, this program has successfully mentored over 70 startups, with roughly a third securing significant funding.
Co-Working Spaces Fueling Growth
Co-working spaces are pivotal to Vietnam’s startup growth, providing collaborative environments for entrepreneurs.
- Circo: A bustling co-working hub in Ho Chi Minh City that caters to both local and international startups.
- sYs Hatch! Nest: Located in Hanoi, this space serves as a nurturing ground for young startups.
- Saigon Innovation Hub: A government-backed initiative offering collaborative workspace and essential guidance for startups.
Government Support for Entrepreneurs
With an encouraging stance towards startups, the Vietnamese government is increasingly committed to nurturing a thriving entrepreneurial ecosystem.
- Saigon Innovation Hub: Established to foster innovation and support SMEs in tech, this hub plays a role in implementing a 2025 development plan.
- Ministry of Science: This government body emphasizes technological support through a variety of initiatives and events.
- Business Startup Support Center: Focused on empowering young entrepreneurs, this center promotes essential skill development.
- Mekong Business Initiative: A multinational effort to encourage sustainable growth across the Mekong region.
- Vietnam Silicon Valley: A government-supported environment aimed at enhancing VCs and accelerator synergy.
Prominent Tech Events in Vietnam
- TechFest Vietnam: This annual event promotes technology and innovation within the startup ecosystem.
- WHISE: A week of exciting events in Ho Chi Minh City dedicated to startups and entrepreneurship.
- Hatch! An international conference celebrating entrepreneurship in Ho Chi Minh City, incorporated into WHISE.
- Startup Day: Organized by the Business Startup Support Center, this engaging conference brings entrepreneurs and investors together.
Insights for Entrepreneurs Entering the Vietnamese Market
- Find a Local Partner: Local insights are invaluable. Understanding the market culture is key to navigating Vietnam’s unique landscape.
- Global Scaling Strategy: It’s advisable to scale your business in other markets before entering Vietnam to maximize your growth strategy.
- Understand Legal Requirements: Familiarizing yourself with the legal landscape and consulting professionals is crucial for compliance and operational success.
- Cultural Sensitivity is Vital: Being aware of cultural nuances will help you establish strong relationships in the Vietnamese market.
Credits to tiki.vn, CyberAgent Ventures, ESP Ventures, Circo, CP Vietnam and Saigon Innovation Hub
Extending special thanks to True Incube for providing the opportunity to immerse ourselves further in Vietnam’s startup ecosystem.