What is the Current State of Vietnam’s Start-up Ecosystem?
Vietnam’s start-up ecosystem has blossomed remarkably over recent years, evolving into a vibrant hub for innovation and investment in Southeast Asia. With a burgeoning young population and an increasingly educated workforce, coupled with a rich entrepreneurial spirit, Vietnam is increasingly being recognized as an attractive destination for both local and international investors.
Growth of Start-ups
At the onset of the COVID-19 pandemic, Vietnam boasted approximately 1,600 start-ups. Fast forward to now, and that number has surged to over 5,000, according to data from Crunchbase. This explosive growth is mirrored by a significant leap in funding; Vietnamese start-ups secured over $7 billion between 2022 and 2023, nearly tripling the $2.4 billion amassed in 2021.
The financial landscape reveals a clear trend: fintech emerges as the dominant sector, capturing a remarkable 38% of all venture capital investments in 2023. However, the excitement doesn’t stop there; other sectors such as education tech, property tech, e-commerce, and enterprise solutions are also capturing investors’ attention.
The Rise of Green Start-ups
While traditional sectors dominate, an intriguing subplot is the emergence of green climate start-ups. With 122 sustainability-focused start-ups identified in Vietnam—though the real number might be higher due to some companies establishing their headquarters abroad but operating locally—the green sector is carving out its niche. These ventures prioritize eco-friendly technologies to tackle pressing environmental challenges.
Venture capital firms are keenly aware of the potential in this sector. Vietnam Silicon Valley (VSV) Capital, a government-backed initiative, has invested in over 80 start-ups within the green space. Notable investments from firms like Touchstone Partners, which has backed companies such as Selex Motors (an electric motorcycle manufacturer) and Forte Biotech, showcase the growing enthusiasm for climate solutions.
Government Initiatives
The Vietnamese government is actively engaged in nurturing the start-up landscape through numerous initiatives, focusing on incubators, accelerators, and educational programs. Prominent programs like National Program 844, Vietnam Silicon Valley, and the National Innovation Centre have been launched to provide essential support and resources for budding entrepreneurs.
Challenges Faced by Start-ups
Despite the promising growth, several challenges impede the progress of Vietnam’s start-up ecosystem. One of the primary concerns is the lack of a robust policy and regulatory framework that fosters innovation. Start-ups often grapple with bureaucratic hurdles, leading some to establish parent companies abroad to attract foreign capital.
A lingering issue is the readiness of graduates entering the workforce. Many start-ups find it challenging to attract and retain talent due to gaps in skills and local educational standards. Additionally, while large corporations can play a significant role in supporting start-ups, corporate investment remains minimal, making initial funding a significant obstacle—especially for eco-focused ventures.
Opportunities Ahead
Looking to the future, opportunities abound for start-ups, especially those focusing on green technologies. The recent elevation of Vietnam and Australia’s bilateral relationship to a Comprehensive Strategic Partnership presents a unique opportunity for fostering innovative solutions to the green transition.
Start-ups and investors can leverage Australian government initiatives designed to spur green innovation in Southeast Asia, such as the $2 billion finance facility for green energy. Established models, like the successful Landing Pads for businesses, demonstrate how international collaboration can facilitate market entry and scaling solutions.
Venture capital firms and incubators are also encouraged to create dedicated funds to back climate-focused start-ups. Such funding avenues are blossoming, showing significant traction for investments aimed at addressing climate challenges.
Tailoring Solutions to Local Needs
Vietnam’s agricultural sector stands out as a prime candidate for innovative climate solutions. With agriculture accounting for a significant portion of greenhouse gas emissions and employment, sustainable practices can greatly enhance productivity while diversifying farmer livelihoods. Tailoring offerings to meet local market demands will be crucial for start-ups aiming to succeed.
The Role of International Collaborations
Eco-focused start-ups require robust support and investment for transitioning Vietnam towards its net-zero goals. Australia’s unique position lends itself to fostering growth in Vietnam’s green tech ecosystem. By sharing expertise and resources, international partnerships can accelerate the development and adoption of sustainable solutions.
Antonia Robson is a Senior Associate in the Advisory & Insights team at Asialink Business.