The Resilience of Vietnam’s Startup Scene: Navigating Challenges and Opportunities

Many startups will need to reinvent themselves in order to stay afloat in a tough economy. Photo: Le Toan

In recent times, the Vietnamese startup landscape has captured the attention of venture capitalists looking for long-term growth opportunities. Despite the ongoing challenges presented by the pandemic, investment continues to flow into the region. Notably, Hiroshima Venture Capital has launched a ¥1 billion ($9.3 million) fund aimed at bolstering local startups and small- and medium-sized enterprises.

Meanwhile, homegrown initiatives like ThinkZone are actively investing in emerging players. The accelerator recently allocated $250,000 to five diverse startups, including a beauty service platform, a home healthcare service for infants, and specialized software solutions like Hachium and Airiot, an Internet of Things product. This trend of strategic investment highlights the growing importance of innovation in fostering economic resilience.

The Appeal of Vietnam

Daniel Muller, Finance Head at Amanotes, a mobile game publisher based in Vietnam, emphasizes that investors are increasingly viewing the country as a prime opportunity. Factors such as favorable demographics, a growing economy, and an increasingly welcoming business environment make Vietnam an attractive destination for investment. “Investors throughout Asia are awakening to the potential that Vietnam offers,” Muller notes, “especially as they encounter saturation in other markets.”

The tech scene in Vietnam has seen impressive growth in recent years, bolstered by supportive government policies and free trade agreements. The nation’s young, tech-savvy workforce is a significant draw for investors, especially in sectors spanning e-commerce, fintech, e-learning, AI, and cloud-based services. From 2017 to 2019, the investment value in technology deals surged six-fold, underlining the country’s burgeoning role as a tech hub.

Shifting Consumer Behavior

The pandemic has undeniably shifted consumer behavior, pushing many businesses to adapt rapidly. According to Dang Duc Thanh, director of the Startup Success Institute, startups have seized this moment to disrupt traditional markets. Many have pivoted their offerings to include online services, such as remote training and express delivery, which cater to new consumer priorities.

Ravi Saraogi, co-founder of voice AI startup Uniphore APAC, elaborates on this transformation: “While this is a challenging time, it’s also ripe for businesses to reassess and innovate.” He echoes the sentiment that digital channels will become the norm, especially as social distancing measures reshape how consumers engage with products and services.

An Unprecedented Growth Rate

Muller points out that Vietnam’s internet economy has experienced staggering growth, with a 40% increase in 2020 alone. This trajectory positions Vietnam favorably compared to neighboring countries like Indonesia and the Philippines, making it fertile ground for tech-based initiatives. He encourages startups to “embrace change, invest in cutting-edge technologies, and harness the best global practices” to thrive in this transformative environment.

Despite these optimistic signals, startups are still grappling with the economic pressures brought on by the pandemic. The story of Vexere, a bus booking platform, illustrates the difficulties many face. After successfully raising funds from Asian investors last year, the firm has struggled to maintain revenue following the nationwide lockdown that halted bus operations.

Sector-Specific Challenges

The logistics industry, exemplified by startups like Loglag, has faced significant revenue declines. In the first quarter of 2020, Loglag reported earning merely one-third of its income compared to the same period in the previous year. To weather the storm, the company implemented salary cuts and paused marketing efforts, further showcasing the harsh realities many in the sector are enduring.

As the economy begins its slow recovery, the question remains: how can these startups adapt and emerge stronger? While there are obstacles, the underlying potential of the Vietnamese startup ecosystem is undeniable. With strategic investments, a rapidly evolving digital landscape, and a shift toward online consumer behavior, there is a pathway for startups to not only survive but thrive in a post-pandemic world.

The resilience shown by these businesses underscores a critical truth: innovation often flourishes in times of adversity, leading to groundbreaking solutions that redefine industries and consumer experiences alike. As Vietnam continues to navigate these uncharted waters, the prospects for its startup scene remain vibrant and promising.