Look at startups in Vietnam
More and more young people are becoming a new generation of consumers, which is undoubtedly a huge opportunity for entrepreneurs. In addition, Vietnam’s Internet penetration rate has reached 50%, and more than one-third of smartphones are used. However, many people believe that start-ups doing business in Vietnam will be affected by the complex nature of Vietnam’s multi-ethnic and multi-cultural nature. How can start-ups develop in such a country? What about the local entrepreneurial ecosystem? Listen to the insights of local Vietnamese entrepreneurs.
Southerners and Northerners
After the end of the Vietnam War in 1975, the North and South developed into two different ethnic groups, originating from the northerners of Hanoi and the southerners of Ho Chi Minh City where the government power is located. Son, who was born and raised in Ho Chi Minh City, said that southerners tend to be more open-minded and pro-business, and most of them are in business. The northerners tend to emphasize political relations and often regard political relations as a key entry point before conducting commercial activities.
Alvin Koh, founder and CEO of Peko Peko and an entrepreneur from Singapore, said that according to his observations, northerners are generally good at learning, have the habit of saving money, and are more conservative. Southerners are more energetic, more impulsive, and more willing to spend money. The CEO of the co-founder of Cititech, a startup in Ho Chi Minh City, said that northerners are afraid of change, making it difficult for their market to adapt to technology. I have noticed that some companies in Hanoi prefer to go to the international market rather than putting their products on the Hanoi market at the beginning.
Vietnamese overseas Chinese studying abroad
Vietnamese Chinese refer to those who left Vietnam during the Vietnam War. According to foreign media, these Vietnamese overseas Chinese have a tendency to return to Vietnam. A report shows that there are an estimated 1.5 million Vietnamese living in the United States, and more in other countries.
The return of Vietnamese overseas Chinese will become one of the driving forces of Vietnam's economy. In 2015, Vietnamese remittances reached 12.3 billion U.S. dollars. They not only bring the funds back to Vietnam, but also the skills and connections.
Sonny Vu is one of the classic examples. This Vietnamese American founded MisFit Wearables, which was later acquired by Fossil Group for US$260 million. Another example is Binh Tran, the co-founder of Silicon Valley Klout, who now runs the 500Startup Vietnam Fund. Anh-Minh, the former Vietnamese editor-in-chief of the well-known technology media TechInAsia, pointed out in a report that we will not forget those Vietnamese who have received overseas education and choose to return to Vietnam to contribute to the startup ecosystem. Vietnamese studying abroad will have more advantages in understanding the local culture and lifestyle of Vietnam than Vietnamese overseas Chinese. Because usually Yueqiao uses Western thinking mode to try to understand Eastern thinking mode.
Opportunities in the Vietnamese market
Like other emerging Southeast Asian markets, more and more highly educated middle-class groups have become the focus of many entrepreneurs. E-commerce is a growing market. In 2015, the market size reached 4.1 billion US dollars, with an annual growth rate of 37%. Cao Nguyen, founder and CEO of marketing automation platform UseData, said that 95% of e-commerce stores are small and medium-sized enterprises, and they use advertising to drive marketing. But such efficiency is not high.
A healthy lifestyle is gradually pursued by more and more middle-class people. This is one of the reasons why Khio founded WeFit. WeFit provides monthly cards that can be used in hundreds of gyms and fitness classes in Hanoi and Ho Chi Minh City.
The level of education in Vietnam is increasing day by day. At present, the literacy rate of the middle class in Vietnam is 94.5%. Therefore, Khanh Tong, the CEO of Checkit, chose to create an APP that provides condensed insights into Vietnamese books and enters the market.
Duong said that one of the major advantages of engaging in technology business in Vietnam is Vietnam's lower operating costs.
Son explained that the general starting salary for software engineering graduates is more than US$500, and experienced employees can get more than US$1,000, which is considered a relatively high income.
Most of the high-quality developers come from universities such as Ho Chi Minh University of Science and Technology, which have experienced lecturers who have been exposed to overseas education. Those start-ups or large overseas technology companies that have established technical teams in Saigon need high-quality engineers, which has improved the evaluation criteria for outstanding engineers. At the grassroots level, organizations like Grokking Vietnam hold regular events to bring together the best talents in software engineering to share practical experience in building large-scale complex software systems.
Vietnamese entrepreneurs
Khio found that Vietnamese entrepreneurs work very hard, with an average of 14-16 hours a day. They also like meetings, especially informal Hangouts. Most entrepreneurs have a strong technical background in software development.
Son believes that this attitude is inevitable. Vietnam's inflation rate is rising faster than wages. Many entrepreneurs also take part-time jobs such as freelance or teaching while starting a business to subsidize their wages. In addition, the peer pressure culture of some entrepreneurs makes them easy to be short-sighted and hope to succeed quickly.
Cao pointed out that most startup companies are founded by young people who lack skills, networking, and experience. Such companies have a low chance of success. The difference is that Alvin said that young people are more willing to work hard and try once if they fail. This resilience of Vietnamese entrepreneurs is deeply rooted in their country and history.
If Vietnamese entrepreneurs have a unique behavioral habit, it is drinking beer in a noisy bar.
Government-sponsored ecosystem
Khoi said that now everyone is talking about entrepreneurship, but in fact many people have started to do something last year. The government has also adopted some policies, organized some events, and opened accelerators to show its support. In order to further promote the development of the ecosystem, the Vietnamese government approved the Innovation Partnership Program, which plans to promote the development of the ecosystem of innovative startups in Vietnam by 2025.
In Ho Chi Minh City, Saigon Silicon Valley is worth 38.5 million U.S. dollars, covers an area of 52 hectares, and is built based on the Silicon Valley of the United States. This center aims to attract overseas Vietnamese enterprises and international companies applying for high-tech and supporting industries, research, innovation and transfer. In Da Nang, a fairly new industrial cluster that promotes the development of technology start-ups has also formed. Son said that operating in Da Nang is different from other areas. All infrastructure in Da Nang is built from scratch, thus bypassing some of the remaining planning issues.
The challenge
Although the startup ecosystem is good, entrepreneurs still face challenges. The first is the lack of funds. Khoi said that it was difficult to persuade Vietnamese investors to take risks when a company was just starting out, and the process of seeking financing from foreign investors or VCs took too long. The initial stage is always extremely difficult.
Khanh also agreed with this view, saying that the startup ecosystem in Vietnam is still in its immature stage, with limited resources, lack of co-working space, venture capital and entrepreneurial projects.
According to him, angel investors are not familiar with the situation and have not really provided the necessary support. Because of lack of confidence in the Vietnamese legal system, he set up a startup in Singapore, received investment from Telstra in Australia, and joined the Muru-D accelerator in Singapore.
Second: The policy is not clear and the implementation is slow. Alvin emphasized: Although the government has measures to support the development of entrepreneurship, the implementation of government regulations is slow and there is a lack of a strong system to truly benefit start-ups.
Cao also believes that although some government funds have been announced recently, start-ups are still not very clear about what these funds can bring to them in addition to money and a lot of paperwork.
Duong added: I think Vietnamese regulations are good enough for the current Vietnamese technology and innovation companies. The law that supports the development of start-ups still needs time to further develop and improve. Fortunately, the government is now ready to support start-ups.
Third: Language barriers VS international cooperation needs. Son sees that in terms of fundraising, there is a gap between local Vietnamese and overseas Chinese, which may be because Vietnamese locals face more language barriers when contacting foreign VCs.
In addition, the start-up products are ready, but due to language barriers, they have to focus more on the local Vietnamese market. He said that more overseas cooperation is needed to increase exposure and knowledge transfer. Alvin said: In terms of funding, more and more angel funds and seed funds have recently emerged. However, many of them are new angel investment funds, which are not very structured and may slow down the financing process. This round of financing will take 3-6 months to make wise guidance while making full preparations. Startups need to know how to sell themselves. Even if they cannot successfully obtain financing, they can learn from the feedback from VC and prepare for the next financing. Building strong ties is crucial in Vietnam. Not only must pay attention to technology, but also to focus on business relationships.
Vietnam is a huge emerging market, and many basic needs are still unresolved. With the government's initiative and support, more capital has poured in, coupled with the introduction of outstanding talents into the market, the consumption of the middle class has upgraded, and the startup ecosystem in Vietnam is also full of vitality.
Box: Vietnam is the leader in Asian infrastructure competition
Vietnam may be one of the smallest economies in Asia, but it is among the leaders in the infrastructure race. According to data from the Asian Development Bank, Vietnam’s public and private industrial infrastructure investment has accounted for an average of 5.7% of GDP in recent years, which is the highest among Southeast Asian countries, slightly lower than China’s 6.8%. Indonesia and the Philippines have this ratio. Less than 3%, while Malaysia and Thailand are even less than 2%.
According to estimates by the Asian Development Bank, emerging economies in the region will need to invest US$26 trillion by 2030 to build transportation networks, promote power supply, upgrade water conservancy and sewer projects. As one of the fastest growing economies in the world, Vietnam is trying to attract foreign investors through the development of infrastructure. The country positions itself as Asia's next Tiger Economy.
But the challenges facing Vietnam are also huge. The country needs US$480 billion by 2020 to build infrastructure including 11 power plants with a total capacity of 13,200 megawatts and 1,380 kilometers of highways. Vietnamese Prime Minister Nguyen Xuan Phuc recently ordered the Ministry of Transport to accelerate plans to attract private investment in infrastructure, and the country’s budget is not enough to meet one-third of its financial needs. Rana Hasan, director of development economics at the Asian Development Bank, believes that private investment may account for less than 10% of Vietnam's infrastructure spending.