Govt support and young population set Vietnam's startup scene abuzz

At the signing of the MOU involving Enterprise Singapore, Singapore-based venture capital firm Quest Ventures and the Vietnamese government-backed agency, the Saigon Innovation Hub, last month were the representatives of the three parties.
AUGUST 07, 2019 - 5:50 AM

Ho Chi Minh City

VIETNAM, one of South-east Asia's strongest-performing economies, is emerging as a hot startup hub in the region, courtesy of its young and digitally-savvy population and a government intent on turning the country into a technology powerhouse.

The number of startups has boomed in recent years - from 400 in 2012 to 3,000 in 2017. Australian Trade and Investment Commission (Austrade) names the country as the third-largest startup ecosystem in South-east Asia.

One factor driving Vietnam's dynamic innovation ecosystem is the country's young and educated population. With a median age of just 30, the country's 95 million people make for a considerable market comprising tech-savvy, digitally active consumers keen on testing out new products. The population also offers a large pool of low-cost, high-tech talent.

A major software development hub in Asia, Vietnam has attracted tech giants such as Lazada and Sea Group, which have tapped the market for its abundance of software development talent.

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Samsung Electronics, in operation in Vietnam since 2009, employs more than 160,000 people in the country, and is today the country's largest foreign investor. It has set up eight factories and a research and development centre - entailing US$17.3 billion in investments, said the Authority of Foreign Information Service.

This, coupled with a fast-growing economy, a rising middle class and a growing number of world-class founders, makes Vietnam an attractive destination for investors.

Eddie Thai, a general partner at 500 Startups Vietnam, told The Business Times: "Vietnam is one of the rare places in the world where there is a lot of engineering talent that grew up in an emerging-markets context.

"Many of these engineers are uniquely familiar with the challenges that poor or rural people face, compared with engineers from wealthy cities like San Francisco, New York or London. This should mean that Vietnamese engineers are better able to solve those challenges."

500 Startups, a renowned Silicon Valley early-stage venture fund and seed accelerator programme, launched its Vietnam-focused fund in 2016, closing it recently at US$14.1 million; its original target was US$10 million.

500 Startups Vietnam debuted the inaugural batch of participants of its Ho Chi Minh City-based Saola Accelerator programme in June, with 25 participating founders and senior team members made up of six nationalities.

Within the Vietnamese startup ecosystem, fintech has emerged as one of the hottest segments, raising US$117 million out of 2018's total startup investment of US$899 million, going by data from local accelerator Topica Founder Institute. Most of that amount went towards digital wallets and payments companies.

M_Service, the company behind the MoMo mobile payment app, is currently one of the most well-funded startups in Vietnam. In January, US-based private equity firm Warburg Pincus announced that it had led the startup's Series C funding round.

Although the size of the round was not disclosed by the company, a source familiar with the matter told Deal Street Asia that the investment was in the region of US$100 million. This would make it one of the largest single rounds raised by a Vietnamese startup; it brings the total investment raised by M_Service to US$133.8 million, reported TechCrunch.

500 Startups Vietnam's Mr Thai said he expects digital payments to be buoyed by its momentum in the next few years, with Vietnam moving from being a largely cash-based economy to cashlessness.

But 500 Startups Vietnam is keener on "the next wave of fintech startups" in smaller segments like personal and SME credit, insurance and investment and wealth management, he said. Its website reports that it has so far invested in nine fintech startups. Some of these are:

  • Trusting Social, which provides credit scores based on social data;
  • Papaya, an insur-tech startup that aims to bring insurance products to the masses; and
  • Zeuss, a blockchain-based know-your-customer and anti-money laundering technology provider.

Alongside financial services, Mr Thai said he expects "disruption, but also evolution" in sectors that include education and training, transportation and logistics and small and medium-sized enterprises (SMEs) productivity.

Overall, he said the biggest potential for Vietnamese startups lies in "developing technology solutions that solve emerging-market problems."

Vietnam's burgeoning startup ecosystem has not only fostered a new era of entrepreneurs, but also attracted a growing number of foreigners looking to tap into the country's growth potential.

When German native Dominik Weil, co-founder and chief operating officer of the Ho Chi Minh City-based Bvn Trading Services Technology, arrived in the city in early 2014, the startup ecosystem was still in its infancy.

"There were just a few early pioneers around who tried to make things happen with limited resources; they just gathered the few notorious people with an interest in the tech and startup space," he said.

But things began moving rapidly in 2016 with the launch of Dreamplex, the first and only high-standard co-working space in Ho Chi Minh City at the time.

Since then, co-working spaces - which have fostered the startup culture - have flourished throughout major Vietnamese cities; brands like CirCO, Toong, and, most recently, WeWork, have set up shop in Ho Chi Minh City.

Mr Weil's Bvn Trading Services Technology operates Vietnam's first bitcoin exchange, BitcoinVN.

Since it launched the first version of the platform back in March 2014, the company has introduced an array of cryptocurrency-related services; these include a digital asset trading platform (BitcoinVN Cloud), a remittance service (Cash2VN) and a bitcoin ATM network. For Mr Weil, navigating the Vietnamese regulatory landscape has been the most challenging part, particularly in his experience of doing so as a startup dealing with digital currencies.

"Regulatory uncertainty is a No 1 issue preventing Vietnamese startups from becoming dominant global, or even regional, players.

"This is multiplied in our line of business, which is one of the most challenging developments for law-makers around the world in recent years. The unclear regulatory environment makes it hard to foresee the outlook for your business tomorrow or next year."

But cryptocurrency regulation might be coming soon as the Ministry of Justice has been tasked to draft a new framework, he said.

Although Vietnam's startup scene is still in its early days, the ecosystem is maturing rapidly, Mr Weil said, noting that interest coming from foreign investors "has exploded, especially over the past two years".

He is part of the earlier wave of foreign tech entrepreneurs to enter the Vietnamese market, but a new bilateral partnership between Singapore and Vietnam is likely to trigger a movement of Singapore startups into the country.

On July 18, Enterprise Singapore, the government agency in charge of supporting SME development, expanded its Global Innovation Alliance (GIA) network to Ho Chi Minh City by inking a partnership with Singapore-based venture fund Quest Ventures, and Vietnamese government-backed agency Saigon Innovation Hub (SIHUB).

The collaboration aims to facilitate the two-way exchange of startups and students in Vietnam and Singapore, and includes a market-access programme to introduce Singapore startups to the innovation ecosystem in Ho Chi Minh City, and to connect them to partners, investors and local customers.

Enterprise Singapore chief executive officer Png Cheong Boon said the GIA network's expansion to Ho Chi Minh City will help Singapore enterprises and startups tap into "one of the largest innovation ecosystems in Asia".

Aside from the private sector, government agencies have also contributed to the growth of the startup ecosystem.

SIHUB, launched by the Ho Chi Minh City Conservation Centre in 2016, provides facilities for startups and leads innovation projects with the aim of developing the city into a leading startup and innovation hub in South-east Asia.

Initiatives such as, an online portal launched in 2017 by Hanoi's People Committee, and high-tech complexes such as the Saigon Silicon City Centre, have also been set up to support tech startups.

Funding for startups has become more accessible through avenues such as SpeedUP, a fund by the Ho Chi Minh City Department of Science and Technology, and the National Technology Innovation Fund, a government agency which provides preferential loans and grants.

In May 2016, Vietnamese Prime Minister Nguyen Xuân Phúc approved a national programme to support an innovation startup ecosystem in Vietnam, expected up by 2025. Also known as Project 844, the initiative aims to promote startup development and build a favourable environment for the sector's growth.