Now in Vietnam: A culture of entrepreneurship, a landscape of opportunity
This is the second post of “Now in Vietnam“, where TechNode visits Vietnam’s leading companies, to explore the next startup ecosystem to emerge among Southeast Asian countries. Vietnam’s GDP growth could surpass China by 2020 according to Turicum Investment Management.
Vietnamese startups saw a 46% rise in investment in 2016, valued at $205 million. Vietnamese startups are strong in fintech and are getting global attention. Vietnam can serve as an optimal market for foreign startups, as it has 97.5 million population, most of them young and tech savvy.
Startups flock to Vietnam’s main cities, Hanoi, the capital city which has 7.5 million people, and Ho Chi Minh, which has 8.4 million population.
Some investors were quick on tapping into this market. IDG Ventures has focused on Chinese investments since the early 1990s, investing in Tencent, Baidu, Xiaomi, Ctrip, Meitu, and Sohu. Since 2004, Vietnam is the third country to get their attention after the US and China.
“IDG Venture’s founder saw a lot of Vietnamese students in MIT, and thought he should start the Vietnam fund,” Truong Nguyen, Vice President of IDG Ventures Vietnam, told TechNode.
Global financial startups
Vietnam is now seeing more startups offering universal products globally from day one such as tutor on-demand service GotIt! and graphic design platform DesignBold. Some Vietnamese startups start by expanding to their neighboring South East Asian countries, such as edtech group Topica or restaurant review media Foody,
Meanwhile, local market-focused platforms like e-commerce, payment, content, games have been getting larger funding up to tens of millions USD in various rounds. One of the first investments of IDG Ventures Vietnam was VNG, pocketing a series A investment in 2005. The company, offering its flagship chat app Zalo, was valued at US$ 1 billion and has since secured US$ 100 million in revenue. MobileWorld, Vietnam’s largest mobile retail chain is listed on the HCM City Stock Exchange, reported that their total revenue in 2016 is estimated at around US$ 70 million.
“The market will see more mature larger deals like VNG and MobileWorld in the future. Smaller startups have been catching up with most of the trends in the world, and Vietnam is a perfect market to introduce new products and services,” Truong says. “I see some of the early trends of Vietnamese startups going global, and more companies are focusing on areas like fintech, edtech, and IoT.”
Fintech is a sector in Vietnam to keep your eye on: startups raised US$129 million in 2016, greater than the combined value of all other sectors, according to Topica Founder Institute’s report. Many Vietnamese fintech companies have received a good sum of funding from international investors in the last two years. M Service, the company behind the mobile e-wallet Momo, raised US$ 28 million in March 2016 from Goldman Sachs, Payoo, providing intermediary services for e-commerce platforms was funded US$ 2 million and was acquired by NTT Data, E-pay’s 62.5% stake was acquired by Korea-based UTC Investment for $34 million and OnOnPay, top-up tool for prepaid mobile subscribers received a US$ 800,000 investment.
IDG Ventures Vietnam is now focused on startups in technology, media, and consumer services and products.
“Among TMC industries, the internet sectors, such as mobile services, media content, e-commerce are the very strong potential areas where many founders with great entrepreneurship and experience can tackle. They have gone through a roughly 15-year-long experience of fast development in these sectors in Vietnam,” he says.
A young market
Vietnam has a younger workforce, with its 65% of the population under the age of 35. By 2021, 15.5 million new consumers aged 10-19 years will enter the market, according to TNS VietCycle.
“Vietnam with its favorable demographics of the young population, increasing middle class, and tech-savvy consumers has been a strong consumer market, labor market, and tech market with users very open to new product trends,” Truong says.
Vietnamese people are entrepreneurial, as they often invest and trade USD and gold, and bet on things. In fact, the Vietnamese consume more gold on average than Indians, Chinese, and Americans.
Many Vietnamese start their business after establishing a career in their field and studying in overseas countries. According to IDG Ventures Vietnam, the common thing about successful Vietnamese founders is first, they have studied abroad. Second, the average age of them is older than 28, older than US or Japan counterparts. Third, they needed 5 to 7 years to bring their business to a successful level. Fourth, they had been in the executive position before they started the company.
Opportunities to expand your startup to Vietnam
Vietnam may not be the first port for expat entrepreneurs, but it could turn into the ultimate startup hub for the Southeast Asian market.
For startups, Vietnam can be a great test bed, without having to spend too much money to sustain the business. Vietnam is growing bigger as a consumer market, as its GDP is now US$ 2215 expanding with GDP growth of 6.21% in 2016, among the highest in the world.
Once startups get funding, the burn rate is lower than other Asian countries, meaning the company can last longer with its investment than in other Asian countries. This gives less burden for the founders since its labor, living cost, and marketing cost is cheaper.