|Startups capitalise on rosy prospects. Source: freepik.com |
According to StartupBlink’s 2020 startup ecosystem rankings, Vietnam ranks 59th globally, up 13 places from last year. The Vietnamese ecosystem is thriving, mostly due to the substantial size of the economy, making the creation of successful local startups profitable even if they do not expand internationally. However, to become a true regional and global hub, Vietnam will have to generate innovations that have regional or global impact.
The country set the target to have at least 10 startups joining the unicorn club by 2030, according to the Ministry of Planning and Investment. If this goal is achieved, Vietnam can expect rapid rank increases for the nation and its cities. So far, the country has two unicorn startups with a valuation of $1 billion, namely VNG and VNPAY, among the 12 unicorns in the region.
Eddie Thai, general partner at 500 Startups, said that there are many factors determining why certain ecosystems have more or fewer unicorns than others. “I think a major reason for Vietnam not having many yet is simply ecosystem lifecycle. In my opinion, the Vietnam startup ‘renaissance’ only just started around five years ago, but it takes time for an ecosystem to mature and for startups to become unicorns.”
For example, Indonesia’s unicorns of today were founded around 2010-2012 and took about 6-8 years to become unicorns. If Vietnam takes a similar amount of time, then the country could expect new unicorns to emerge here in the 2020s. There are already a number of potential “soon-icorns” (soon-to-be unicorns), especially in e-commerce and fintech.
Last month, 500 Startups partners Thai and Binh Tran officially launched Ascend Vietnam Ventures. Ascend is open to investing in any tech or tech-enabled startup in Vietnam. However, there are certain sectors that the fund is particularly optimistic about, including but not limited to fintech, edtech, healthcare tech, HR tech, and enterprise software as a service (SaaS).
Thai said, “There is a substantial opportunity for Vietnamese technology over the coming years to be successful not only domestically but regionally and globally, and we believe that our team can provide unique value-added support to founders to help them achieve their full potential.”
Meanwhile, Olivier Raussin, managing partner of FEBE Ventures, said, “Startups like VNG, VNPAY, MoMo, and Tiki and many others are demonstrating the quality of Vietnam’s startup ecosystem. Vietnam has a deep talent pool and a large emerging middle class, which constitutes fundamental building blocks for future quality startups and future unicorns.”
“Since the beginning of 2021, FEBE Ventures invested in three new Vietnamese startups which all were able to close large rounds in a short period of time, demonstrating the strong interest from international investors in Vietnam’s startup ecosystem,” he noted.
Le Hoang Uyen Vy, general partner at Do Ventures said, “Vietnam is catching up to startup hubs in the region like Singapore. In fact, Vietnam’s startup ecosystem has entered another phase of development. Early startups like VNG and MoMo are now not only raising funds but also invest in other startups. It is clear that as startups mature, they become a new driving force for the whole ecosystem and produce more unicorns.”
She added that MoMo has acquired local AI company Pique last month. The deal will not only help transform MoMo into a true AI-first company, it will also facilitate Pique to expand its operations. Founded in 2017, Pique has become a leading AI company in Vietnam specialising in providing diverse AI solutions for digital businesses from e-commerce to content and entertainment.
Meanwhile, VNG also scooped up a 20 per cent stake in logistics startup EcoTruck last year. The startup, established in 2017, helps transport companies manage their vehicles through technology. With the new investment, EcoTruck is expected to take advantage of VNG’s network and resources to scale up its business.
Government support plays a central role in development of a startup ecosystem. In 2017, startup and venture capital investment was legally recognised in the Law on Supporting Small- and Medium-sized Enterprises. The following year, Decree No.38/ND-CP, which came into effect in March 2018, named startup investment as a business and provided legal status to venture capital funds.
Though the legal framework for venture capital investment is still nascent, the government has made breakthroughs in developing favourable policies for startups and investors, according to Vietnam Innovation & Tech Investment Report 2020.
Vietnam introduced the sandbox concept in 2019 via Decision No.999/QD-TTg promoting the sharing economy model by former Prime Minister Nguyen Xuan Phuc. The concept was incorporated in other legal documents including Decision No.2289/QD-TTg outlining the National Strategy on the Fourth Industrial Revolution and Decision No.749/QD-TTg on the programme for national digital transformation by 2025, all of which demonstrate a high level of commitment to encourage the adoption of new business models and ease market access for foreign investment in new sectors.
Thanks to the progress, a slew of Vietnamese startups have announced investment in the midst of the pandemic such as e-wallet app MoMo, edtech startup Elsa, investment app Infina, fintech startup MFast, and healthcare booking app Docosan, among others.
Indeed, Vietnam’s startup ecosystem is on the radar of both local and foreign investors. The most active group included investors who are willing to take the role as lead investors from Vietnam, South Korea, and Singapore. Notably, local funds played a vital part in supporting Vietnamese startups during these trying times as over 75 per cent of the recorded deals were conducted by local funds or foreign funds with personnel based in Vietnam.
To build mutually trusting relations between startups and investors, Raussin from FEBE Ventures said, “On the founders’ side, we advise them to be fully transparent, share the challenges they are facing, and act according to the principle of saying what you do and doing what you say.”