Growth beckons for GenAI startups in Vietnam

According to data from The ASEAN GenAI Startup Report published by GenAI Fund in mid-October, the startup landscape in Southeast Asia is seeing a notable up tick in funding despite the global 'startup winter'. While ASEAN’s overall startup funding hit a five-year low in the first quarter of the year, raising just $1.4 billion across 177 rounds, GenAI startups in the region have shown resilience, with two-thirds of emerging startups securing early-stage funding.

Of the top 10 funded GenAI startups in Southeast Asia, seven are based in Singapore, one in the Philippines, and two in Vietnam. This trend aligns with the broader ASEAN startup growth pattern, as Vietnam ranks as the region’s second-fastest-growing market for GenAI startups at 27 per cent, following Singapore at 44 per cent.

Photo: vir.com.vn

The report, which surveyed over 700 startups across Southeast Asia, supports this momentum. The growth in Vietnamese GenAI startups is expected to accelerate over the next 18 months, amid suggestions that Vietnam could become a key hub for the nascent technology. It predicts that Vietnam’s share of the ASEAN GenAI startup market will increase from 27 per cent to 35 per cent as local startups expand their capabilities.

Vietnamese startups are demonstrating how tailored, localised solutions are allowing Vietnamese GenAI startups to draw in significant investment. AI Hay, a tech startup based in Ho Chi Minh City, was selected by Amazon Web Services (AWS) in September for the AWS Global Generative AI Accelerator programme, aimed at promoting innovation among startups developing GenAI applications.

Priya Lakshmi, head of Startup Business Development for ASEAN at AWS, said, "We selected three Southeast Asian startups, including one from Vietnam, to participate in this accelerator. This choice underscores the quality and potential of startups in this region. Our selection process focused on not only the innovative use of AI, but also the foundational strength of the teams and their ability to deliver real value to customers."

While advanced models from large corporations focus on broad, general-purpose applications, AI Hay has taken a different approach by developing highly localised use cases tailored to the needs of Vietnamese users. By focusing on specific use cases that resonate with its target audience, AI Hay has identified high-demand applications in academic assistance and real-time updates.

Nguyen Tho Chuong, AI director at AI Hay, told VIR, "The core value lies in addressing specific use cases tailored for Vietnamese users. Through focused experimentation, we’ve developed key applications in high-demand areas, such as academic support and current event updates. This approach enables us to deliver specialised solutions that meet daily needs."

Similarly, Reforged Labs has leveraged its niche focus to secure growth opportunities. The company provides a GenAI workspace tailored for game marketers, allowing them to benefit from AI capabilities in a sector that relies heavily on creativity and performance. In August, Reforged Labs raised $3.9 million in seed funding from global venture capital firms and angel investors to support it in advancing its AI technology and refining its creative and performance models.

Another standout GenAI startup in Vietnam is Vbee, which gained recognition for its innovative solutions. In August, Vbee's conversational AI platform, developed by Vbee Data Services and Solutions JSC, won first prize at the 2024 Qualcomm Innovation Challenge. The accolade has since opened doors for Vbee to connect with Qualcomm’s partner network, expanding its potential for growth and collaboration.

While the outlook for investment in GenAI startups in Vietnam is promising, experts warn that challenges remain. Speaking with VIR, Denning Tan, partner at GenAI Fund, said, "Vietnam has a skilled workforce, but as GenAI evolves, the advantage of technical expertise is diminishing. With AI code generators now allowing code to be created through natural language programming, Vietnamese GenAI startups will need to upskill their workforce to stay competitive, or risk losing their edge in coding expertise."

Recognising these challenges, the Vietnamese government is collaborating with major tech firms to support startup growth. In July, the National Innovation Centre (under the Ministry of Planning and Investment) partnered with Google to launch the Google for Startups Accelerator scheme, which aims to strengthen talent and networking opportunities for Vietnamese startups by providing valuable tools and mentorship.

The programme includes the 'Google AI Startups Masterclass', an eight-week online course offering entrepreneurial skills, and the 'Google for Startups Accelerator Southeast Asia: Vietnam, AI-focused' initiative. This accelerator helps Vietnamese AI startups to grow and scale by connecting them with Google experts. Additionally, the Google Startup AI Space enables startups to rapidly create prototypes and commercialise their applications, enhancing Vietnam’s competitiveness in the regional GenAI landscape.