Over the last thirty years, the country has moved from being one of the world’s poorest regions, which had been devastated by decades of conflict, into one of the most dynamic emerging economies south-east Asia, partly due to the government’s focus on fostering the homegrown growth of technology and innovation.
Despite being ruled by a communist administration, a recent Pew survey highlighted that as much as 95 percent of the Vietnamese population support free-market capitalism—a higher percentage than in any other country surveyed, including the United States.
Vietnam is now one of the the fastest-growing economies in the world and if its steep upward trajectory continues, is on track to become the 20th-largest economy globally by 2050.
But while the government has been a key driver of change from the top down, over the last decade startup culture and innovation has played a key role in the regeneration of the country and its economy from the bottom up. So let’s take a quick look at the startup ecosystem in Vietnam, which is predominantly based in the two main urban hubs of Hanoi and Ho Chi Minh City.
Local ecosystem strength
Vietnam is now home to as many as 3000 startups, making it the third largest startup ecosystem in Asia. It recently jumped 12 places to 47th among 127 economies on the Global Innovation Index 2017 with only Singapore and Malaysia ranked higher in the region.
While micro-communities of tech enthusiasts are popping up all over the country and in particular in Da Nang and Dong Thap, the main startup hubs are centered around the capital city of Hanoi in northern Vietnam, and Ho Chi Minh City (HCM) in the south.
The local startup ecosystems in both areas have quite distinct characteristics. Hanoi is known as a technological hub, where local players are pushing the needle in terms of software development and innovation. However, Ho Chi Minh’s community is known for its strong entrepreneurial mindset and culture, producing local talent who are business-minded, market-oriented and know how to build and scale businesses.
As seen in many other developing economies, local entrepreneurs across Vietnam have a strong focus on using technology to solve local problems.
Many of the problems which are more pressing in developing economies, such as large numbers of underbanked citizens, and low access to funding for micro-businesses, are driving startup innovation. Only 31% of adults in Vietnam have bank accounts, but smartphone saturation is rising rapidly, with 40% of the population expected to own smartdevices by 2021. This opens the door to new fintech players who can create mobile first, inclusive services.
As such, there has been a rapid growth in the field of fintech across the country in recent years. A recent Ernst & Young report estimates that as much as $129 million dollars was invested in fintech startups in 2016, accounting for 63 percent of all start-up contract value, with local startups including Payoo, VNPT E-pay, and F88 leading in terms of deal value.
Advancing hand in hand with the fintech movement is the blockchain. A recent Forbes article highlights Vietnam as a blockchain leader in south-east Asia, arguing that the dynamic, and rapidly expanding startup community in Vietnam ‘may well provide fertile ground for developing in blockchain applications’.
Phuong Nguyen of Remitano, a Vietnamese startup that helps crypto traders to work quickly and securely, argues that the blockchain offers Vietnam the chance to catch up with other Asian countries in terms of its infrastructure, which is still lacking in many parts of the country, especially in rural areas.
Moving past crypto, local experts and innovators are increasingly researching different ways that the blockchain can be used to solve problems in Vietnamese society, such as protecting land rights, improving conditions for agricultural workers in rural Vietnam, along with more high tech applications like insuretech, agrictech, medical fields and Internet of Things (IoT) services.
In 2017, the overall startup deal value in Vietnam stood at $291 million, with all but US$ 46 million coming from foreign investors and funds. Fintech, food tech, and e-commerce startups are receiving the most amount of investments, followed by a handful of investments in the spheres of media, logistics, and online travel. Vietnam’s startup scene is also well documented in an upcoming book by Andrew Rowan, titled Startup Vietnam.
A top-down focus on innovation
The Vietnamese government has been criticized for infringing on the digital freedoms of its citizens. In the past, the administration shut down Facebook during a visit by President Obama, threatened to ban Whatsapp and Telegraph, and introduced fines for people who criticize the government on social media. However, when it comes to supporting and encouraging the growth of startups and innovation, the government has played a focal role.
The Vietnamese government has made technology and STEM courses a key part of the local education curriculum. According to the OECD’s 2016 Programme for International Student Assessment Vietnamese teenagers are shooting ahead of Asian peers and even consistently outperforming their American and British students in STEM courses such as mathematics and science. School curriculums now include computer science classes from as early as grade two and by grade four, students begin to learn basic software development skills such as loops programming in Logo.
To encourage homegrown entrepreneurship and innovation, the Vietnamese government has launched a number of projects to support local innovation and entrepreneurship. Notable government assistance programs include SpeedUP a fund launched by Ho Chi Minh City’s Department of Science and Technology, which as of this year had invested in 14 startups and Startupcity.vn, a digital platform launched by Hanoi’s People Committee that lists local startups and builds bridges between early-stage companies and local investors. The Vietnam – Finland Innovation Partnership Programme, a program co-financed by the governments of Finland and Vietnam has to date funded 18 innovative companies and 5 high growth startups aiming to launch in international markets.
The government and local authorities have also backed accelerators and educational facilities, designed to help local entrepreneurs build and scale companies both within and outside Vietnam. The Saigon Silicon City Center is a 52-hectare high tech complex in the capital which aims to support tech-focused startups and international firms. The Mobile Applications Laboratory (mLab) East Asia was launches by Ho Chi Minh City authorities and offers an incubation program, mentorship and seed funding to local startups.
On a nationwide level, the National Technology Innovation Fund (NATIF) is a government agency backed by Vietnam’s Ministry of Science and Technology which provides equity-free grants and loans for technology companies to invest in R&D, innovation, and technology transfer. The National Agency for Technology, Entrepreneurship, and Commercialization Development (NATECD) was launched by the Vietnam Ministry of Science and Technology and offers startups and technology companies education, mentorship, and funding to take their businesses to the next level.
The Founder Institute, started by Adeo Ressi and Jonathan Greechen, and its program in Vietnam
Other support networks and events
Strong startup ecosystems generally develop when both private and public support networks are in place to allow founders to turn ideas into businesses. In Vietnam, there is an abundance of accelerators offering seed funding, mentorship, and high-level facilities, as well as active community builders like co-working space and events.
Both Hanoi and Ho Chi Minh City are home to the Founder Institute, a leading global accelerator program, along with government-backed accelerator program and coworking space Vietnam Silicon Valley (VSV).
Hanoi is also home to accelerator programs from Hatch Ventures, iAngel, Kisstartup, X-Incubator, IDG Ventures Vietnam, Saigon Hi-Tech Park (SHTP Incubation Center) and 5Desire. There has also been an explosion of co-working spaces popping up, with as many as 43 spaces now available across the city.
These accelerators and co-working spaces are important for community building, and hosting events which allow budding entrepreneurs to learn new skills, communicate and cooperate on projects. A quick browse of meetup.com reveals more than 50 active startup and developer groups in Hanoi, and regular hackathons, and technology interest groups such as HackerNest Social.
The city has also been host to a number of large-scale events in recent years, including TechFest Vietnam an annual event supported by the Ministry of Science and Technology, and co-organized with many other ministries, and key local startup ecosystem players, and SprintStars, an event which is designed to bring together the female tech community in Vietnam.
However, local experts suggest that the community is not as united in Hanoi as in HCM city, partly due to the fact that lower average levels of English in Hanoi reduce the amount of international and bi-lingual events held there.
Aside from the aforementioned The Founder Institute and VSV, Ho Chi Minh City is also home to the Vietnam Innovative Startup Accelerator (VIISA) another government-backed accelerator program, as well as private accelerators including Zone Startups which is operated by Ryerson Futures, a Toronto-based accelerator linked to the esteemed Ryerson University, 500 Startups, Expara, The Business Startup Support Center and the Alphavision Angel accelerator.
As many as 15 coworking spaces have launched in the city since 2014, and WeWork is set to open their first location in Vietnam based in HCM later this year.
There is an extremely active startup community within the city, with regular meetups around different coding languages, mentorship meetups, and pitch events. A browse of sites like TechEvents and Meetups shows a particular interest in the blockchain.
There are a number of regular events in English across the city, appealing to foreign founders, returning Vietnamese who were born or have lived abroad, and locals who tend to have much higher levels of English than in other parts of the country.
While Hanoi, the capital city, often bags some of the larger international conferences, earlier this year HCM was host to the Vietnam Blockchain Week which featured an extensive lineup of international and local speakers and included a number of side events across the city. The event, which was organized by Ho Chi Minh City based Infinity Blockchain Labs attracted as many as 2000 attendees from all over the globe.
On the 25th and 26th of November of this year, Horasis, an international organization founded by Dr. Frank-Jürgen Richter, will be hosting its Asia meeting in Binh Duong, a high-tech development zone on the outskirts of HCM city.
The event will bring together over 400 leaders from the worlds of politics, innovation, and business in Asia, and will deal with themes such as nurturing Asia’s digital economy, boosting investment in the region, and improving cooperation between Asian states and the rest of the world. That Vietnam was chosen as the host for this event, over larger neighboring countries, is a sign of the country’s emerging status within the region.
Homegrown and returning talent
With as much as 70% of the Vietnamese population under the age of 35 years old, there is a lot of youthful energy and enthusiasm in the startup community of Vietnam, and thousands of new potential founders and thinkers joining the workforce every year.
Vietnam has an advantage over other SE Asian countries in its strong homegrown base of developers. Thanks to the abundance of startup support organizations as well as funding and accelerator programs, these developers are leaning towards launching their own startups rather than working for larger companies.
In a recent blog post from the American Chamber of Commerce in Vietnam, Binh Tran, a partner at 500 Startups and co-founder of Klout, Inc. argues that Vietnam is particularly attractive as a startup location and a talent pool for larger companies due to the abundance of low-cost, high-tech talent, engineers and coders who are able to build and develop products just as well as their competitors in Silicon Valley — for a fraction of the cost.
And as well as nurturing homegrown talent, since 2000, the government has been making a big push to bring back Vietnamese who have emigrated abroad, as a means of kickstarting local innovation. In a recent BBC documentary, Mike Tran, CEO of Ticketbox, argues that returning Vietnamese who have lived and worked abroad can bring back a lot of fresh ideas, and business knowledge from more developed business environments back to Vietnam.
Eddie Thai, general partner at 500 Startups’ Vietnam-focused fund argues that returning Vietnamese have played a “major role” in the recent boom of the country’s economy and innovation sector, as previously seen in other countries like China and India where emigres have returned en mass over the last decade. Thai argues that as well as providing a steady source of capital and remittance, that emigres returning from years abroad are a key source of expertise, forward-thinking ideas but also connections.
In a recent TechinAsia article, Thai points out that of the 26 firms which 500 Startups Vietnam has made investments in to date, more than half had founders who are Vietnamese returning from overseas.
Looking to the future
While technology and innovation are clearly playing a key role in driving the growth of the Vietnamese economy and offering a wealth of opportunities for young people across the country to play a part in the new Vietnam, there is still progress to be made. Urban Vietnam is progressing rapidly, but levels of socioeconomic advancement in rural areas are still moving at a snail’s pace. Vietnam is marking its position as a powerhouse in Asia but still lags far behind neighboring countries such as Singapore and Malaysia, both of which are well ahead of Vietnam in terms of not only their economies but also their startup infrastructures.
However, it is important to note that startup culture is still comparatively new in Vietnam compared to other parts of the world. And with a country that has shown it is prepared to back innovation, increased attention from foreign investors and startup organizations and an ever-expanding talent pool of young, tech-savvy potential founders and employees, Vietnam has the opportunity to be a key spot on the global startup map for many years to come.