English
Opportunities to start up in Vietnam
ENTERPRISE Singapore’s regional director (Ho Chi Minh City) Leon Cai, and regional director (Hanoi) Hong Anh Bui Thi identify some of the key developments in Vietnam’s startup scene and explains why SIngapore companies should consider this growing market.
1. What are some of the latest developments in Vietnam’s startup scene right now and its strengths?
Vietnam is making rapid progress as an entrepreneurship and startup hub. According to a report released by startup accelerator Topica Founder Institute (TFI), investments in Vietnamese startups have tripled to US$889 million in 2018, from US$291 million in 2017.
The market has groomed its own unicorn, VNG Corporation, which specialises in digital content and online entertainment, social networking and e-commerce. It developed the Zalo app, a mobile application used for free calls and texting which reached 100 million users in 2018.
There are also other up-and-coming startups. Ami is an example of a promising Vietnamese internet of things (IoT) and block chain technology startup. Founded in 2017, it aims to digitise Vietnamese homes, buildings, universities, companies, hospitals and more. Ami delivers software as a service by setting up IoT devices in rooms and houses controlled by block chain technology to automatically transfer and synchronise data on its app. Within six months of inception, Ami secured a US$9 million investment to develop products to further this digitisation process.
The vibrant startup landscape can be attributed to two major developments – the young, increasingly tech-savvy population with its strong entrepreneurial spirit, and strong government support.
The country has built up a strong pool of tech talent, especially in engineering. Almost 70 per cent of the population is below the age of 35 and majority of the youth are exposed to compulsory computer science classes, resulting in a force of 250,000 young and capable engineers. These engineers are constantly upgrading themselves by integrating cutting-edge technology into their work. As a result of this, multinational corporations (MNCs) are attracted to set up offshore software development centres in Vietnam. Intel and Microsoft for example, have been outsourcing their software projects to the country for years.
The combination of these technological capabilities with the enhanced business acumen of the rising numbers of returning Vietnamese who have been educated or worked overseas is the perfect recipe for growing a startup ecosystem. The number of startups has rocketed up to around 3,000 currently from 400 in 2012 and they are supported by 30 incubators and 10 accelerators.
There is also strong commitment by the Vietnamese government to develop startups. It aims to increase the number of enterprises to one million by 2020 and is backing startups by upgrading infrastructure and policies. Saigon Innovation Hub (SIHUB), launched by the Ho Chi Minh City Energy Conservation Centre in 2016, provides facilities for startups and spearheads innovation ventures with the aim of developing Ho Chi Minh City into a startup city. Tech complexes such as the Saigon Silicon City Centre have also been set up to support tech startups; connecting overseas Vietnamese high-tech firms, support industries and international groups specialising in the research and application of technology transfer.
Funding for startups has also become more accessible. Besides funds from venture capital (VC) firms, the Ho Chi Minh City Department of Science and Technology set up SpeedUP, a fund of about US$520,000 to invest in startups.
Beyond these efforts, the National Agency of Technology, Entrepreneurship and Commercialisation (NATEC), under the Ministry of Science & Technology, also set up Project 844 in 2016 to promote startup development. It focuses on supporting the national innovation startup ecosystem through 2025 and developing a legal system and national e-portal for startups by 2020, which will link foreign and domestic policy-making agencies, incubators, investors and startups to drive collaboration and information exchange. It will also provide funding support to 200 startups in Vietnam.
2. Why should Singapore startups or companies consider entering this market, and what sectors would it be suitable for?
Vietnam has the third largest population in Southeast Asia and enjoyed economic growth of 7.08 per cent in 2018. It has a sizeable and young consumer base with growing disposable income – the media age is only 30.5 and its middle class looks set to make up 26 per cent of the population by 2026. This makes the market attractive for Singapore startups as they need market size to scale further.
E-commerce is a key sector that Singapore startups should target, given the rapidly increasing internet penetration rate in Vietnam. Vietnamese consumers are warming up to online shopping, with 30% of consumers expected to shop online by 2020. While competition is fierce with Vietnamese e-commerce sites like TIKI and Sendo, the market is still relatively untapped and presents a great opportunity for Singapore startups.
The growing e-commerce market and digital space in Vietnam has led to an abundance of consumer and market data. To sieve out market insights, data and business analytics solutions are required. A report from technology research firm IDC states that revenue for Big Data Analytics will have a five-year compound annual growth rate (CAGR) of 19.4 per cent in Vietnam, the second fastest growth rate in the world after Argentina. Singapore startup Holistics, a business intelligence automation and visualisation software, has leveraged this demand to set up in Vietnam and worked with companies such as Grab, LINE and ShopBack.
Fintech is also a sector that offers opportunities. Although 41 per cent of the Vietnamese population is still unbanked as most consumers prefer using cash, 72 per cent of the population has already adopted smartphones, presenting a massive opportunity for fintech firms. We observe an increasing push for mobile-based payments in Vietnam, especially among the younger generation. The government has also announced the Vietnam Cashless initiative, where they want to move towards a mainly cashless economy by 2020. This leaves a great space for Singapore startups to facilitate the digitalisation of banking services and the implementation of e-wallets.
Another growing industry, although nascent, is cryptocurrencies and trading, with a heavy emphasis on block chain technology and automated trading processes. Interest in block chain technology has been growing in Vietnam, and the government welcomes such new technologies as it helps accelerate the economy’s growth. Vietnam’s talent pool, which is strong in mathematics and computer science, also makes it an important source of talent for block chain technology.
3. What are some of the biggest challenges that these startups would face and how can they overcome these challenges?
The challenges that startups could face are similar to any business which wants to set up in the market. Vietnam is currently developing and opening up its market to the world. Thus, Singapore startups will need to spend time to understand the market and how to setup and expand businesses in the Vietnamese startup ecosystem.
The language barrier can serve as a considerable obstacle when recruiting talent for business operations or finding business partners as some tend to prefer the Vietnamese language for business dealings. Therefore, it is important to spend time finding and developing the right talent who understands the culture and market nuances, as well as has a good understanding of the business, regulatory landscapes and government policies.
Given the importance of personal relationships in doing business in Vietnam, the person whom the startup sends to the market needs to know how to build strong relationships with its Vietnamese partners. Even within Vietnam, there could be regional differences in the conduct of business.
Specific to Singapore startups, the general unfamiliarity in servicing a larger market can be quite daunting. This is exacerbated by the lack of uniformity in the consumer demographics of different cities in Vietnam. The best way to overcome these issues and maximise the opportunities in Vietnam would be to attend various networking events and to get to know more people on the ground. This will allow founders to build a network of partners to hinge on during the actual set-up of their business.
4. What’s your top advice for startups thinking of entering this market?
It is crucial that startups looking to venture into Vietnam do not view Vietnam as a single market. Given its size, there may be cultural differences in different parts of the country. Companies will need to invest time to understand each city and be aware of the different business preferences.
Different cities also have different pain points that need to be addressed. Companies should do a market survey on the landscape in each of these regions and develop a customised market penetration strategy. There is no one-size fits all strategy for Vietnam as the startup ecosystem players are extremely different in each region.
5. What are the resources Singapore companies can tap on to enter Vietnam’s startup market?
With Vietnam’s rapidly growing startup ecosystem, we see room for Singapore technology companies and startups to tap into this vibrant ecosystem to find partners, co-innovate, and offer their solutions. To encourage this, Enterprise Singapore expanded the Global Innovation Alliance (GIA) network to Ho Chi Minh City on 18 July. This provides an entry point for Singapore startups and small and medium sized enterprises (SMEs) to connect with the local innovation and business community in Vietnam. We are working with SIHUB and Quest Ventures to organise programmes for Singapore-based startups to better understand the innovation landscape and connect with partners to co-create solutions for the Vietnam market and beyond. At the same time, we also encourage Vietnamese startups to leverage Singapore’s established innovation ecosystem and to connect with multinational corporations (MNCs) and leading Asian enterprises based in Singapore to scale their business further.
One of the key success factors necessary for a successful startup is a strong base of partners and mentors to help them set up, find partners or investors. Besides approaching Enterprise Singapore, startups can work with the network of partners we have developed. Ecosystem players in the startup space such as SIHUB, Vietnam Silicon Valley (VSV), Startup Vietnam Foundation, Vina Capital and HCM University of Economics are some useful contacts to connect with.
For example, PostCo, a delivery startup from Singapore which allows convenient collection of parcels, has found traction by working with leading Vietnamese players such as SIHUB via the Runway to the World (R2TW) programme. It connected PostCo with key startup ecosystem players in Vietnam and also provided the opportunity for it to learn from other foreign startups participating in the same programme. PostCo is now fully operational in Vietnam.
We also provide more touchpoints for Singapore startups with Vietnamese corporates via in-market innovation roadshows, where they can showcase their expertise and explore partnerships with these local corporates, as well as via upcoming events such as the Singapore FinTech Festival and the Singapore Week of Innovation and TeCHnology (SFF x SWITCH) in November this year.
For more market insights on ASEAN and information on how Enterprise Singapore can work with your business to venture to the region, please visit www.enterprisesg.gov.sg/ASEAN
Source: https://www.businesstimes.com.sg/asean-business/opportunities-to-start-up-in-vietnam