New mindset needed for Vietnam to have tech unicorns
There has been a growing number of local startups who neglect raising funds in subsequent rounds after gaining initial successes, said an expert.
Despite impressive growth rate in recent years, the Vietnamese startup community has not made breakthroughs to go global and created tech unicorns capable of competing with regional standouts such as Grab, Go-Jek, or Traveloka. Experts say that the key issue would be a mindset changing from the government and startups.
Techfest Vietnam 2019 in Silicon Valley, California. Source: Techfest.
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According to the report, Vietnam has seen phenomenal growth in the number of startups during this third wave, growing from 400 in 2012 to nearly 1,800 in 2015, and 3,000 in 2017. Co-working spaces, accelerators, incubators and programs for the startup community boomed in 2016.
The community welcomed the launch of co-working spaces such as Toong, Up, Dreamplex, Circo, Hatch!, Nest, and Hub.IT. New accelerators were also launched, including Vietnam Silicon Valley (VSV) and Vietnam Innovative Startup Accelerator (VIISA), along with a range of incubators under government agencies, universities and institutes.
Austrade referred to a report by the Topica Founder Institute that investment capital poured into Vietnamese startups increased by more than four times in the 2016 – 2018 period, reaching US$900 million from US$205 million.
Thach Le Anh, director of VSV, a national accelerator under the Ministry of Science and Technology that provides acceleration programs for early-stage startups, told Hanoitimes that such figures showed strong growth of the Vietnamese startup community in terms of quantity and quality.
“For the Vietnamese market, local startups have generated healthy revenue, however, in order for them to go global, Vietnam’s startups would need to participate in series B or C funding with a bigger amount of capital and the involvement of large scale investment funds.”
Vietnamese startup Abivin won the first prize at Startup World Cup 2019 in the US. Source: Abivin.
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Following the event, Techfest Vietnam 2019 is scheduled to take place in Singapore and South Korea in November.
Anh said the move is essential for Vietnamese startups to expand and get a glimpse of international standards in innovative startups. ”For major venture capitals, what you get is not only capital but also their expertise and knowhow in penetrating international markets,” he said.
Nguyen Hoang Anh from Abivin, Vietnamese startup that won the highest prize in Startup World Cup 2019 in the US, said events such as Techfest 2019 are beneficial to Vietnamese startups. “We have the chance to learn from world’s major companies, as well as looking for potential investors and partners.”
New mindset from startups
VSV Diretor Thach Le Anh acknowledged positive results from events such as Techfest, but said a stronger push is required to realize the potential of Vietnamese startup community.
Anh expressed concern over the trend of a number of local startups who neglect raising funds in subsequent rounds after gaining initial successes. “They need to be aware of the fact that raising funds is the responsibility of founders, and this process would only stop when their startups launch IPO or are acquired by bigger companies.”
Echoing Anh’s view, CPO of Vietnam’s major e-commerce platform Tiki Sakshi Jawa said for Vietnamese startups, the challenge would be more about global reach. “From my view, a lot of startups probably do not know where they can reach and how do they position themselves in a global market. So the challenge is that they need to widen their horizon and see how and where they can get their funding from,“ she said.
Assessing shortcomings of Vietnamese startups during the raising funds process, Kil Ehong, CEO of South Korea’s leading financial groups Welcome, said that startups of Vietnam only talk about how many users they can attract, but for investors, the most important point is profitability.
Ehong added another issue for foreign investors is license. “Not all startups have required license for operation. So investors need to know if their projects are in line with the Vietnamese law or not.”
Necessity of “Venture capital law”
VSV Director Thach Le Anh said the above issue would be solved with the introduction of a Venture capital law. As risk is the nature of venture capital, so the presence of such law would lay the foundation for investors to commit long-term investment in startups.
“The game is for startup’s founder and investor. However, as the success rate of the former is as low as 1/10, both two sides need to accept risks and stay for long-term. But without the presence of the law, this bond is easy to break.”
Moreover, the law is an important step forward to the creation of venture capital market right in Vietnam. In that case, “Vietnamese startups do not have to go to other countries such as Singapore or South Korea for raising funds.”
“Even Vietnamese investors are looking at business opportunities in Singapore, due to the clarity and detail of the country’s laws and regulations.”
“Without a venture capital market, there will be no successful startups. The introduction of the law would help nourish startups right in Vietnam. Moreover, investors would push for more investments in the community, knowing that there has been legal framework in place to protect them.”
“This is also the main driving force to help Vietnamese startups go globally,” Anh concluded.
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