vietnam startup ecosystem

Why Vietnam is an up-and-coming startup hub

Over the past several years, Vietnam has emerged as a vibrant startup hub.

In the Vietnam Ventures Summit 2020, an alliance of venture capital firms pledged to invest $815 million in the country’s startups in the next three to five years. That’s $400 million more than the commitments made in the event the previous year.

The firms want a piece of Vietnam’s digital economy, which is projected to grow to $52 billion by 2025, according to a report by Google, Temasek and Bain & Co. Prospects appear particularly bright in the e-commerce, digital finance, online gaming and tech-enabled services sectors.

Tremendous change

According to startup founders, with a young and educated population, high smartphone and internet penetration, and strong government support, Vietnam makes for a compelling destination for tech entrepreneurs and investors.

Several founders recount their startup journeys and highlight Vietnam’s dramatic digital transformation during GGV Capital’s Evolving For the Next Billion podcast interviews.

Le Hong Minh, founder and CEO of VNG, one of the largest internet companies in Vietnam, says he has seen “tremendous change” in the country’s digital landscape since the company started operations, initially in gaming, in 2004.

“We started the company when there are less than one million internet users in Vietnam. Seventeen years later, now, I think that Vietnam has almost 70 million internet users,” Minh says.

Aside from having a high internet penetration rate of 70%, Vietnam has more than 61 million smartphone users, placing it among the top 10 countries with the largest number of smartphone users in the world.

It also has a large population of more than 97 million and a relatively young one at that, given the median age of 32.5 years. “We have people who are really open to new things,” says Minh.

What makes a good startup scene?

SyPhong Bui, founder of Tellio, Vietnam’s largest B2B e-commerce platform and a GGV portfolio company, says the tech ecosystem in Vietnam has reached an “advanced state”. The situation is vastly different from when he founded his first company back in the early days of the startup scene in Vietnam in 2014.

“A good startup scene is made of good founders, good talent and good resources for building the company like IT talent and access to capital. You also need good mentors and support from the government,” notes Syphong.

Vietnam has made great strides in some of these areas. In terms of talent, Syphong says the country has gotten a boost from the return of Vietnamese from abroad who bring with them their experience and skills amid the country’s “new era of development”.

“Our GDP has been growing 6% to 7% year-on-year for more than 10 years, and we are expecting to hit around 9% this year. We have an open economy with export and import, which creates a good landscape for investment to flow in,” Syphong notes.

Among the returnees to Vietnam are the husband and wife team Sonny Vu and Christy Trang Le, CEO and CFO of 3D printing technology company Arevo. While Arevo, also a GGV portfolio company, is based in Silicon Valley, the couple spend a lot of their time in Vietnam, where the company’s 3D printing farms are located.

“It all starts with belief. Although the statistics are clear – there’s a big population that’s really educated – it’s kind of overlooked,” Sonny says of Vietnam’s software and hardware capabilities. “At the beginning, it was because we were Vietnamese that we ended up moving here, but it came down to us believing that you can make this happen in Vietnam.”

Government support

Friendly government policies have also buoyed the growth of Vietnam’s digital economy.

Syphong says the government is “supportive” and has become “more open-minded”. Similarly, Minh says there are a “few great policies in terms of promoting the development of the internet”.

Some of these reforms include the passage in 2018 of the Law on Support for Small and Medium-Sized enterprises and the issuance of a decree promoting investments in startups and providing legal status to innovative startups and funds.

Vietnam’s government has also set up several funds to support startups and cooperated with countries and banks to facilitate funding, loans, technical training and business mentoring.

Last year, the country also introduced new incentives to accelerate the founding of startups in information technology and other high-tech businesses.

All in all, while challenges will always remain for any startup market, Vietnam appears to have what it takes to attract increasingly large amounts of tech investments over the long term.

Fresh insights delivered to your inbox.

I would like to receive news and updates from GGV.