Enterprise Singapore Logo
Blog
26 Aug 2019 Updated 27 Aug 2019

Vietnam

Vietnam’s startup environment is blooming. How can I be a part of this journey?

Vietnam is making rapid progress as an entrepreneurship hub, buoyed by an increasingly tech-savvy population and strong government support.

Promising Vietnamese startups like Ami, an Internet of Things (IoT) and blockchain technology company, are attracting more interest – and with it, more investments. Within 6 months of its inception, Ami secured an investment of US$9 million to expand its product line.

ESG Spotlight on Vietnam 1


According to a 2018 report by startup accelerator Topica Founder Institute (TFI), investments in Vietnamese startups amounted to US$889 million in 2018, up almost three times from US$291 million in 2017.

Here’s the run-down.

1. Vietnam’s thriving startup ecosystem

In recent years, the ecosystem has grown tremendously. By the numbers: 3,000 startups, with the support of 30 incubators and 10 accelerators. With the emergence of more startups such as Ami, Vietnam has become one of the largest startup ecosystems in Southeast Asia.

A number of MNCs are already present in the market, setting up offshore Software Development Centres, thanks to Vietnam’s pool of strong engineering talent. Intel and Microsoft, for instance, have been outsourcing software projects to Vietnam for years.

Almost 70% of the population is below the age of 35, and a vast majority of youths attend compulsory computer science classes. The end result: A workforce of 250,000 young and educated engineers. Not only are they constantly upgrading themselves, wages are 40% less than their counterparts in China and India.

ESG Spotlight on Vietnam 2


But it takes more than technological capabilities to build a startup ecosystem. Being added to mix are more Viet Kieu – Vietnamese who have been educated or have worked overseas. They bring home with them enhanced business acumen and experience.

The Vietnamese government also aims to increase the number of local enterprises to 1 million by 2020, and is promoting startup growth through infrastructure and policy upgrades.

Take for example initiatives like Saigon Innovation Hub (SIHUB) and the Saigon Silicon City Centre, which were set up to support startups and promote innovation. Avenues for funding are also more accessible, with the likes of SpeedUP, a fund of about US$520,000, set up by the Ho Chi Minh City Department of Science and Technology.

2. Explore market trends in these sectors

E-commerce
Vietnam has the third largest population in ASEAN and a growing middle class (which is on track to make up 26% of the population by 2026). With rapid economic growth of 7.1% in 2018 and a median age of 30.5, the Vietnamese middle class is relatively young and has a growing disposable income.

ESG Spotlight on Vietnam 3


Vietnamese consumers are slowly but surely seeing the merits of online shopping, with 30% of consumers expected to shop online by 2020. E-commerce players like TIKI and Sendo have made quite some headway, but the market is still relatively untapped and presents great opportunity for Singapore startups.

Big Data
In line with growing interest in the e-commerce and digital space, there is an abundance in consumer and market data. Expertise in data and business analytics to tease out useful market insights is thus expected to rise exponentially. According to technology research firm IDC, revenue from big data analytics is expected to clock in a CAGR of 19.4% in Vietnam. Singapore startup Holistics, a flexible business intelligence automation and visualization software is looking to leverage this trend. Based in Vietnam, the startup has to date worked with established companies like Grab, LINE and ShopBack.

Fintech
Another key sector is fintech - 41% of the Vietnamese people are unbanked, with most consumers preferring to use physical cash.

ESG Spotlight on Vietnam 4


Despite this, smartphone adoption is on the rise, with mobile-based payments becoming the norm among the younger Vietnamese. The trend is further backed by government moves like the Vietnam Cashless initiative, which aims to move the country towards a primarily cashless economy by 2020.

This presents massive opportunities for Singapore startups to facilitate the digitalisation of banking services and the adoption of e-wallets. Up for consideration as well is cryptocurrency and trading, with a heavy emphasis on blockchain tech and automated trading processes.

3. Singapore startups are likely to face some challenges

Vietnam is in the process of developing the market and opening up its economy to the world.

Despite the strong government support and changes in policy, startups may find it challenging to establish a solid base in Vietnam without a clear understanding of the necessary legal processes. And there’s the language barrier too – it may be difficult to recruit talent or find suitable business partners.

ESG Spotlight on Vietnam 5


It’s thus crucial for startups to develop the right partners and talent. This goes beyond acquiring knowledge relating to the business, regulatory landscapes and government policies; teams who understand the subtle cultural and market nuances will fare much better. Given the strong emphasis on inter-personal ties when it comes to doing business in Vietnam, any company hoping to enter the market must know how to build strong relationships with its local partners.

Ideally, companies should engage with like-minded local partners to gain quick access to useful connections and market knowledge.

3 tips to get you started in Vietnam

Some general advice
Don’t view Vietnam as a single market. Each city has its own personality and distinct characteristics, especially in terms of culture and how they do businesses. Localisation is very important.

For example, people in the southern regions tend to be more direct in the way they communicate and engage for business. In the north, greater emphasis is placed on relationships, and people tend to spend more time building networks and ties before embarking on formal business discussions.

Different cities also have different pain points that need addressing. Businesses should do a market survey on the business landscape and develop a customised market penetration strategy for each of these regions.

There is certainly no one-size-fits-all strategy for Vietnam.

Network, network, network
Attending networking events and getting to know the people on the ground would be a good way to maximise opportunities and alleviate some of the challenges mentioned earlier. This helps founders build a diverse network of partners to lean on during the initial set-up stage.

ESG Spotlight on Vietnam 6


A strong base of partners and mentors will also go a long way. Singapore parcel delivery startup PostCo has found traction by working with leading Vietnamese players such as SIHUB on the Runway to the World (R2TW) immersion programme. On the flip side, Vietnam startups like 689 Cloud are incubated at BLOCK71 in Singapore.

Check out our resources
Together with partners, Enterprise Singapore provides support, both financial and non-financial, for startups under Startup SG. It encompasses all local support initiatives and provides stakeholders with a platform to connect globally.

If you’re a Singapore company looking to enter the startup market in Vietnam, here are some avenues for assistance.

  • The Global Innovation Alliance (GIA) network now spans 11 cities around the world with its latest addition, Ho Chi Minh City. A market entrance programme is targeted to commence in September 2019, with an inaugural cohort of 10 Singapore startups. The newly expanded GIA network will also see more startup collaborations between Singapore and Vietnam, as well as internship opportunities for Singapore students in innovative Vietnam companies.

    ESG Spotlight on Vietnam 7

  • Have a burning question about the nuts and bolts of setting up shop? Read our guide to doing businesses in Vietnam.

  • Breaking into any new market takes plenty of preparation, but if you’re ready, we’re here to help. Tap our Plug & Play Network to access assistance in areas like market study & consultation, business matching, specialised advisory and co-working space.

  • As member states of ASEAN, Singapore and Vietnam are part of the ASEAN Free Trade Area. Through the establishment of the ASEAN Trade in Good Agreement (ATIGA), Singapore and Vietnam have elimated intra-ASEAN import duties on many tariff lines. Find out how you can benefit from tariff concessions from Vietnam.