Entrepreneurs believe that the economic hub of Ho Chi Minh City is the new “holy land” for startups (Photo: VietnamPlus) Hanoi (VNA) – Bloomberg has published an article entitled “Silicon Valley talent is helping grow Vietnam’s startup hub”, which quotes founders as saying that an abundance of high-quality engineers, inexpensive labour, and a rapidly-growing economy make the country an attractive spot for startups.
For many Westerners, the enduring image of Vietnam is of a war-torn, impoverished nation where Nike makes its shoes. These days, coders are moving to the nation’s commercial hub of Ho Chi Minh City to launch startups focused on everything from insomnia to microloans. But becoming Asia’s next startup hub will require overhauling existing regulations and navigating some hefty economic headwinds.
Lauria, an American expat and co-founder of Golden Gate Ventures, relocated to Ho Chi Minh City in 2022 after previous stints in Singapore and the US, joining a growing number of foreign nationals lured there by a belief that the dense metropolis is a new mecca for startups.
“Southeast Asia is going to be a global growth engine in the next 10 years and Vietnam will be at the centre of it,” said Lauria.
The number of startups in the country nearly doubled from the beginning of the pandemic through mid-2022, according a July report by KPMG International and HSBC Holdings. Some of the world’s biggest investors, including Sequoia Capital, Warburg Pincus and Alibaba Group Holding, are backing those offering promising solutions.
In 2021, Vietnam drew a record 2.6 billion USD through 233 private deals, up from the 700 million USD via 140 deals a year earlier, according to a Google, Temasek Holdings and Bain & Co. report.
Local firms are also competing with their Southeast Asian peers, accounting for 13% of the total venture funding flows into the region after Indonesia and Singapore in 2021, according to Do Ventures.
Vietnamese government sets a target to turn Ho Chi Minh City into a magnet for tech investment attraction. (Photo: VietnamPlus) The Vietnamese government has set a target to turn Ho Chi Minh City into a magnet for tech funding and target a digital economy that represents 40% of the city’s gross domestic product.
To realise the target, the city will prioritise attracting foreign investment to high-tech projects while also offering other incentives to lure global talent and international firms to establish innovation research centres.
The city’s policy has already yielded some results. Gaming developer VNG, the nation’s first unicorn, is expected to pursue a US listing in the coming months. Money is pouring in, with a salary payment firm and another agricultural platform becoming the latest startups in recent weeks to receive millions of USD in funding rounds.
Ho Chi Minh City has the makings of the next Silicon Valley-lite (Photo: VietnamPlus) Industry insiders say Ho Chi Minh City has the makings of the next Silicon Valley-lite: a heavy math and science educational system, a decades-old software outsourcing industry that’s created an abundance of talented engineers, and the benefits of Vietnam’s economic expansion which last year was one of the fastest across Asia.
Vy Le, co-founder of Do Ventures, said that a decade ago, funders could spend six months mulling an investment.
“If we don’t make a decision within one or two months, other funds will definitely take the deal,” Vy Le revealed. Every month, she meets on average 10 overseas funds.
Vietnam’s nascent startup sector has been years in the making. In 2013, the launch of Flappy Bird was hailed as a gaming phenomenon that would boost the country’s startup heft. While that game was later pulled, it showed the way to a new generation of firms like mobile payment provider VNPay, which according to the ADB became the country’s second unicorn in 2020.
Founders say that there haven’t been more success stories because the government has yet to establish a proper framework for stock options.
Still, that hasn’t deterred foreigners like Lauria, whose fund had started backing local startups in 2014 and opened offices both in Ho Chi Minh City and Hanoi last year. He decided to take the plunge after watching the country’s extraordinary growth per capita triple over the past decade. He thinks online spending could multiply fivefold over the next six years.
Startups are also tapping an acceleration of Vietnamese citizens returning home, according to Nguyen Nguyen, who runs a Sequoia-backed artificial intelligence firm that helps people without credit histories obtain loans.
The sector has undergone a “night-and-day” transformation, said VNG’s co-founder Le Hong Minh, whose glass-walled headquarters overlook the Saigon River, an area once known for making textiles. High smartphone and internet adoption, a large young population and fast-growing middle class are now redefining the country.
Tran Binh, co-founder of Ascend Vietnam Ventures, who returned from the Bay Area with his family in 2020, said the new Vietnam is well beyond what people outside of Vietnam understand. This is a very accessible market with a lot of young talents eager for startups./.
