My Vietnam Startup Report

Submitted by tomo on September 6, 2013 - 3:43pm

Last Wednesday night, @Bowei Gai of the World Startup Report made his stop on his year-long globetrotting tour to the center of the Vietnamese startup scene at Saigon Hub in Ho Chi Minh City. He gave a talk that had been honed over many months and included lots of interesting bits from startup scenes around the world, from the amazing size (trillions!) of Chinese e-commerce companies, to the equally impressive adoption of mobile payment in Sub-Saharan African countries (30%!). Later, in private, we heard of the incredible arrogance of French startup people and corruption around the world. But we were also humbled by the recent multiple-hundreds of million dollar exits of Nepalese technology companies. And perhaps secretly identified with the conditions of economic crisis under which Argentinean entrepreneurs had to run their businesses - 20+% annual inflation driving up business costs, a local currency constantly losing value leading locals to buy dollars when they could...

Bowei has been flying to a new country every few days to study a brand new local startup scene. Originally with the intention of writing up the local report as he was traveling, that was clearly impossible. And so it'll be at least a few months before we see his Vietnam Startup Report. So let me share my own thoughts while they're still fresh.

VIETNAM RELATIVE TO THE REST OF THE WORLD....

So where does Vietnam sit amongst all the world's startup scenes?

1. Economic size: The entire country's startup scene is still smaller than second tier American startup cities.
2. Offline community centers are a recent development. Unlike the US and Germany which have had hackerspaces for years, there's still not a proper hardware hackerspace but there are shared co-working spaces where events can happen.
3. Startup-related events are just now happening.
4. There are just a few venture capital firms but there has been a recent uptick in technology company acquisitions. Regional (Asian) money is looking for investment opportunity here.
5. The number of people talking about startups on Facebook in Vietnam has grown from just a handful to 10k in just a single Facebook group.

1. Economic size

It's hard to compare the amount of money being invested in technology companies in Silicon Valley to anywhere else in the world. From what I hear, in terms of size, Israel / Tel Aviv is also the second largest startup place in the world. Things cost less in Vietnam and things are also worth less. So a company that services the American consumer would potentially be worth much more than any in Vietnam because a) the US has 3x the population and b) Americans have far more money. Yet Vietnamese companies aren't inventing new products that Americans want to buy yet either, or even that other Vietnamese people would want to buy for that matter.

2. Offline community

Physical spaces that service startups around the world would include coffee shops, real offices, virtual offices, co-working spaces, incubators, hackerspaces, universities. FWIW, Vietnam has perhaps the most advanced cafe scene in the world. And all those cafes have free wifi. These can be incredibly cheap places to work with a laptop. But in the past few years we've seen developments in small incubators, a "hackerspace" (now defunct), and co-working spaces like the Start Center and Saigon Hub. The Hub is the largest yet and is big enough to host medium-sized events of 100 people or so.

There is also (in Saigon):

SaigonCoworking: Phu Nhuan District http://www.saigoncoworking.com/
Gekkospace: District 3
Aspire Office: Binh Thanh District. http://www.aspireoffice.vn/ @cottervn

And in Hanoi:

Hatch http://hatch.vn/
HubIT
ClickSpace http://clickspace.vn/
5Desire
CommuneHanoi http://communehanoi.com/

Thanks to @guytruong for the list.

3. Events

In 2008, we had our first BarCamp Saigon unconference which hosted discussions of many topics including technology entrepreneurship. While not strictly a startup event, it was a focusing point for a nascent community of expat and local tech entrepreneurs. While BarCamp has been going strong every year (and growing in audience size).

Last week Vietnam hosted the regional DEMO ASEAN technology trade conference which had a startup component to it, with dozens of companies from Vietnam and the region (Thailand, Myanmar, Cambodia) pitching on stage. In the past 2 years, there have been several other such pitch-off events, some organized by regional conference organizers like e27.

Other notable events are the TechInAsia meetups and Keewi's StartMeUp monthly events.

4. Investment

There are two notably large funds (with American roots) operating in Vietnam: IDG VV and VinaCapital. IDG Ventures Vietnam has raised and disbursed hundreds of millions of dollars and DFJ-VinaCapital also invests in Vietnamese technology companies - all companies that make their money off the local Vietnamese market. CyberAgent Ventures from the Japanese gaming company has also entered and invested in a number of Vietnamese content and e-commerce companies.

There are more local investors like PVNI and a network of loose rich Vietnamese looking to invest in things they know nothing about. But in sum the actual number of funds that could invest in startups is extremely small. It matters far less that there might be tons of funds just a 1-hour plane ride away in the region if they don't (can't) invest in Vietnamese companies.

Although Vietnam has had a stock market for several years now, it's not one where technology companies can realistically see themselves IPOing one day. But acquisitions can happen, as we've seen in the jobs marketplaces space very recently (VietnamWorks and KiemViec/VON).

THE VIETNAM SITUATION AND WHAT'S SO SPECIAL ABOUT VIETNAM

Should you come into Vietnam and try to build a startup?

E-commerce is thriving. People come into Vietnam and think e-commerce would be impossible and get left behind. They assess (correctly) that the logistics infrastructure just isn't there - this in itself is an opportunity for new companies. Online payment hasn't been figured out despite many teams trying for years and investing a lot of money into models that worked in the US - credit cards, e-wallets. Mobile payment isn't taking off like in other developing countries (like M-Pesa) because of extremely high fees that mobile network operators charge. Advertising rates are dismal if you want to start a media company - not that foreigners are allowed to enter that space anyways.

When you look at the breadth of services that are available online across the world (especially the US and many are Bay Area-only) Vietnam has very few of them. They haven't all been cloned, even if most companies here are "clones".

Gaming is popular, but you might not want to enter that space at this point. VNG, the most well-known tech startup is a gaming company that is now also in social media (and they along with large outsourcing firms are sucking up all the dev talent - but you can still hire developers from $150 a month in Vietnam). There are Internet cafes everywhere where people play games and chat.

Local market vs global market

There are few companies that are striving to become global products in the way that Facebook is. Klamr is one of them, but they've also painfully shown us how difficult that path is - not exactly encouraging. Otherwise local companies that go global are selling services (outsourcing, manufacturing) rather than "made in Vietnam" products. Of course there's Vietnamese coffee (ca phe sua) and other food commodities like fish and rice. But it's hard to think of any Vietnamese software brands or Vietnamese websites that are big outside of Vietnam.

Vietnamese prefer using foreign (American) internet brands over local. Facebook over Zing, GMail (and Yahoo) over local ISPs, but e-commerce is completely localized, including local branches of Rocket Internet ventures like Zalora and Lazada, instead of Amazon.com or Ebay. Google is by far the dominant search engine although Vietnamese-language-specific search engines like Coccoc are appearing. But news sites are predominately the Vietnamese ones. Everything above, even the foreign websites, are used in the Vietnamese language.

People here also use forums and many Vietnamese "startups" are actually just forums.

Vietnam has optimistic demographics

90 million population, mostly rural, mostly one race speaking one language (although I might disagree if you stuck a Hue speaker in front of me), and mostly really friendly to foreigners including Americans (surprise!). The urban population is concentrated in two cities, Ho Chi Minh City (Saigon, former capital of the south) and Hanoi. People are generally poor but optimistic and have spending money now, and their income and disposable income is increasing. While inflation has made life hard for many Vietnamese, the super low cost of living still makes Vietnam an attractive place for foreigners to relocate to. So it's a decent-sized population for internal consumption and inward-facing consumer startups.

Viet Kieu, millions of ethnic Vietnamese who have grown up in foreign (American, French, German, Australian) cultures and speak English (or French and German) fluently, were educated abroad, and know how the rest of the world works and does things. Millions of them come back each year, a massive (but mostly missed) opportunity for information exchange.

NOW WHAT? WE ARE THE FUTURE

A few days ago a few friends and I (namely @caligarn and Mr. Hong) created a website temporarily named StartupS.vn to become a authoritative database of startups and technology-related organizations in Vietnam, akin to TechCrunch's CrunchBase or AngelList. So any company you're interested in should be listed there and you'll be able to scan the Vietnamese startup landscape category by category.

Read the rest of this article...
John Villasenor (not verified)

It is a pleasure to know about Vietnam Startup Report. Since you are flying to a new country every few days to learn a brand new local startup scene, it think this will benefit you.

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mimhchau (not verified)

Thanks Tomo for this great post !

The e-commerce in Vietnam is not comparable to e-commerce in many countries but the sector is progressing and I am sure there will be a business to do in the coming years in Vietnam.

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