Vietnam is one of the best kept secrets in Southeast Asia’s tech entrepreneurship story. In a region full of promising emerging markets, it might be the most promising of all – it boasts a booming digital economy and a rising, tech-savvy middle class with increasingly more money to spend.
Vietnam boasts a booming digital economy and a rising, tech-savvy middle class.
Mobile is the country’s preferred way of accessing digital services, especially among the 18-49 demographic. According to Emarketer, 85 percent of those users use their phone to access the web.
The country has been catching the eye of international investors. Last year, Goldman Sachs went in on a US$28 million funding round into Vietnamese ewallet and payments startup Momo.
US-headquartered venture capital firm and incubator 500 Startups doubled down on Vietnam in 2015. A new fund for the country was announced shortly thereafter, led by startup advisor Eddie Thai and Binh Tran, co-founder of US social influence ranking startup Klout.
Thai joined 500 Startups after months of talks about collaborating in Vietnam. He described his hiring process as mirroring the VC’s approach to assessing startups during our AMA in 2015.
“Forget guessing how the person will work and what she/he will get done based on a one-page interview and few hours of conversation,” he said at the time. “Observe real activity to see how the candidate can ‘get shit done’ without being an asshole.”
Right after graduating from college in 2007, Thai consulted on product and business cases for fintech startup Nodal Exchange. He then spent some years working in strategy and finance for larger corporations but always kept a foot in the tech startup space to learn more about it. This included an internship at VC DFJ VinaCapital and an advisory role at the Harvard Innovation Lab. He switched to Vietnam’s startup scene full-time in 2014.
Thai recently sat down in Ho Chi Minh City with Jide Adebayo, strategist at US-headquartered startup builder Rokk3r Labs, to talk about the opportunities and challenges in the Vietnam ecosystem. This is a condensed and edited version of that interview.
Give us a few details about your background, your passion, your story here in Vietnam.
My connection with Vietnam goes back to my roots. My parents were born in Vietnam, grew up here and left in the 70s. So, while I was born in Massachusetts and grew up in Florida, I’ve always kept an eye on Vietnam as well. I’ve been visiting here since 2001, when I was in high school.
It didn’t take any particular genius to see that there was something exciting happening. Vietnam had already gotten so far in a short period of time after the economy opened but still had a long way to go. So even in 2001 I thought about ways I could come back – to harness what’s happened here, add more fuel to the fire.
What are the strengths and gaps in Vietnam’s startup and tech ecosystem that you recognize today?
The strengths come in two forms: One is the local market opportunity, the other is talent. Vietnam is a country of 90-plus million people with a median age of 29 years, and they’re increasingly connected. There are almost 50 million internet users today. About 30 million of them have smartphones.
This is massive growth compared to around 10 years ago. So there’s this greenfield opportunity to deliver products and services that internet consumers in other parts of the world are already accustomed to.
There’s about 100,000 engineers a year graduating in Vietnam.
The talent is primarily on technology. There are great schools here – they might be lacking in some things, but are really strong in math and science. Grade school students score in the top 20 on [international student assessment] PISA tests worldwide. When they graduate, a lot of them go to universities here that are pretty strong at outputting engineers. So there’s about 100,000 engineers a year graduating in Vietnam. It’s top 10 in the world in engineering output.
These graduates start at a salary of just a few hundred dollars a month. Even after some experience, they’re making a couple of thousand dollars a month. So it’s a lot cheaper to start up a tech company here than it is in other parts of the world.
There’s also a growing diaspora. There are 4 or 5 million Vietnamese living worldwide right now. A lot of them are in the US but also in Australia, France, Germany, and so on. Some of them are like me, they were born overseas. Others are folks who maybe grew up here but went overseas to study and work. And what we’re seeing now is an increasing number of folks who are coming back to do something. A friend of mine referred to them as “Vietnam’s secret weapon.”
What industries and technologies do investors have on their radar?
Investors are very diverse. But I would say in Vietnam’s tech there are two categories.
One is the obvious clones, looking at business models and products overseas and bringing them here. But it’s more challenging – it’s not just about translating into Vietnamese. You really have to be very mindful and nimble about how to adapt for the local market, local consumer behavior, and so on.
The other part is, there’s tech talent here that, unlike in other places like Silicon Valley, New York City, and London, is much more deeply familiar with the challenges of the lower and middle classes in emerging markets. So all else being equal, they are probably better suited to solving those problems with tech.
So we love seeing things in fintech, adtech, healthcare tech, education tech, that are tackling emerging markets problems.
How would you compare the tech and VC scene in Ho Chi Minh City to that in the United States?
The challenging difference is on the regulatory and business environment. When you sign a contract in the US, it’s pretty clear how it is structured. If there’s any disagreement, we can go through arbitration or the court system – depending on how big the companies are, it can be solved generally in the span of a few months or one to two years.
I love Vietnam as a place of innovation for the emerging world.
In Vietnam, that process is not as robust yet. The capital markets here are not as efficient, which gives us the opportunity to right-size on valuation, whereas we see overvaluing in other parts of the world. But, the bright side of it is, there are great teams here that we think are world-class.
And here in Vietnam you’ve got founders who are hustlers. Yes, they are bitten by the startup bug a little bit, but they also know they’ve got to build something that can be a real business within a short period of time, or else they might not build it at all. So there’s a real drive, a real hunger to get there.
Some founders in some parts of the world, there’s almost an expectation that they’re going to get funding. That kind of expectation doesn’t exist here.
The popular opinion is Silicon Valley is the startup hub. Which city or country will take the baton next?
Already half of unicorns arising these days are outside the US. They’re pushing on cutting edge tech: AR/VR, AI, robotics.
Silicon Valley is great at pushing the science forward, but there’s a little bit of a bubble about how people live there versus other parts of the world. So, I love Vietnam as a place of innovation for the emerging world. I don’t think it’s the only place but I think it has some advantages against China, which is almost no longer an emerging market; India, which has its own matrix of challenges within the country so it’s hard for companies to get out of India quickly; and Indonesia, which faces the same challenge.
So look around the world at how many countries have this nexus of emerging markets problems, good tech talent, and the right ingredients to go beyond the home market faster. Vietnam is a really unique place there.
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