Vietnam could be one of the leading startup hubs of Southeast Asia in the next few years. The vibrant startup scene and the energy of venture capitalists have fueled the growth of the startup ecosystem of the Vietnam.
The country has emerged as the hub of startups in the region closely competing with Singapore and Indonesia. With the onset of pandemic in 2020 the first half of the year saw a reduction in deals as compared to the previous year, however, by the second half of 2020, Vietnamese startups have shown a sign of recovery.
Many factors constitute Vietnam’s emergence as a startup hub of Southeast Asia. These include- rising consumer spending, revenue growth in digital sectors such as e-commerce and fintech, growing interest of foreign investment funds especially Singaporean, South Korean, and Japanese VC funds along with targeted support from the government.
How Vietnam is planning to become the startup hub of the region?
As part of the efforts to become an innovation hub in the region, Ho Chi Minh City has approved a plan to foster 1000 startups by 2025. The city plans to empower 3000 businesses to increase their innovation capacity and assist 100 access venture capital.
Vietnam aims to achieve these targets by developing an ecosystem and infrastructure that will assist startups to develop high-quality products, enhance productivity, and go international. The city enabled around 650-700 businesses from 2016-2020 to improve their innovation capacity.
In 2020, in a ranking done by a global comprehensive startup ecosystem research and map center, StartupBlink, the city moved up to 59th place out of 100 economies with the best startup ecosystems.
Foreign investors have played a major role in funding the startups in the city. The tech sector dominates the startup scene in Vietnam and a robust ecosystem has been developed for this sector. However, other sectors such as fintech, e-commerce, AI, enterprise solutions, information technology services, and food-tech have also shown a dominance in the funding rounds in the last few years.
For instance, from 44 fintech startups in 2017, the country reached 123 in 2020. These trends reflect the ability of Vietnamese startups to capture market opportunities and the strong growth potential of Vietnam’s digital economy.
To encourage new entrepreneurs, the government has established various funds at State and city levels. Besides that, the government has also collaborated with banks and countries to develop innovation and funding programs, provide loans, business mentoring, and technical training.
The regulatory trends suggest that the Vietnamese government’s focus is on attracting foreign investment in startups that will help in promoting P2P lending, crowdfunding, and sustain investors network in the city.
Another driver for the growth of the startup ecosystem in the country has been its population size. It is large enough for the startups to experiment locally first before going international.
The Vietnamese startup scene looks promising but the challenges remain
The success rate of startups in Vietnam is only around 3 percent since most of the startups are not able to identify their business goals clearly. Vietnam needs to perfect its legal framework to provide more practical assistance to startups and ensure the protection of investors.