Despite one of the world’s highest economic growth, broad-based macroeconomic stability, and advanced IT infrastructure, Vietnam is still dogging behind many Southeast Asian nations in developing a large startup community.

Vietnam chases neighbours in its Southeast Asian startup race. (Photo: VIR)

The rise of technology companies in Southeast Asia has lured in global investors bringing nearly $10.9 billion in 2018, producing a 38 per cent growth compared to 2017. Not surprisingly, Southeast Asia is on the cusp of becoming green pastures for unicorns (startup which are valued above $1 billion), with eight unicorns including Grab, GoJek, and Lazada setting a solid foothold in the market.

Of all Southeast Asian countries, Indonesia is home to the most unicorns. Motorcycle ride-hailing mobile app GoJek, for instance, has recently secured $1.5 billion from giant investor Tencent. It has developed into a mobile app offering a full suite of services, ranging from digital payments, cleaning services, and logistics.

Traveloka – a hotel reservation and flight booking online platform from Indonesia – epitomises the Southeast Asia unicorn expanding to foreign markets, not just in Asia but also to developed countries farther down like Australia. This rapid expansion marks a new milestone in the neck-breaking development of the Indonesian startup ecosystem.

With the continued growth of e-commerce, Sea – a Singaporean unicorn gaming platform – has bought into Shoppee to expand to digital payments and e-commerce around Southeast Asia and Taiwan.

How about Vietnam – the fast-growing economy with its young and tech-savvy population?

In 2014, VNG Corporation became Vietnam’s first ever tech firm valued at $1 billion.

However, VNG’s success has not been repeated by a single Vietnamese startup. Compared to other Southeast Asian countries, Vietnam has been recognised for its burgeoning market as well as talented human resources, but challenges remain in every aspect that prohibit the country from producing other unicorns like its neighbours.

According to Deputy Prime Minister Vu Duc Dam, the main principal issues are the lack of capital, skilled and committed human resources, support from the government and the society, as well as the high competition, and last but not least, the lack of experience and network for startup development. The last issue seems to be the toughest to mount as experience is gained over time.

Novaon’s CEO Nguyen Minh Quy shared, “When I first opened my business in Singapore, the government was very supportive by providing loans to companies to buy computers and set up facilities to operate. We only really had to pay 40 per cent of the total capital, asthe rest was returned to us as one part of the government support plan for entrepreneurs. It takes two days to open a business and $1 to get a license. All these factors make for a very convincing pitch, don't they?”

Forbes puts the failure rate of startups at 90 per cent in the world, and the number could be even higher in Vietnam, with more than 3,000 startups in operation on average.

However, look at the bright side: more investors are pouring money into young Vietnamese startups.

A recent survey by Topica Founder Institute (TFI) showed that last year witnessed $900 million invested in Vietnamese startups, three times as much as in 2017. The top recipients of investment were fintech, e-commerce, traveltech, logistics, and edtech. Besides, there are 70 venture capital funds actively seeking promising business ideas to invest in, making Vietnam one of the up and coming startup economies.

It is also noted that many well-educated and tech-savvy people who previously studied and worked abroad have recently returned to Vietnam to seize opportunities by opening business and filling in holes in the market.

Elsa – an English talking application which utilises Artificial Intelligence to improve learners’ English accent and skills– has raised $7 million from Gradient Ventures, a Google AI venture fund. Surprisingly, Elsa’s founder/CEO is a young Vietnamese girl who graduated from Stanford, and her original idea for this startup came from her lack of confidence when speaking English.

Van Dinh Hong Vu - Elsa CEO (Photo: VIR)

By sharing his personal experience, Tony Wheeler of ImagineX Ventures also stressed the importance of smooth co-operation among the government, businesses, and scientists. Startups must concentrate on solving customers’ problems and improving quality first, then expanding later, which is the key to sustainable development.

Getting the balance right between government intervention and industry collaboration to encourage innovation is a difficult challenge for all nations engaged in building their digital future. However, it is noted that the Vietnamese government has recently been actively nurturing startups through incentivising venture capital activities.

In an attempt to establish more room for young entrepreneurs’ growth, the brand-new Decree No.13/2019/ND-CP of preferential and supporting policies for scientific and technological activities has become effective from March 20, 2019. Science and technology enterprises (STEs) are exempt from corporate income tax (CIT) for four years and are eligible for a 50 per cent CIT reduction for nine years.

Furthermore, STEs can enjoy preferential treatment like low interest rates, land and water leasing fees, and registration fee from the National Technology Innovation Fund. With such incentives supporting STEs, the Vietnamese government hopes the country would become a favoured destination for robust tech firms.