What about Vietnam defines its tech startup successes so far, and makes it poised to grow into a SE Asian startup powerhouse? The answer in large part lies in the country’s history and culture. The average Vietnamese worker/entrepreneur (as a small yet fitting representation of the broader population) embodies certain qualities and mindsets well suited to starting and growing startup businesses. Here are some of Vietnam’s most poignant cultural characteristics, including how they translate to an entrepreneurial mindset. This post is informed by time I spent on the ground in Vietnam, in Hanoi and Ho Chi Minh City.
Vietnam has a war-torn history, and its population has suffered greatly as a result. In recent history, the Vietnam War ending in the 1970s cost around 2 million lives and destroyed the country. Yet, despite this history of conflict and collision, the population is shockingly optimistic. Not only have the Vietnamese people persevered through constant strife, but they have come out the other side with a positive mindset and a forward-looking outlook, a focus on ‘what’s next.’
This approach extends to the Vietnamese viewpoint on economic development. A 2014 Pew Center study revealed that while Vietnam is controlled by a communist party, 95% of the population supported capitalism, a striking figure considering the costly Vietnam War revolved around America’s mission to eliminate communism and promote western capitalism. In the U.S. itself, only 70% of the population supported a free-market capitalist economy as the best type of economy, and no other country in the 45 country poll exceeded 90% support. The general Vietnamese public no longer harbor negative feelings towards the United States. Their responses demonstrate an impressive ability to overcome adversity, and to quickly pivot and move on, both of which are crucial entrepreneurial qualities that translate well to powering through the uphill battle of creating a successful startup.
Vietnamese entrepreneurs generally are less susceptible to the ‘fear of failure’ mentality endemic in many countries’ startup culture. Whether because of pride or necessity, many local entrepreneurs embrace the unpredictability and volatility that comes with founding a company. Oftentimes, founders will found and work on many startup endeavors at once as they view this diversification as a way to minimize risk. Thuc X. Vu, a tech entrepreneur based in Hanoi, oversees a portfolio of startup companies including a customer feedback platform called hearme and a facial recognition tool called Linkedface. Besides growing his individual products, Thuc also focuses on the ways in which his products can complement each other or be combined to offer different or better solutions. One example he is exploring is whether to integrate his facial recognition software into the hearme platform in order to capture and analyze demographics data about each customer providing feedback. This would undoubtedly provide more value to the businesses using hearme. While Thuc acknowledges the challenges of juggling several companies or products at once, he recognizes that the best way for him and his companies to succeed is to constantly reconsider, iterate, and pivot.
The hunger for success motivating Vietnamese youth is a driving force behind the emerging startup scene, and a departure from the mindset of the previous generation. The older segment of the population in general has a small business mentality, and is primarily concerned with providing for their families. The streets of Vietnam are lined with small shops and restaurants families run out of their homes. As long as these families can support the immediate needs of their family, they are content. This follows centuries of Vietnam functioning as an agrarian society, with families farming the land and providing for themselves by consuming/trading the produce (this remains the case in much of rural Vietnam).
On the other hand, Vietnamese under the age of 25, which make up an estimated 40% of the total population, are increasingly ambitious and tech-savvy. They are well aware of the latest technology products on the market, and are already starting to think of ways to use these products to solve local issues. Among the companies I came across at the TechFest Vietnam technology conference in Hanoi were Maker Hanoi, a company focused on developing robotics kits to be used by schoolchildren to enhance STEM education, and Fresh Deli, a company meant to connect stay-at-home moms looking to supplement their income and willing to cook home cooked lunches with workers in the market for food delivery while at work.
This mentality bodes well for Vietnam’s equally young economy. Because of its lack of maturity and regulation, the Vietnamese startup community has a unique opportunity to innovate and leapfrog more established ecosystems rather than playing catch up or achieving parity. This effort is and will continue to be led by the young bold entrepreneurial generation coming up now in the country, and across Southeast Asia. Technologists in this region are starting their journey with a blank slate compared to more developed regions, and are therefore not as constrained by the ‘way things currently are done.’
It comes as no surprise that early adoption of new technologies and the products that support these technologies is common across Southeast Asia and is emerging in Vietnam, from blockchain wallets and applications, to smart home and city internet of things applications, to artificial intelligence applications. Despite this momentum, it’s worth calling out that this ambition for the most part does not yet extend to scaling outside of Vietnam.
This quality might not seem positive at first, but the informality and casualness epitomizing young Vietnamese today translates to increased efficiency and faster progress. In certain ways, Vietnamese cultural and familial norms promote formality and hierarchy. For instance, in the Vietnamese language, there are separate pronouns used to address people that are younger, of a similar age, or older than the person speaking. On the other hand, specifically in the context of professional life, there’s an informal quality to business and industry in Vietnam that starkly contrasts the way business is done in the Western world, and particularly in the United States. Advanced scheduling and polished PowerPoint decks are replaced by informal meetups and casual conversations. One day after meeting the CEO of the Vietnamese search engine and web browser Cốc Cốc, I was not only invited to his office, but tagged along for a pitch meeting with a potential client.
The informality on the part of company executives and investors expedites the process of decision-making and setting a company vision and course. It is one of the many factors responsible for the current pace of change and growth in Vietnamese industry, and is the reason why entrepreneurs like Thuc X. Vu are willing and able to start multiple ventures simultaneously, despite typically having small technical teams and virtually no sales or marketing support. These entrepreneurs don’t always wait to fully flesh out their ideas and develop all of the needed supporting research, which makes the process of pitching and raising capital more challenging, but also means they bypass what others view as the initial barriers to getting a business concept off the ground. The Vietnamese startup research and development phase is an expedited process, and much of the learning happens on the fly.
There is also an embrace of openness and collaboration, an informality surrounding the exchange of ideas and feedback. Vietnamese entrepreneurs are not afraid to talk about their plans, or to listen to others’ reactions to those plans.
An intense focus on education and specifically technical training pervades the country, and has resulted in a wealth of young technical talent. Despite its low GDP per capita, Vietnam consistently places among the top countries on international academic tests, and significantly better than other developing countries. The below figure shows an example of this phenomenon, illustrating Vietnam’s strong math scores on the PISA (Program for International Student Assessment) exam, which tests student education levels in countries around the world every three years.
Outlier results like the above led researchers to study what was behind Vietnam’s academic success, nicknamed the “Vietnam effect.” In 2016, researchers at the World Bank Group published a paper detailing the empirical reasons that Vietnam performs so well on international tests and has a seemingly world-class educational system.
The study revealed several trends touching on all parties involved in the education system: students, parents, teachers, and the government. (Note: To learn more about the state of education in countries around the world and the reasons behind the educational success or lack of success of different countries, see Amanda Ripley’s book “The Smartest Kids in the World.” A detailed and fascinating look at how students are taught to think and learn, it offers well crafted arguments and is full of insight.) Vietnamese students approach their studies with rigor and diligence and take their schooling seriously. They have a clear understanding of the applicability of their learning to their future lives and jobs, particularly for quantitative subjects such as Math. The parents of these schoolchildren have high levels of expectations and high levels of involvement in their children’s academic performance. On top of that, teacher’s performance is carefully monitored and evaluated. Finally, the government invests in education (starting at the pre-school level) at a disproportionate rate given the national per capita income level.
This convergence of factors has led to the rise of Vietnam as a educational power, which in turn has led to the training and development of a sizable group of homegrown young, talented, and affordable engineers and IT specialists, (and an improvement in the English language proficiency within this group). Vietnam’s status as a hub for technical talent is evident through the investment of large tech companies Samsung, Microsoft, LG, and others in scaling tech operations in the country in recent years.
For all the character traits that support and solidify the ability of Vietnamese entrepreneurs to build lasting and impactful startups, there are also traits or cultural issues that serve as drawbacks and could hinder this mission:
Trust is a common issue in Vietnam; trust in who people claim to be, and what they offer versus what they can deliver. As is the case in many developing countries, there’s an undercurrent of scamming and bootlegging. This issue is made worse by the lack of proprietary rights and intellectual property protection in Vietnam. For example, as I walked around Hanoi, I noticed many of the streets are organized thematically based on the products sold on each street. There’s a flower street filled with flower shops, a chicken street, even a bamboo ladder street (see image below). These streets came to be because a single store opened on the street, and became commercially successful. Others took notice, and opened up stores (often with the same exact store name) in the same area selling the same product. Hence the growth of streets filled with stores selling the same product.
Another prominent issue in a similar vein is a lack of binding contracts. Even if a written contract is signed by both parties, if one reneges after the terms have been met, it is incredibly hard for the wronged party to receive what’s due to them. Because of the general lack of trust or protection of property, Vietnamese people are oftentimes cautious and skeptical that what is presented to them is true. This issue has broad implications for local startups. Many Vietnamese tech companies whose business model revolves around the usage and sale of data have a difficult time finding local clients, as companies question the validity of the data, and whether it’s been tampered with or manipulated. Other companies have a hard time sourcing contract-based workers or even investors, because both parties doubt they will eventually be compensated for their time/investment.
Lastly, foreign investors are often weary to invest in Vietnamese companies because of the concern that they will encounter unethical behavior or business practices. This was a key point stressed by Marco Breu, the founding partner of the McKinsey & Company Vietnam office. I had the opportunity to chat with Marco and discuss his experiences working with and investing in many Vietnamese companies. As an angel investor himself, Marco highlighted the need for non-local investors to have a local counterpart or partner on the ground in Vietnam to ensure effective communication, legality, and overseeing the management of investments. When searching for potential investments, investors must consider not only whether company founders are able to successfully grow their company, but whether they can be trusted and will work well with foreigners.
While Vietnamese employees are incredibly hardworking, they are not always fully committed to their job, many times out of necessity. In a lot of ways, the national economy has grown at such an explosive pace, that there has not been nearly enough time for the effects of this large-scale growth to trickle down to households and individuals. Even at larger late-stage startups, or better yet multinational corporations with offices in Vietnam, the cost of labor is astonishingly cheap. Executives at these established companies can expect to make in the range of US$1,000-US$2,000 per month, to say nothing of the lower level employees taking home one-tenth of that salary. As a result, most employees need to supplement their corporate jobs with side-jobs to increase their income and support their desired lifestyle. Vietnamese companies understand this, and accept the fact that they might get less than 100% effort from many of their employees.
However, low salaries only tell part of the story. Specifically in the startup world, employees are not always committed, because they see no reason to invest fully in the success of the company employing them. They have only a couple of examples of successful Vietnamese startup exits (most notably VNG, a gaming company turned technology giant) to serve as motivation to be a part of growing their company and contributing to its long-term success. This is why most startup employees would much rather receive a pay bump than receive company equity. Lack of commitment is a complex issue native to Vietnamese workers, and will only be mitigated with a wide-scale attitude shift.
These qualities offer perspective into starting up in Vietnam, and what foreigners can and should look out for as they contemplate entering or doing business within the country’s startup community.