Given how young the Vietnamese economy and its technology sector are, there are limited numbers of angel investors and seed-stage investors actively investing in companies. Well known funds include 500 Startups, IDG Ventures, and Golden Gate Ventures, and importantly these funds are committed to maintaining active investment portfolios in Vietnam. As Eddie Thai, Venture Partner at 500 Startups, noted, “there’s typically a lot of education to be done with both founders and investors on everything from fundraising terminology to basics on financing strategy to what to seek or avoid from potential investors.”
Those investors that have taken a chance on a Vietnamese startup venture have usually done so because of the executive team leading the company. Given the trust issues within corporate Vietnam, investors place a premium on sourcing and working with trustworthy executives and talent. Building this trust requires regular communication and oversight, which is more of a challenge for foreign investors lacking a presence in the country. There’s an immediate need for increased foreign investment, although government policy and regulation surrounding this approach is still in development and is not yet easy to understand or navigate. Foreign investors must jump through many bureaucratic hoops to invest, which in many cases threatens the investment altogether as many of the small cash-poor companies they would like to invest in can’t afford to wait for the red-tape to clear.
Moreover, foreign investors are not always as accustomed to the informal nature of Vietnamese startup leadership and management, which circles back to the need for proper education of investors by founders. However, local startup founders are oftentimes young and lacking experience. They require advice from more seasoned industry veterans, which brings us to the next key ecosystem stakeholder: mentors and advisors.
In Vietnam, many startup founders hustle their way into the startup world without the product or executive-level experiences and skills necessary to lead and grow a company. This lack of experience or know-how oftentimes undermines the founder’s credibility and chance at securing capital and hitting defined targets. There is a tangible and urgent need for mentors and advisors to guide this group of young and ambitious founders and entrepreneurs, and to teach them what not to do as much as what to do.
In the past, Vietnam experienced a brain-drain in which much of its promising talent left the country to seek better opportunities or higher salaries elsewhere. This created a vacuum of executive-level talent with cross functional expertise and perspective that is just now beginning to be filled by successful Vietnamese entrepreneurs returning to Vietnam and contributing more directly to the growing tech industry. Most recently, an intensification of U.S. immigration policy has led many highly qualified professionals from Vietnam (and other countries) to return home and re-enter their native workforce. This policy change has had an indirect positive impact on the Vietnamese advisor/mentor community.
Despite the return of many Vietnamese from the diaspora, and an increased involvement in the local tech scene of those who remain in other countries, an accessible community of startup mentors and advisors is still sorely lacking. This role is crucial to enabling startup success, as mentors can teach founders the valuable skills they need to secure investment and to grow a business.
Last but not least is the role the government plays in supporting local startup businesses. The communist Vietnamese government has made concerted efforts to promote startup development because it recognizes the importance of a vibrant startup ecosystem in growing the overall economy. In late 2016, on the heels of a speech made by the Prime Minister a few months prior stressing the importance of focusing on local entrepreneurs, the municipality of Ho Chi Minh City committed to spending US$45 Million to support local startup development in the city. There is also a plan underway to develop a Silicon Valley type tech center in Ho Chi Minh City.
In addition to direct financial investments, the government has championed a series of initiatives meant to provide support such as Innovation Partnership Program (IPP), a joint program with backing from the governments of Vietnam and Finland (interestingly both among the globe’s top performing countries on international education assessments). IPP’s objective is to “boost sustainable economic growth in Vietnam through the increased production and export of innovative products and services.”
On the other hand, government regulation remains a massive barrier to startup growth. On one end of the regulation spectrum are those regulations which are undefined or have not been properly updated to facilitate business growth. As an example, the government is still quite slow in registering company intellectual-property, which is extremely crucial for tech-based companies. On the other end of the spectrum are far more dangerous regulations–a new wave of regulations challenging individual rights and threatening the viability of Vietnam to attract global internet companies and foreign interest. A prime example is a recent cybersecurity bill undermining freedom of speech and stipulating that internet companies operating in the country must locally store data and openly share data with the government.
The core question going forward: will the government’s economic agenda to fuel high-tech growth win-out from a policy perspective, or will its political agendas continue to stand in the way?
Local thoughts and insights from the editorial team at Startup Universal, based on our personal experiences and knowledge.