Tomorrow’s next generation of tech startups will likely come from Vietnam, as the country is making significant strides in building a strong ecosystem to support these businesses. According to a new report by the Asian Development Bank (ADB), Vietnam has all the necessary ingredients to become a leading player in the tech startup space. However, the country needs to make policy reforms to create an overall favorable startup ecosystem.
Vietnam’s Ecosystem for Technology Startups
The report “Vietnam’s Ecosystem for Technology Startups” finds that while Vietnam is still in the early stages of development, it has made significant progress in creating an enabling environment for startups to thrive. From government support to the presence of angel investors, incubators, and research institutes, Vietnam has put itself in a solid position to become a major hub for tech startups.
For example, the government-backed Project 844 aims to develop up to 600 enterprises by 2025, with 100 raising at least VND2 trillion (US$85.44 million) collectively. Project 844 was approved in 2016 when the Ministry of Science and Technology (MOST) also established the National Technology Innovation Fund to attract knowledge, organizations, entrepreneurs, and resources worldwide.
To fully unlock its potential in the tech startup space, Vietnam must address some key challenges, such as a lack of venture capital (VC) financing and regulations.
ADB analysts recommend that the government continue to revise the legal framework governing startups, focusing on making it easier for them to access financing. The report suggests that the government clearly distinguishes tech startups from small- and medium-sized enterprises (SMEs), as they have different needs and operate in different ecosystems.
VC financing may be difficult
Furthermore, VC financing may be more difficult to obtain in Vietnam than in other countries because of investor risk aversion and a lack of regulations governing the formation and management of VC funds. The study recommends that the government create a more favorable environment for VCs by developing regulations allowing them to operate more freely.
The report also lists the following as key considerations for policymakers:
- Remove barriers to business and cumbersome administrative procedures.
- Focus on policies and programs that encourage innovation.
- Strengthen regulations to protect intellectual property rights.
- Develop the legal framework for the establishment and operation of incubators and accelerators.
- Encourage joint activities between universities, research institutes, and the private sector.
- Evaluate the activities of incubators, accelerators, and support centers.
As of 2021, there are an estimated 3,800 tech startups in Vietnam, with four “unicorns” (companies worth over $1 billion) already in operation: VNG, VnPay, SkyMavis, and MoMo. These businesses have collectively attracted $861 million in capital investment in 2019.