Is Vietnam the dark horse of Southeast Asia’s venture ecosystem?

A oft-repeated plan of attack devised by start-ups looking to attack non-developed Southeast Asia is: first crack Indonesia, then the others will follow. 

There is certainly merit to this. Indonesia is the largest economy of the region and has a booming start-up ecosystem. However, there seems to be a dark horse emerging in the region which warrants increasing attention – Vietnam. 

Over the last thirty years, the country has moved from being one of the world’s poorest regions, which had been devastated by decades of conflict, into one of the most dynamic emerging economies in Southeast Asia.

Growth in the face of a pandemic

In a year ravaged by COVID-19, Vietnam witnessed GDP growth of 2.9% in 2020 – it’s lowest in ten years but still higher than most of the world. The country’s latest five-year plan till 2025 set an average annual growth rate target of 6.5 to 7.0%. 

This optimism has certainly poured over into the country’s ecosystem – as of last year, Vietnam made its way into the top three start-up funded places in ASEAN, representing ~18% of total funding to the overall Southeast Asia region.

Tech boom

Apart from the obvious factors of rising incomes, government support and demographics (common to most high potential emerging market geographies), Vietnam seems to particularly benefit from a growing technology ecosystem. 

As per the Global Innovation Index 2020 rankings, Vietnam ranked 42nd out of 131 countries, higher than peers Thailand and Philippines. The combination of a collectivist culture and tech-driven mindset has resulted in a young demographic pursuing opportunities within a burgeoning technology ecosystem. 

At a time when most countries are facing shortage of software developers and overall technology talent, Vietnam has capitalized – initially, by becoming a hub for offshore talent, and in recent times, developing solutions built for the local market. 

Hanoi and Ho Chi Minh, in particular, have developed a very robust ecosystem. 

All of this combined has led to an eightfold increase in tech related investments in the last 3 years, reflecting the growing market opportunity. 

Areas within the broader tech ecosystem that have seen the maximum allocation of funding have been the usual suspects:

eCommerce: Like with most emerging markets (Flipkart in India, Lazada/Shopee in Southeast Asia) the initial wave of start-up success in Vietnam were the ones who tackled eCommerce. These were the likes of VNP-Group, Tiki, Weshop, Deca and others.  Upon gaining traffic and user share in their core businesses, founders of these businesses chose to expand their companies to adjacent spaces, usually via category expansion or offering their services cross-border.

Fintech (Payments/Lending): Vietnam has a large number of underbanked citizens, with only ~40% of adults with Vietnam with a bank account. Combined with rising smartphone penetration and the push for digital services, gave the opportunities for start-ups such as Payoo, VNP, 123 Pay F88, TrueMoneym ZaloPay, and others. 

Food Delivery: Now a ~US$300-million-dollar market by revenue, These included the likes of, Loship, Now and others, that are competing against the likes of Grab across the country. 

Post these early successes, there have been several startups ushering a second wave of successes, in spaces such as Edtech (Topica Education being the most popular), Logistics (Logivan, Ecotruck, Lozi, Boxme and others), along with content, communication etc.

A fun fact though – despite these names and sectors, the first unicorn in the country was actually a gaming one. VNG was the only other unicorn apart from Sea Group a few years ago, with both building empires largely due to gaming. 

Since then, however, Sea Group has skyrocketed to a public listing and is the best performing stock on the US exchange since 2018, VNG has stayed local with a valuation of a (relatively) modest US$2.2 billion. 

However, that is soon changing – with the company planning to focus on global expansion akin to Sea Group, perfectly encapsulating the “dark horse” nature for not only itself but the broader ecosystem. 

While it remains to be seen if it can live up to its full potential, it is clear that Vietnam has now caught the eye of the rest of the region, with exciting times ahead for the country’s ecosystem.