When Eddie Thai joined as one of the Partners of 500 Startups Vietnam mid 2015, he was certain that the country was about to change the game in Southeast Asia. It was already on the global startup radar as the government had already laid the foundation through economic reforms and good maths and science education.

In the past couple of years, Vietnam saw considerable growth in terms of VC deals and exits. Global startups also set foot in the country by setting up offices or augmenting teams, and there has been an influx of foreign resources too. Thai is now happy that 500 Startups could also contribute to this growth by investing in a dozen startups  across fintech, e-commerce, edtech, and hardware. He is now looking forward to doing even more.

In an interview with e27, Thai shares Vietnam’s dynamic startup culture, 500 Startups’ future plans, and his key learnings.

Edited excerpts are below:  

It has been almost two years since you joined 500 Startups Vietnam. What visible changes have happened in the startup scene in the country over this period?

The scene has continued to move ahead. We’ve been seeing approximately 2x the number of VC deals done per year compared to the previous years (based on Topica Founder Institute data). We’ve seen Vietnam take a larger share of regional exits than previously (based on Golden Gate Ventures data). And we’ve seen a sustained increase in international interest.

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Global startups are setting up or augmenting their engineering teams. There’s a steady wave of investors coming to town to see what’s happening (we maintain a list of dozens of funds who have asked for access to interesting opportunities). The mainstream media has finally caught up to e27 and TechInAsia in picking up the story as well — we’ve talked with folks from Bloomberg, The Wall Street Journal, AFP, Al Jazeera, The Korea Herald, and dozens of other outlets. There’s something in the air. But there’s still a long journey ahead, so it’s great to see that lots of folks – founders, investors, etc. – have their heads down getting stuff done.

Recently, Vietnam saw quite a few activities, such as opening of new accelerators and launching of new entrepreneurship programmes. How are these initiatives helping the startup ecosystem? Have these initiatives started yielding results?

These initiatives help the ecosystem by expanding the “top of the funnel”, i.e. encouraging people to make the leap from traditional sectors or investment into startups and venture capital, and giving them some baseline skills to do so.

The yield of these initiatives is to be determined, and that should be expected: from top of the funnel to startup success typically takes many years!

What have been your key learnings in Vietnam?

Basically two key learnings: 1) humility and focus, and 2) resilience and commitment.

Humility and focus: When I first committed to supporting Vietnamese startups back in late 2014, I saw that there was work to be done across the ecosystem (startup leadership, tech talent, funding, regulatory framework, etc.). But I thought that few people were working robustly to take things to the next level. So I collaborated with select folks to build a solution that would theoretically solve everything.

I quickly learned, first, that it’s really hard, but more importantly, that many folks were working hard to make things better in their own way. And those efforts were adding up to help develop the ecosystem a lot faster than I anticipated. There’s still a lot of work to be done, of course, but the progress has allowed me to quickly refine my efforts, from trying to solve everything to focusing on a few key aspects, especially seed-stage funding.

Resilience and commitment: That said, I have seen that some more experienced and/or deeper-pocketed investors and entrepreneurs are more talk than action when it comes to tech startups. These people would cheerlead or would even verbally commit to supporting startups — for example, by investing money or time into a startup or an initiative — but when it came time to “pull the trigger” they would get cold feet. Their stated reasons varied, but ultimately most seem to be waiting for more wins to materialise first. I leave it to your audience to decide why: risk aversion? laziness? Whatever the reason, I have realised just how long and arduous this journey will be.

So I have had to prepare myself for that, for example, by trying to adopt more sustainable personal and professional routines. (I’m still working on it). It has also reinforced how important it is to find founders and partners who are ready to be “in it” together for the long haul.

Do you think the country is moving in the right direction with regard to startup growth? How serious is the government when it comes to supporting startups? Has the government taken any specific initiatives? Are you looking to collaborate with the government?

I think it’s clear that the country is generally moving in the right direction. Vietnam, like many other governments, recognises the rising importance of tech companies. It is simply a matter of speed.

The government has been very vocally supportive of startups. Officials have talked about turning Vietnam into a “startup nation”, and 2016 was declared “the year of the startup”. Different ministries and departments have organised and/or participated in startup conferences, investor training programs, etc.

Both the Hanoi and Ho Chi Minh City governments talked about establishing government funds to support startups (and SMEs). Actually, I’ve heard that the Ho Chi Minh City government has already started to disburse some capital.

Long before all of this, the government laid some of the key seeds for what we’re seeing today through economic reform, good math and science education, and so on. Just like the rest of the ecosystem, though, there’s a lot of work to be done here.

500 Startups Vietnam Partner Eddie Thai

500 Startups has actively engaged with governments in many parts of the world, and we are certainly willing to collaborate with public programs and/or regulatory evolution where we believe it can add value. We have already talked with a number of officials in different parts of the Vietnamese government.

The overarching message we offer, though, is that a lot of the elements necessary for success are already in place — Vietnamese are incredibly entrepreneurial — so they just need to be allowed to do what they do. It may be that the easiest thing that the government can do for the startup ecosystem is to simply let it happen, i.e. to resist the urge to regulate or get too involved.

How many startups has 500 Startups invested in so far in Vietnam? How many are in the pipeline?

As of the end of May 2017, we have closed 12 deals. They include fintech, e-commerce, edtech, and even hardware. Based on our current pipeline, we expect to make another 10-15 investments by the end of the year, i.e. roughly two per month.

Do you think Vietnam startups have the potential to become unicorns in the near future?

VNG — which has been long-rumoured to have a valuation north of US$1 billion — was recently reported to have begun exploring an IPO on NASDAQ. So that does demonstrate the general potential for Vietnamese startups to become unicorns.

I expect others to rise to that level over the next 10 years. Some of those companies may already exist, and others are being established today. Although VNG has done well for itself by focusing on Vietnam, I think that future unicorns are likelier to be the teams that are aiming for regional or global opportunities.

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That said, it’s important to remember that exceeding a US$1 billion valuation is just one metric of startup and VC investor success. In fact, I think it’s a pretty poor metric for a variety of reasons – a valuation from a funding round is not the same as an exit, an exit valuation doesn’t consider entry valuation and length of time, impact should be measured by more than only financial ROI, etc.

I think the better question is whether any Vietnam tech startups have the potential to change how humans lives, work, and play. I think that answer is clearly yes as well.

How is the funding ecosystem evolving in Vietnam? Do corporates and HNIs come to invest in startups?

I am seeing more interest from investors both in Vietnam and outside of Vietnam. All have told me that they are motivated by the various strengths and opportunities of the Vietnamese ecosystem; some have also told me that they are partially motivated by the highly competitive and/or insufficient deal-flow environments in certain other verticals or geographies.

In any case, we maintain a list of investors with Vietnam on the radar and have invited select investors into our deals. They are joining, albeit with more demand for downstream opportunities than angel and seed-stage opportunities. This aligns with the data that Topica Founder Institute has collected – the deal volume in 2016 was down somewhat from 2015, but deal dollars increased almost 50 per cent. (Disclaimer: the TFI data is admittedly incomplete; they didn’t even include us on the list of most active investors, even though our six deals closed in 2016 puts us at more than 2x the No.1 investor on the list!).

How is the consumer internet segment, especially e-commerce, growing in the country?

As AVCJ noted at their first Private Equity and Venture Capital Forum in Vietnam last month, “Vietnam is fast becoming an attractive destination for local and international venture capital funds, who are hoping to capture the growing consumer opportunities and leverage the Vietnamese entrepreneurial spirit.”

There are now more than 50 million internet users, and e-commerce activity seems to be continuing its rapid growth. In 2010, it was perhaps US$10 million, yet in 2016 it hit US$1 billion (my estimates; official estimate puts it at >US$4 billion). In five years, it could reach 2x-4x that.

So, despite the relatively smaller market size than certain other countries, the high rate of growth makes it unsurprising that the fight to be the Amazon or Alibaba of Vietnam is heating up. Tiki raised a strategic round from aforementioned VNG last year and may be loading up its war chest again this year; VinGroup-founded Adayroi seems to finally be hitting its stride; Alibaba is competing hard via Lazada after acquiring it last year; etc.

That said, there’s still a lot of work to be done on-boarding folks onto e-commerce and ramping up volumes. There are still tens of millions of people who still aren’t even online yet, and even among those who are already online, e-commerce has only really hit its stride among a portion so far.

Various folks need to continue to work to reduce friction (increase trust, expand payment options, improve logistics, etc), and the teams who can figure that out can nab a meaningful portion of the pie.

Are you seeing an influx of foreign capital and brains to Vietnam? What opportunities does the country offer to foreigners who want to set up a business there?

I am indeed seeing an influx of foreign resources. The two opportunity sets are clear for foreigners. One is to team up with smart locals to combine the best of both to tackle local market problems. The other is to launch a global startup at lower cost. There’s a lot of engineering talent for a fraction of the cost compared to other startup hubs, and cost of living is lower here too.

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