Last year, we witnessed a series of records and firsts in Vietnam. The country saw 67 deals — more than double the number in 2014 (according to Topica Founder Institute), the funding for almost half of which came from overseas investors; the inaugural TechFest Vietnam (a multi-day platform to connect startups and investors in the region), the launch of the largest co-working space Dreamplex in Ho Chi Minh City; the launch of Coderschool, a free coding school (in Ho Chi Minh City); the launch of iSpace, a free co-working space (in Hanoi); and the launch of the first co-working space chain Toong (in Hanoi).
And 2016 has started strong as well: the official newspaper of the Communist Party of Vietnam, Nhân Dân (“The People”), published an article on January 1 with the headline “Startup Spring” which covered startups, entrepreneurship, and reflected on improving institutional support to lower the risk of doing a startup in Vietnam.
There are currently two national frameworks that are being developed to incentivise startup creation in Vietnam — one is from the Ministry of Planning and Investment (MPI) and another is from the Ministry of Science and Technology (MOST). In either case, it will be important to focus on the internal and external development of startups, i.e., incentivise the creation of startups in Vietnam and also provide the international support (financial) to expose more Vietnamese teams to innovation hubs like — but not limited to — Silicon Valley.
Two potential options for Vietnamese startups in Silicon Valley are Parisoma and Runway, both of which offer soft-landing opportunities to foreign startups coming to the US, in order to progress in a structured and efficient environment during a multi-month period.
At Parisoma in San Francisco’s SOMA district, there is a special programme called TarmacSF, which is ideally suited for these kinds of incoming startups since the support and services offered are comprehensive.
Rachida El Hawzali, Project Manager at CALSO, which is partnered with Parisoma on the TarmacSF programme, stated: “Tarmac SF is a 3-month programme that provides all the necessary resources –- immigration, housing, co-working space, network, classes and events –- so that entrepreneurs can focus on their startup development in the US. We welcome a wide range of individuals and projects such as tech entrepreneurs or and new business managers.”
Currently, in the second edition of the programme, TarmacSF will provide two sponsorships to assist a woman and a social entrepreneur. For these select entrepreneurs, the programme will be 100 per cent free. The deadline to apply to these two sponsorships is March 25, 2016 and the winners will be announced the following month.
And at Runway, which shares a building in downtown San Francisco with Twitter, German and Portuguese entrepreneurs at the space receive support from the German Accelerator (backed by the German government) and Portuguese Ventures (a merger of three state-owned Portuguese enterprises), respectively.
For the German and Portuguese teams at Runway, the cost of the programme (US$700 per person per month) is covered by their sponsoring organisations — essentially providing a major advantage to those startups upon arrival in the US via access to a curated community, educational programming, and a collaborative workspace.
According to Katie Doherty, Manager of Partnerships and Business Development at Runway, “We believe strongly that diversity is conducive to creativity and innovation. Moreover, at the core of what we do is our community; being surrounded by collaborative entrepreneurs is important for peer-to-peer learning, connections, and sustaining motivation — benefits that can be especially helpful to teams relocating from abroad.”
These sponsorships and partnerships drastically reduce the barrier to gaining experience and exposure in Silicon Valley, but the remaining challenge for some foreign entrepreneurs may be the cost of housing (in programmes where it is not provided) where a single room can easily cost US$2,000 per month.
For comparison, the per capita GDP of Vietnam is approximately US$2,000. But with the support of both the public and private sectors, as well as local community support from the diaspora and other friendly parties, a creative solution will surely emerge to enable more Vietnamese entrepreneurs to venture into the heart of Silicon Valley.
“Startup March Madness”
This month, there will be an assortment of events across Vietnam to celebrate startups, entrepreneurship, and innovation. On March 7, Hanoi will be the first stop on an American Innovation Roadshow in Vietnam organised by the US Department of State in co-ordination with the US Embassy in Hanoi and the US Consulate in Ho Chi Minh City.
The US Delegation, led by Ambassador David Thorne, Senior Advisor to the US Secretary of State, will continue on to Ho Chi Minh City for events on March 8 and 9 before heading to the Philippines. The Innovation Roadshow is an opportunity for US business leaders to witness innovation firsthand in Vietnam, as well as to create and build relationships between the US and Vietnam across the entrepreneur and technology communities.
According to US Ambassador to Vietnam Ted Osius, “As we continue to work with the Vietnamese government to foster sustainable economic growth, we are proud to be bringing a delegation of entrepreneurs, executives, and investors to both Hanoi and Ho Chi Minh City in March. In Hanoi, we will sponsor the 2016 Conference on Innovation in Hanoi, which will bring together ‘global game changers’ in the Vietnam startup community with US corporate leaders in IT, finance, and manufacturing, in order to develop a ‘Silicon Valley state of mind’ in Vietnam.”
Among the representatives in the delegation, there will be personnel from IBM, GE, and Qualcomm. The course of multi-day events will feature a presentation on US innovation and advances in technology, as well as a demo fair and presentation showcasing the best tech talents in Vietnam.
“The 2016 Conference on Innovation will focus entrepreneurs on the technologies and global best practices needed to drive growth and take advantage of market opportunities. The delegation will then travel to Ho Chi Minh City where they will engage in a series of events that will connect them with investors, entrepreneurs and community builders. I am proud to support the innovation ecosystem in Vietnam through these events, and I look forward to seeing a wide range of participants from the growing start-up community in Vietnam,” stated Ambassador Osius via the US Embassy in Hanoi.
Recently, at the US-ASEAN Summit Press Conference at the Sunnylands Center in Rancho Mirage, California, on February 16, President Obama announced a new initiative called US-ASEAN Connect — a network of hubs across the region to better co-ordinate our economic engagement and connect more of our entrepreneurs, investors and businesses with each other.
President Obama, who will visit Vietnam this May and Lao PDR in September, also reaffirmed, according to The White House, that “the US will continue to be a partner in ASEAN’s efforts to integrate economies and reduce barriers to trade and investment.”
In fact, one of the major opening points during the press conference was about cooperation between the US and ASEAN members: “First, we agreed to do more together to encourage the entrepreneurship and innovation that are at the heart of modern, competitive economies,” stated President Obama as he began to dive into the heart of his address. During President Obama’s visits to the region later this year, we may learn more about concrete plans to encourage entrepreneurship and innovation in ASEAN, which in Vietnam’s case might include Fulbright University Vietnam (FUV), the nation’s first non-profit and private university.
Growing International Support
Now, more than ever before there is support for startups and entrepreneurship in Vietnam from a variety of sources, including foreign governments. Besides the Finland-Vietnam Innovation Partnership Program (IPP), there is also the Business Incubator Policy Project (BIPP) co-funded by the Governments of Vietnam and Belgium which launched last summer with a budget of €4.4 million (US$4.84 million).
Another programme, the SECO EP (Entrepreneurial Programme), will focus on increasing entrepreneurial activities, enabling innovative entrepreneurs to commence and scale their businesses, and supporting the enterprise ecosystem. The programme is financed by the Swiss State Secretariat for Economic Affairs (SECO) and implemented by Swisscontact from 2015-2019 in Vietnam, among other countries. A special focus is given to both connecting the diaspora back into Vietnam as well as promoting the participation of women in entrepreneurial activities.
From a regional perspective, the Asian Development Bank (ADB) will move forward with its Mekong Business Initiative (MBI) with funding from Australia Aid and a dedicated country team in Vietnam. Among its purposes is to incentivise business formalisation, help Small- and Medium-sized Enterprises to grow and integrate into global supply chains, and to empower women-led businesses.
Moreover, the Embassy of Canada in Vietnam is planning a new innovation initiative and the British Council annually supports social investment and social enterprise in Vietnam, most recently via the Business and Investment Readiness programme pilot 2015/16, which is ongoing through September.
The focus of several organisations and programmes such as HATCH! and IPP are two-fold for this year: the promotion, creation, and building of mentor networks and angel investor networks. For mentor networks, the challenge will be to find quality mentors to provide active (quality) mentoring where both parties benefit instead of accepting hourly-based consultants to deliver solutions.
Already, some international mentor networks are beginning to form, e.g., Startup Rising in San Francisco and Women of Saigon in Ho Chi Minh City. And when it comes to angel investing, the best angel investors are those entrepreneurs who have successfully exited from their previous ventures.
While Vietnam does have these kinds of entrepreneurs, many successful people as a result of Vietnam’s economy are micromanagers and some do not understand the risk involved in angel investing—there is no guaranteed return.
Another point of concern is the already high power distance between older and younger Vietnamese people; add in funding provided by older Vietnamese CEOs and company owners to young and inexperienced founders and the imbalance of power (and risk for accepting bad deals, e.g., US$20,000 in seed funding for 51 per cent of a company) is increased.
Thus, educating local angel investors on best investment practices is a necessary step toward seeing more successfully funded startups in the long-term. The other way to de-risk the investment process is to optimise the existing deal flow by implementing requirements for investors a la the accredited investor archetype. That’s where organisations like the Vietnam Angel Network come in; its stated purpose is “to help the best upcoming seed-level startups to access a broader range of investors.”
Also new to the playing field are international organisations which are looking to set up in Vietnam like Seedspace from Switzerland and NUMA from France. These are part co-working spaces and part seed funds which are looking to position themselves to be future pillars of the rapidly-growing market in Vietnam. One challenge is to spread the foreign interest across Vietnam smartly, if not evenly, so that the three distinct ecosystems of Hanoi, Ho Chi Minh City, and Da Nang can develop in the healthiest ways possible by playing to their natural strengths.
In a larger sense, this year is the 30th anniversary of Đổi Mới (when Vietnam began to open up its economy) and it is surely to be exciting as Vietnam’s economy continues to modernise and is set to accelerate with an assortment of new trade deals on the horizon as a primary driver.
It will be an opportunity for Vietnamese entrepreneurs and companies to rise up to the challenge of international standards by making the capital and training investments, and education and long-term commitments necessary to create innovative company cultures and individual mindsets. Only then will Vietnamese enterprises be in a position to fully reap the benefits of a burgeoning and increasingly globally-connected economy after this Year of the Monkey and beyond.
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Image Credit: Andrew Rowan