The country has had some success stories, but none so far that would warrant major attention
My name is Lam Tran, and I’ve been funded by the accelerator VIISA ( www.viisa.vn ) a couple months ago. The company I founded is aiming at turning into a global business from Vietnam. It’s really hard, as it’s something that nobody has done yet, and I’m struggling at the moment to go through the process. Thus, I thought of sharing my personal story and my take on why Vietnam hasn’t seen any startup turning into a global one.
Let me quickly define global startup so nobody gets confused. It’s a company that has expanded in more than 15 countries with more than US$1 billion in annual revenue. Totally arbitrary, I know, but I would love to shoot down Flappy Bird (no pun intended) and VNG as these two are great Vietnamese stories, but it doesn’t interest me.
Flappy Bird was a hype and didn’t last long (unfortunately). It was certainly downloaded and played in more than 15 countries but I haven’t heard Dong (the man behind the game) claiming making a billion USD in revenue.
VNG is one of the success stories we have in Vietnam, but so far, they haven’t been able to turn any of their products into a global business (yet). The whole company itself is making less than US$1 billion yearly, and it doesn’t seem to be on track to get there anytime soon.
Now that I’ve addressed those two, I can maybe start talking about a few dimensions that hinder the Vietnamese startup from turning into a global business (+15 countries and +US$1 billion revenue)
Reason 1: Mindset
The mindset in Vietnam is usually not to start a revolutionary idea. It’s more about looking at what’s working overseas and then just apply and localise. It’s usually difficult to turn a copycat into something global with a billion dollar revenue, as the market itself is too small in Vietnam to think about such numbers.
Therefore, if we see some copycat, the best case is to find some really good entrepreneurs that might go and build a regional business. We usually think South East Asia first and then we usually don’t even dare to go elsewhere, as the complexity to do business those countries (Vietnam, Thailand, Malaysia, Indonesia, Singapore, Philippines) is so high that we rarely dare to think further outside the region.
At best, some brave ones may mention Korea, Japan, Hong Kong, and Taiwan. For the crazy ones, we got another neighbour named China, but we usually prefer to wait for Elon Musk to set up a colony in Mars to expand there first before thinking about China.
Reason 2: Ecosystem
For all the good and bad reasons, most of the investors I’ve met have been asking me to set up a company in Singapore or Hong Kong. Currently the main reason is because it’s hard to get the money from Vietnam due to some regulations in our country. It’s seen as a risk and investors just don’t want to feel like putting some cash in here.
Despite the relative attractiveness of Vietnam with its GDP growth, Vietnam hasn’t set a legal framework to ease investors concerns yet. Hence, most of the money is parked in Singapore, and we end up travelling there signing some investment contracts. If it were easier to open a business as it is like in Singapore, easier to get the money out from Vietnam and easier to invoice businesses digitally (it’s 2017 for God’s sake), then it’s likely to see more money flowing in.
Too many times, I’ve got people telling me that it’s great to start here in Vietnam, because we’ve got tons of cheap labor for IT compared to San Francisco, it’s amazing. It might be true that the cost of labour is lower, but that’s already starting with something wrong. Just because we have a significantly lower cost compared to California doesn’t guarantee that we can build a great billion dollar business.
Sadly, it’s just that we take into account the cost and we don’t factor in the productivity, the years of experience, and the languages (it’s pretty much ASP here). The ecosystem is set in a way that it’s hard for a developer to find some truly interesting job locally and the best ones end up being sucked away in other countries (Singapore, USA). There’s no such company in Vietnam to retain our talents. The tech talents that are growing are thinking first to go somewhere they get a much better salary, and sadly, it’s most of the the time outside of Vietnam.
Reason 3: Internationalisation
Expanding in other countries represent such a set of challenges (communication, culture, currency, time zone, do I need more?) that a startup alone is rarely well prepared to take over some new markets. It’s an issue of network, local knowledge and playbook. There’s no such framework yet to expand in +15 different countries and enough mentors to coach a founder/entrepreneur across the different stages.
Let’s be honest, who’s been doing this? There’s no such pioneer yet. Period.
Who has got the guts to fund a Vietnamese startup to become global? There’s no such type of investor. Period. The reason is most of the exits today are acquisitions. There’s no IPO in the region yet or it’s so rare that it’s better to think about simple clear exits like that for a local VC (or so-called VC ).
These are my 2 cents and I might be burnt for saying all this but it’s shared now. Let me know what you think.
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