The Vietnam startup ecosystem has the potential to grow immensely with very strong years ahead, but let’s not get carried away here
In a recent article published by the BBC, the writer asks the question: “Could Vietnam become the next Silicon Valley?”. If you haven’t read it already, you can click on the link and take a look.
I have a few issues with this article so as someone who’s written about Vietnam’s startup ecosystem extensively, I think it’s good to take a quick look at why this question doesn’t quite make sense for Vietnam.
No ecosystem can be Silicon Valley
Let’s start at the premise of the question. Vivienne asks if Vietnam can become the next Silicon Valley. But the problem is that this question already starts from a faulty premise: that any ecosystem can one day become Silicon Valley.
I think maybe 2 or even 10 years ago, it was fashionable to ask if the younger ecosystems of the world from New York to Berlin to Beijing could become a new Silicon Valley. But it’s slowly crept into the dialogue that this is simply not possible and an unfair question. As the The Rainforest: The Secret to Building the Next Silicon Valley, a book about the development of startup ecosystems, elaborates Silicon Valley is a singular occurrence that grew out of hundreds of years of American history.
Historically, the Valley had over a hundred years of development starting with early investments by the US government in radio and wartime technology. It’s simply impossible for any ecosystem in the world to catch up to what the Valley has built.
The dialogue around developing startup ecosystems has shifted away from how to become Silicon Valley and to two major areas: 1) What things can we steal from Silicon Valley that fit for us and 2) What are we good or unique in that we can leverage to build a stronger tech startup ecosystem.
TL;DR Becoming the next Silicon Valley is foolishness, becoming a better version of yourself is what matters.
Even if it were possible Vietnam is very far from Silicon Valley
Okay, just for the sake of argument, let’s accept the BBC’s premise that it is possible to become the Silicon Valley, how far is Vietnam from truly attaining this. In terms of years? I think Vietnam is more than 60 years away from that goal.
Some people are appalled when I saw such a big number. “60?!? Really?!”, they think. Well, it might even be 100 years.
Seriously, what does Silicon Valley consist of? Multi-billion dollar companies with billions of users for many of those companies. The area is such a magnet for talent that it pulls in the best engineers, managers, and business people all over the world. It’s got top class universities like Stanford and incubators like Y Combinator.
Consider for one second that Apple, the Valley’s and the world’s most valuable company, is worth over $530 billion at the time of this writing. Vietnam’s GDP was $170 billion in 2013. Just that fact alone puts everything in perspective.
Silicon Valley runs faster and faster everyday
We’re also living in an unprecedented time when although the world’s ecosystems are growing very fast (Los Angeles, New York, London, Beijing, Singapore, and more are producing multi-billion dollar tech companies), the Silicon Valley’s influence over the tech universe has only grown more.
Silicon Valley is at an unprecedented period of investment growth (despite the market fluctuations) and startup output. And Silicon Valley’s largest companies are much more robust and quick than they ever have been before.
Remember that just five years ago, Groupon had to buy its way into new markets where local competitors were cloning its model. Uber, no doubt learning from that, has aggressively expanded across the world faster than any other startup of its age ever has. At the same time, giants like Google are even able to crush massive upstarts like Dropbox.
So although there are still opportunities, and giants will always be slower in some ways than new startups with deeper ideas (and sometimes big pockets), the game has changed completely.
As soon as the rest of the world catches up to Silicon Valley on the race track, Silicon Valley has already run another twenty laps ahead.
Where Vietnam is today
In Southeast Asia, most people are looking at Indonesia, Singapore, and Malaysia. The Philippines, Thailand, Vietnam, and others are still not taken seriously. They’re either too small or not developed enough for serious investors. Due to its political situation and opaque legal system, some international investors have turned off from Vietnam.
Despite that, Vietnam has made a strong showing in the past 10 years of producing powerful startups like VNG, Appota, Tiki, VC Corp, Coc Coc, Adatao, KMS, Misfit, Gotit, and more. This is one of the most interesting insights about Vietnam. How is that a country, which too many in the region is a mystery, upon closer inspection reveals a maturity. Remember that in 2014, Vietnam had about 28 total investment deals, but in 2015 this number hit 67. And all signs point to this number doubling yet again.
Why is this? What is inside of Vietnam’s blackbox?
Vietnam’s 4 secret weapons: tech talent, USA, maturity, and culture
Across the region, Vietnam is universally known as a technical hub. Vietnam has great tech talent. Vietnam has a large supply of junior, middle, and sometimes senior engineering talent that do outsourcing, product, and design work for American companies and companies across Southeast Asia. Obviously, Vietnam can’t compete with the likes of China and India, in terms of quality and volume, but this is also a competitive advantage. Vietnam is producing mobile studios, outsourcing companies, and product-focused teams that, at times, perform at the world class level.
If you look closely at the companies that have either headquarters in the USA or got investment from the USA, Vietnam is unique in the region for this influence. This is, no doubt, a result of the diaspora population that 1) lives in the Silicon Valley or 2) the Vietnamese Americans (Viet Kieu) and other Vietnamese overseas who have come back to Vietnam to live. The connection has lead to the creation of companies like: Misfit Wearables (acquired by Fossil for $200 million), Tappy (acquired by Weeby), Adatao (received $15 million investment from a16z), and more.
Mainly due to the help of IDG Ventures raising $100 million to fund Vietnam’s startups (including VNG) and the deep and broad influence of FPT, one of Vietnam’s largest technology-related companies, Vietnam is arguably one of the older tech startup ecosystems. VNG is 11 years old and is worth over a billion dollars. This is unique to the region. Vietnam is an old and mature ecosystem. It has a large group of managers, former founders, product people, and engineers that know how to build companies. And this is all becoming more significant as Vietnam goes through its latest cycles of investments and startups (i.e. Seedcom and soon 500 Startups).
Vietnam’s culture is particularly aggressive and entrepreneurial. Although on one side, Vietnamese are quite egoistic, leading to a large majority of companies with no co-founders, it also leads to a highly competitive environment where companies will do almost anything to win. You will just not find this kind of determination commonplace across Southeast Asia. Vietnamese want to be their own boss and they want to have ownership over their destiny and their own company. It’s a double edged sword, but it’s one that most people don’t have.
Where Vietnam is really going
Given the above, it’s no doubt that Vietnam has some engines that will allow it to continue to grow as an ecosystem. There’s no doubt in my mind that 2016 and 2017 will be very strong years for Vietnam. But there are a set of unanswered question that Vietnam will need to address. And I’ll leave you with that, if Vietnam’s startup ecosystem can answer these questions as a community stretching from young startups to the federal level, we’ll see an impressive Vietnam that will launch onto the world stage.
- Can a Vietnamese company IPO within the next two years?
- Can Vietnamese policy make it easier for foreigners to invest in Vietnamese startups?
- Can Vietnam produce a layer of investors that are willing to make small bets on potential companies that are still finding themselves?
- Can those same companies learn leadership, management, product development, and the technology to go big locally and globally?
- Can Vietnamese people in general learn English and learn how to integrate with foreign cultures?
- Can Vietnam exponentially leverage its relationships with China and USA to positive effect?
- Can Vietnamese startups solve real customers problems?
This post originally appeared at Vietcetera.