The big challenge for Vietnam’s high-growth entrepreneurs: To go national or regional?

The following is an edited excerpt from Startup Vietnam: Innovation and Entrepreneurship in the Socialist Republic by Andrew P. Rowan. You can order a copy of the newly released book here.

This is the final part of a two-part series exclusive to Tech in Asia. You can read the first part here.

Photo credit: Matthew Bellemare / Flickr

While the growing interest in startups in Vietnam is positive, the reality is that the odds are against startup founders and employees – both locally and globally.

Between 2008 and 2017, CB Insights, a big data and machine learning research firm, followed more than 1,000 companies in the US from seed round onward and found that the odds of becoming a unicorn – a startup with a valuation of US$1 billion or more – are less than 1%.

In fact, 70% of the companies that raised their initial seed in 2008 through 2010 ended up either failing or entering a self-sustaining pattern. Meanwhile, out of the startups that raised their initial seed funding in 2008 through 2010, 46% managed to raise a second round of funding. Despite these odds, Vietnam did, in fact, produce a unicorn.

The long journey to unicorn

In 2004, a company named Vinagame was started by five co-founders (including one foreigner) with a mission to deliver relevant software to Vietnamese gamers.

Today, VNG (rebranded from Vinagame in 2010) has an estimated valuation of at least US$1 billion, making it Vietnam’s only (and Southeast Asia’s first) homegrown unicorn.

In 2017, VNG announced its intention to launch an initial public offering (IPO) on the Nasdaq Stock Market in the US, which would mark it as the first Vietnamese technology company to be listed on an American stock exchange.

In a company-wide email sent out by CEO Le Hong Minh to mark the occasion, he shared that (translated from Vietnamese):

1. This is just the first step to a long and difficult journey: to get to the point where VNG is actually listing shares on the Nasdaq. Currently, considering the conditions for listing on the Nasdaq, VNG has met [them] almost fully, but in Vietnam there is no precedent for a company to list overseas, and when we are pioneers, the journey will not be easy.
2. So why do we choose to do this? Simply because VNG, if you want to truly become a leading technology company in Vietnam and the region, to be comparable with global technology companies, then we have to accept and participate in big games. That’s what we need to be global: fair competition with global products, direct access to the global market, access to capital and global investors, and the rigorous evaluation of the global stock market. In other words, this is the challenge that VNG embraces to step into the world.
3. The most important [part] of the whole process will be the pressure to change, to improve, and to continually grow – from people, cultures, systems, techniques, products, and ultimately results, business. It means that our innermost ability is still the most important; external factors (such as today’s events) are only the result or catalyst for the continued development of VNG. From the core (and old) business as the game is constantly refreshing itself by going global and regional markets, to the business core (but not as old) as Zing, Zalo must directly compete with the global giants, to new businesses like Payment [which] are striving to perfect the product and experience the user, to new tests like IoT, streaming – our opportunity and ability to change and innovate is zero. Limited, limited only to ourselves.

Cheers to a new journey together,

—MinhLH

While VNG focused mostly on the local market during its rise to success by offering services to Vietnamese consumers, such as Zalo (a chat app) and Zing (an online portal) in addition to its games portfolio, the next major Vietnamese success story reaching a similar level will most likely target regional or international consumers on the long road to becoming a unicorn.

One vision