Face off: Indonesia vs. Vietnam

Indonesia has been proclaimed as one of the most promising startup ecosystems in Southeast Asia. Not only is the archipelago home to a growing number of startups, it also has the most unicorns — companies that are valued at over US$1 billion — in the region.

But while Indonesia hogs the attention of both founders and investors, another country has been quietly growing at a rapid speed: Vietnam. Just last year, the country racked up three of the region’s mega deals that totaled almost half a billion dollars.

To find out the similarities and differences between the two countries’ ecosystems, Tech in Asia sat down with Hao Tran, CEO and co-founder of Vietnamese media platform Vietcetera, Tessa Wijaya, COO and co-founder of Indonesian fintech firm Xendit, and Pieter Kemps, Principal at Sequoia Capital, last September 3.

Small but mighty?

In the first seven months of 2020, Vietnam saw only 32 disclosed funding deals while Indonesia had 82. This raises the question: Why the huge gap?

According to Tran, it could be due to a branding issue. Vietnam has traditionally been the go-to country for any outsourcing work, particularly software engineering, which might have led investors to conclude that Vietnam is good only for finding hard-skilled workers.

In addition, it has only one-third of Indonesia’s population, making its total addressable market a lot smaller. Most investors would worry that with a smaller population, the country might not have enough to warrant a unicorn company.

However, Tran also explained that while the size of the country is indeed smaller, Vietnam’s consumption capacity could offset it. He pointed out that the population generally has an appetite for spending on branded products like iPhone and Vespa.

Out in large numbers

Both Tran and Kemps acknowledged that with Indonesia having the largest domestic market in Southeast Asia, it makes the country very appealing to investors. While Covid-19 has slowed down the funding deals happening in the country, Wijaya sees fintech, edtech, healthtech, and ecommerce as some of the industries that could get more interesting for investors in the future.

According to a March 2020 report from World Bank, about 50% of Indonesians do not have access to bank accounts. This presents a huge opportunity for the many fintech players in the country – if they are able to crack the code.

Likewise, though it lags behind the US, Indonesia’s ecommerce industry is considered to be doing well: Two of its unicorns, Tokopedia and Bukalapak, are both ecommerce companies. The pandemic has also pushed ecommerce players to dish out innovative measures, such as the online sales and delivery of fresh goods.

Conclusion

While Indonesia attracts a lot of funding due to having the largest domestic market in Southeast Asia, there’s also an increased focus on Vietnam. Once dubbed as an outsourcing country, Vietnam might still need to work hard to change people’s perspective. But on the bright side, many of its engineers are now becoming co-founders, and we would likely see more funding to come into the country as more Vietnam-focused funds are getting set up.

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