Vietnam is shaping up to be Southeast Asia’s next hottest startup ecosystem

Singapore and Indonesia have traditionally dominated Southeast Asia’s startup scene. But now, a new contender is emerging.

The fact that Vietnam has one of the fastest-growing startup ecosystems in the world might come as a surprise to some. After all, a mere decade ago, Vietnam was practically a nonentity on this front.

Ho Chi Minh City. Photo credit: dimaberkut / 123RF Stock Photo.

Eddie Thai, general partner at 500 Startups Vietnam, remembers what it was like. “Back then, Vietnam was not an obvious tech investment destination. The country was poor – GDP per capita was barely over US$2,000, according to the World Bank. And [it was] struggling to create an ecosystem for the few disconnected founders and even fewer active angels and VCs (venture capitalists).”

In fact, by Thai’s estimation, Singapore was then about five to seven years ahead of Vietnam. Indonesia, too, had a two to five-year head start.

Over time, however, Thai noticed that investor perception began to shift. “I started talking with potential investors a few years ago. Some LPs (limited partners) saw potential but preferred regional funds for diversification purposes,” he recalls.

But since Southeast Asia “has shown that it can produce several unicorns” – such as ride-hailers Grab and Go-Jek as well as ecommerce players Lazada and Tokopedia, for example – “investors now perceive less risk in the region,” he adds. Thai also notes how in-region dynamics have changed. “Singapore and Malaysia are more saturated and mature, and Indonesia has perhaps been too hot. It’s natural for investors to wonder, ‘Where’s the next place?’”

The numbers are working in Vietnam’s favor, too. According to Tech in Asia data, the total funding amount for all the startups in Vietnam was just US$6 million in 2013. However, five years later in 2018, Vietnam’s startups scored US$193 million, thanks to a number of deals in mature companies.

That year, the biggest sum of money went to Yeah1 Network, a multichannel content network that netted an estimated US$100 million from a group of investors. Online education provider Topica EdTech Group and ecommerce platform Sendo have also received a lot of attention and funding, snapping up US$50 million and US$51 million, respectively.

See: This viral video hitmaker from Vietnam is profitable and worth over $300m

2019 is already shaping up to be a big year, with private equity firm Warburg Pincus investing a reported US$100 million in payments firm Momo.

The completion of these big deals is an important indicator: it offers early-stage investors a chance to sell their stakes and realize their gains, which could eventually drive even more investments into Vietnam.

No silver bullet

Not without its challenges