Vietnam’s Entrepreneurial Surge: Exploring the Nation’s Developing Startup Landscape

Renowned for its history, food, and breathtaking landscapes, Vietnam is emerging as a hub for entrepreneurship. Over the last decade, Vietnam’s economy has grown significantly, with its startup scene mirroring this trend.

Vietnam’s History of Entrepreneurship

Vietnam has a long history of entrepreneurial spirit in the form of one of the world’s largest informal economies: street vendors. This phenomenon originally began in the 1980’s as rural residents migrated to urban centers to sell food, goods, and services. Fast-forward to 2023, and over 11 million individual street vendors contribute to 11-13% of Ho Chi Minh City’s total GDP. History echoes today as Vietnam’s entrepreneurial zeal thrives, showcased by the emergence of over 6,000 distinct startups nationwide.

A Fertile Ground for Innovation

Several factors contribute to Vietnam’s startup growth. Firstly, its youthful population, with over 60% of citizens under 35, gives it a workforce edge over neighboring countries like Thailand, which is projecting a decline in population and a rise in seniors in the coming years. Vietnam’s younger generation also shows a growing interest in high-tech professions, illustrated by the nearly 80,000 annual graduates in the IT sector. Vietnam’s government aims to further increase this number through public-private partnerships, allowing more flexibility in higher education, and improving STEM education in junior and high schools, beginning the education from an earlier age.

Government Policies and Initiatives

The National Technology Innovation Fund highlights the Vietnamese government’s dedication to promoting technological innovation. This fund nurtures innovation by providing financial support through grants, soft loans, and equity investments.

Regulatory reforms are also underway to reduce bureaucratic barriers. For example, in 2020, nearly 60% of Vietnam’s national standard system has been harmonized with international and regional standards. Additionally, tax incentives are generous, with high-tech businesses eligible for 4-year tax exemptions and a 50% discount for the subsequent nine years.

Vietnam National Innovation Center (NIC)

Vietnam’s National Innovation Center (NIC) is crucial in promoting domestic innovation efforts to help promote the long-term development of the sector. NIC, a government-funded initiative, aims to accelerate innovation in global technological sectors such as smart factories, green energy, and semiconductors. NIC supports R&D projects, aids startups in commercializing their technologies, and facilitates international partnerships. Vietnam’s commitment to domestic market growth is strategically aligned with the nation’s goal of attracting foreign direct investment. As the tech ecosystem matures, Vietnam will not only develop a competitive domestic market but also welcome an even greater variety of international investments.

Emerging Sectors of Focus

Vietnam’s startup ecosystem spans diverse industries, mirroring its growing economy and evolving consumer demands. Specific sectors, including financial services and logistics, show significant potential for further growth. Fintech startups cater to the country’s rising demand for digitalized financial services, while e-commerce flourishes amid the growing preference for online shopping.

Funding received per sector in Vietnam (Million USD)

Challenges and Opportunities

Vietnam’s tech ecosystem is still relatively nascent, particularly when compared to its neighbors like Singapore, making it vulnerable to market volatility. The tech venture capital investment sector in particular has witnessed instability, especially post-pandemic. Despite this, however, the sector’s medium-term growth is impressive. In 2014, the sector secured a modest $45M in investment across 42 deals. Fast forward to 2022, and we see a staggering $634M in funding over 134 deals. This exponential growth is a clear indication that Vietnam is a promising destination for continued tech investment.

While the Vietnamese government has outlined regulatory policies, there is a need for more concrete legal statutes, especially for foreign companies interested in expanding in Vietnam. Confidence is crucial, and with a lack of successful exit strategies, it’s challenging for foreign and private investors to take such risks. An example is the 2019 Securities Law, which mandates that investee companies must be profitable for at least two years and have no accumulated losses at the time of listing. For Vietnam to flourish in technology and continue attracting foreign investment in burgeoning sectors such as semiconductors, clean energy and IoT, the nation must supercharge its efforts to transform its business landscape for domestic and foreign entrepreneurs.

How Tractus Can Help

Are you considering jump-starting your business in Vietnam? We are here to assist! Tractus has been helping companies make informed decisions about where to invest and how to expand their business in Asia and beyond for over 25 years. Contact Tractus today to learn more about how we can turn your ASEAN expansion goals into operational reality.

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Authored by

Hugh Goldstein is a Research Analyst