TECH STARTUPS IN VIETNAM

Tech Startups in Vietnam mô tả ngành công nghệ Việt Nam như một trung tâm khởi nghiệp sôi động. Nó chi tiết về các startup công nghệ thành công, tăng trưởng trong ecommerce và fintech, và sự quan tâm từ nhà đầu tư quốc tế. Đồng thời, nêu thách thức như thiếu hụt nhân tài và hạn chế về pháp lý. Điểm nhấn là sự tăng trưởng của người dùng internet và điện thoại thông minh, tạo cơ hội lớn cho ngành công nghệ Việt Nam trong năm 2024.

TECH STARTUPS IN VIETNAM

A STATISTA DOSSIERPLUS ON TECH STARTUPS IN VIETNAM

▪ Digital evolution in consumer landscape

Tech unicorns leading the domestic market

▪ Startups as market leaders

Vietnam: Southeast Asia's next startup hotspot?

Executive summary

Within a few years, Vietnam has seen the emergence of over 3,800

startups and four tech unicorns that have attracted billions of U.S

dollars in funding, raising the question of whether the country could be

the next startup hotspot in Southeast Asia Many of these startups have

proven that they can not only provide internet users with their

demanded digital products and services but can also become market

leaders in several categories One can no longer look at the Vietnamese

internet landscape without the inclusion of the leading social messaging

app, online payment service, or online blockchain game, all made by

Vietnam’s most successful startups Made-by-startup applications have

made significant impacts on the Vietnamese digital economy, especially

in fintech, where financial services and technology are now much more

inclusive for the population

Thus, Vietnam has stood out in the last couple of years as the next

startup nation to watch due to the ongoing growth and potential of this

sector This success can be attributed to recent economic

developments, such as:

▪ Vietnam’s e-commerce market is set to grow threefold and become

the second largest e-commerce market in Southeast Asia by 2025

▪ The 1.4 billion U.S dollars of investment received by Vietnam’s tech

startups in 2021, a large proportion of which came from venture

capitalists from abroad

▪ The thriving digital domestic market, with over 70 percent of its population being online

While Vietnam can be proud of the achievements of its startup sector, the country still has a long way to go and a lot to tackle in order to make itself truly a startup nation:

▪ Vietnamese startups often face difficulty in attracting enough talent, finding angel investors, and managing their funding and growth due

to the new, rather inexperienced ecosystem

▪ Vietnam lacks up-to-date legal frameworks which are needed for the development of tech products and startups, such as in the case of fintech and blockchain As a result, some of the most successful startups in the country have recently moved their holdings to Singapore, as the island nation provides access to more international investors, a well-established startup community, and clear-cut

regulations for the tech industry

This report looks at how far Vietnam has come on its journey to becoming Southeast Asia’s next startup hotspot, focusing on its startup landscape and the driving forces behind the growth of this sector

Additionally, it identifies the challenges faced by Vietnamese ventures,

as well as provides an outlook for the future of made-in-Vietnam startups

3

operating They have to be on the defensive thinking about how to comply with the law rather than spend that time on business and development.

-Nguyen Thanh Trung

CEO of Sky Mavis

44

Vietnam’s startup sector is expanding rapidly

Figures show an increasing number of investments, deals, and deal values

0.5m or smaller Over 0.5m to 3m Over 3m to 10m Over 10m to 50m Over 50m

Value of capital investments in tech startups in Vietnam from 2018 to 2021, by deal size

Vietnamese startups received a breaking level of investment in 2021, valued at 1.4 billion U.S dollars In the five-year period between 2016 and

record-2021, the number of investment deals rose more than fivefold, from 31 deals

in 2016 to a total of 165 deals in 2021.Additionally, bigger deals ranging from

at least 10 million U.S dollars started to pick up in the last couple of years In

2021, almost one billion U.S dollars were invested in deals valued at over 50 million U.S dollars, totaling a gross value larger than the total of all small deals combined These larger deals were often made as later series funding for more mature startups that had already achieved certain milestones, such as in the case of MoMo’s series E and Sky Mavis’s series B (see pages 28and 29)

National Innovation Center; ID 1338611

Local-driven innovations: magnets for venture capital

Online retail and digital payment categories are top receivers of venture capital

469 450 175

61 55 55 42 37 33 29 10 8 7 4 4

Retail Payment Entertainment/gaming

Financial services Education Business automation

Multi-vertical Healthcare Others Real estate and infrastructure

Entertainment/non-gaming

Logistics Communication and communities

Local services Employment

Value of capital invested in tech startups

in Vietnam in 2021, by segment (in million U.S dollars)

Investment value in million U.S dollars

Leading startups based on funding value

in Vietnam in 2021 (in million U.S dollars) Investment value in million U.S dollars

The Vietnamese market of online payment and online retail was, until recently, either in a blue ocean or a monopoly situation But with the online payments market receiving 450 million U.S dollars of investment in 2021 alone, startups are playing a significant role in making e-commerce more accessible and inclusive for Vietnam’s digitally-savvy population

In 2021, MoMo’s e-payment service, and Tiki, an e-commerce marketplace

platform, bagged the biggest funding deals within the startup sector Tech products in these categories are in high demand, such as MoMo’s e-wallet, which had 26 million downloads in H1

2021, making it the most popular app

of its kind that year (see page 28)

Yet much of the funding comes from non-Vietnamese investors

Funds investing in tech startups Vietnam 2021, by origin

Over 170 funds were invested in tech startups in 2021, of which around 16 percent were local investors The rest came from markets with more

experienced venture capitalists, including Singapore, the United States, Korea, and Japan For theseinvestors, Vietnam offers many greenfield opportunities thanks to the domestic consumer pool, in contrast

to the already well-developed markets

in most of the countries

In the case of MoMo, for example, the company operates purely in Vietnam, yet it has been financially backed by well-known American private equity firms such as Goldman Sachs and Warburg Pincus throughout its development

Why Vietnam is Southeast Asia’s next startup hotspot

▪ Government supports and legal framework

▪ Economy-driven factors

▪ Digital evolution in consumer landscape 02

Vietnam aspires to be more startup-friendly

Less time and fewer procedures are needed to start a business in Vietnam compared to many Asian countries

173 99

33 22.5 19.5 17.47 17 16.5

16

13 12.64 12 12.00 12 11.15

Time required to start a business in the

Asia-Pacific region in 2020, by country or region (in

days)

Time in days

13 11 10 9 9 9 8 8

8

8 8 8 7 6 6

Philippines Indonesia India Laos Bangladesh Cambodia Mongolia Bhutan Vietnam Nepal Japan Malaysia Sri Lanka Timor-Leste Myanmar

Number of startup procedures needed to register a business in the Asia-Pacific region in

2019, by country or region

Number of startup procedures

Compared to Asia’s startup hubs, Vietnam still has a lot to do to support entrepreneurs In

2020, it took a startup at least 16 days and eight procedures on average to legally start a business in the country, putting Vietnam in the middle range on the ease of starting a new business in Asia However, the country has been making a lot of progress since then, from allowing 100 percent foreign ownership

of enterprises to providing special tax treatments that exempt a significant share of taxes for new businesses

Embracing the goal of making the country a

“startup nation,” Vietnamese policymakershave been aiding the startup community with additional funding, establishing supporting organizations such as the National Innovation Center, as well as building the tech startup incubator of Sai Gon Silicon City in recent years

(1) Note(s): Asia, APAC; 2020

Source(s): World Bank; ID 731104

(2) Note(s): Asia, APAC; 2019 Source(s): World Bank; ID 1119061

Source(s): Vietcetera; Vietnam Investment Review; VnExpress 10

Vietnam’s economic growth comes with a booming domestic market

GDP per capita, PPP Vietnam from 1990 to 2020

remarkable development in its population’s purchasing power From having a GDP per capita in purchasing power parity of under 1,000 U.S

dollars in the early 1990s, a Vietnamese person today enjoys a GDP per capita of almost 9,000 U.S dollars on average, outpacing the income development of many developed nations

Economic growth comes hand in hand with greater technology adoption (as shown on page 15) among the

Vietnamese Digital products have slowly transitioned from being used exclusively for work or entertainment

by a niche group of people into a must-have in the daily life of the general population

Note(s): *an artificial currency, used to describe what an international dollar would buy in a country in comparison to the amount of goods and

services a U.S dollars would buy in the United States, as of May 2022; Vietnam; 1990 to 2020

Source(s): World Bank; ID 1310418

Source(s): Forbes

11

The fast-growing internet economy has not shown any sign of

Annual gross merchandise volume (GMV) of the

internet economy in Vietnam from 2015 to 2021,

with a forecast for 2025 (in billion U.S dollars)

Retail e-commerce market volume in Southeast Asia from 2019 to 2021, with a forecast for 2025,

by country (in billion U.S dollars)

Spending in billion U.S dollars

The annual gross merchandising value (GMV) of Vietnam's e-commerce

market was 21 billion U.S dollars in

2021 and is set to more than double

by 2025 To keep up with this development, improving online retail and other supporting technologies has become the priority among

businesses As such, retail commerce startups received over 469 million U.S dollars of investment in

e-2021 (as shown on page 7), so it is likely that Vietnam's retail e-commerce sector will continue to grow

Compared to the rest of Southeast Asia, Vietnam's retail e-commerce sector is forecast to reach the second-highest market volume by 2025

(1) Note(s): Vietnam; 2015 to 2021; *forecast

Source(s): Bain & Company; Google; Temasek Holdings; ID 1193113

(2) Note(s): Asia; 2019 to 2021; excluding online media and travel sales; *forecast

Source(s): Bain & Company; Google; Temasek Holdings; ID 647645 12

FDI and remittances are empowering the Vietnamese tech sectors

Total foreign investment capital in the IT, electronics, and telecommunications industry in Vietnam

from 2018 to 2020 (in million U.S dollars)

As the backbone of innovation, the technology and telecommunication sector has been developing fast to accommodate the ongoing digital transformation of businesses and consumers’ daily lives Many developments within the sector are fueled by investments from abroad, including foreign direct investments (FDI) and indirect investments from remittances

In 2019, foreign investment seemed to peak at 3.5 billion U.S dollars, with a significant drop to 1.4 billion U.S dollars in

2020 during the COVID-19 pandemic

However, as some overseas-educated Vietnamese are now taking leadership roles and contributing to the success of

Vietnamese startups, it may be that the level of investment seen in 2019 will return, driven by the international experience and expertise of this group of business leaders

(1) Note(s): Vietnam; 2000 to 2020; in current U.S dollars

Source(s): World Bank; ID 880787

(2) Note(s): Vietnam; 2018 to 2020 Source(s): Ministry of Information and Communications (Vietnam); MPI; ID 1291774

Source(s): Business Times Singapore; Tech Collective SEA

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Activities of extraterritorial organizations and bodies

Financial, banking, and insurance activities

Information and communication

Real estate activities Professional, scientific, and technical activities

Electricity, gas, steam, and air conditioning supply

Mining and quarrying Transportation and storage Human health and social work activities

Education and training Administrative and support service activities

Activities of Communist Party and other government services

Wholesale and retail trade; vehicle repair

Manufacturing Water supply, sewerage, waste management

12.16 9.61 9.54 9.07 8.89 8.37 8.18 7.78 7.4 7.05 6.96 6.94 6.72 6.7 6.42

Vietnam's tech sector and IT workforce have benefited each other

Average monthly salary for paid workers and employees in

Vietnam in 2020, by industry (in million Vietnamese dong)

Known for having a young, relatively affordable workforce, Vietnam has also been focusing on growing its skilled labor force with specialized know-howfor various industries, including the technology and telecommunication sector

The number of employees working in this sector has increased gradually every year, reaching over one million in

2020 as digitalization has become the norm for many businesses At the same time, the IT sector recorded an average salary of 9.5 million

Vietnamese dong, the third-highest average salary among all industries, making it an attractive career path for many young Vietnamese However, Vietnam also faces some issues with building a sustainable IT workforce (see page 33)

(1) Note(s): Vietnam; 2020; 15 years and older

Source(s): General Statistics Office of Vietnam; ID 1302370

(2) Note(s): Vietnam; 2016 to 2020 Source(s): Ministry of Information and Communications (Vietnam); ID 1291803

14 Source(s): The Hong Kong Trade Development Council (HKTDC)

Vietnamese consumers of today are digitally connected and

cannot live without their devices

Internet, social media, and smartphone penetration forecast in Vietnam, from 2010 to 2025

Internet Social media Smartphone Vietnamese consumers are not exempt from

the influence of the Internet of Things on the consumer landscape globally Today, the internet is simply a part of life in Vietnam In the early 2000s, less than one percent of Vietnamese used the internet However, this changed quickly just a few years later when the internet penetration rate in the country started to increaserapidly Today, around over 70 percent of the populationisonline and on social media, and most of them own

at least a smartphone

Together, the usage of the internet, social media, and smartphones have blended seamlessly into the daily life of most Vietnamese This comes with the demand for a whole new kind of products and services for the new generation of digitally connected citizens

15 Note(s): Vietnam; 2010 to 2019; all values are estimates; *forecast Source(s): Statista; ID 1314417

E-commerce has gone mainstream

Number of users Average revenue per user

Number of online shoppers and average revenue per online

shopper in Vietnam from 2017 to 2021

Fashion Electronics Personal & household care

Furniture Physical media

Growth of e-commerce expenditure on consumer goods among internet users in Vietnam in 2021

compared to 2020, by category

Growth rate

As of 2021, around 54.6 million people living in Vietnam, equaling over half of the country’s population, have purchased goods online Not only are there more Vietnamese consumers who shop online, but they have been spending more in general on e-commerce purchases The average revenue per e-commerce user in Vietnam went from under 200 U.S

dollars in 2017 to 251 U.S dollars in

2021

This spending growth could be seen across various product categories, from small everyday goods like food to big-ticket items such as furniture

Correspondingly, online retailtechnologies and related tech support for e-commerce platforms have been in high demand

16 (1) Note(s): Vietnam; 2017 to 2021; figures are estimates Source(s): iDea; Ministry of Industry and Trade (Vietnam); ID 1338678

(2) Note(s): Vietnam; 2021 Source(s): DataReportal; Kepios; Statista Digital Market Outlook; We Are Social;

ID 1112153

Cashless payments on the rise

of the highest adoption rates for these payment methods and the fourth largest amount of transaction value of digital payment

in Southeast Asia

Cash on delivery (COD), which used to be the go-to method for online shoppers, has steadily lost its popularity to other online payment formats, including online banking and e-wallets.Bank transfer is forecast to surpass COD as the most popular payment method for e-commerce purchases in 2022, while e-wallets will continue

to grow in usage in the coming years Besides online shopping purchases, digital payment formats have also become popular for money transfers, bill settlements, and more

17 (1) Note(s): Asia Source(s): Statista; Statista Digital Market Outlook; ID 1306238

(2) Note(s): Vietnam; *forecast Source(s): Statista; Statista Digital Market Outlook; ID 1311563

Source(s): VISA Inc., YCP Solidiance

Increased demand drives fintech growth

Number of fintech deals by category and number of e-wallet apps in Vietnam

Alternative

lending

Blockchain in financial services Cryptocurrencies InsurTech Investment tech Payments

Number of e-wallet apps in Vietnam from October 2015 to August 2020

Meanwhile, together with the increase in demand and usage, the number of online payment service providers introduced in Vietnam has been increasing fast For instance, online banking is now the norm for all traditional banks, and so is QR payment in most retail shops At the same time, e-wallet payment seems to be one of the busiest categories to watch in the Vietnamese fintech sector

While there were only five e-wallet providers in the country in 2015, by 2020, the number of e-wallet brands had grown

to nearly 40 Not surprisingly, a lot of investments have been made into bettering online payment systems in Vietnam In fact, digital payment has been the most well-funded category among fintech startups in the country

18 (1) Note(s): Vietnam; 2016 to 2021; excluding deals with undisclosed amounts Source(s): PwC; Singapore FinTech Association; United Overseas Bank;ID 1227520

(2) Note(s): Vietnam Source(s): Decision Lab; iDauTu.com; ID 1271902

Source(s): OpenGov Asia

Cryptocurrency is the new investment trend in Vietnam

0.84

1.32 2.05 3.04 4.22 5.39 6.32 6.93 7.28 7.46

Banking tech Insurtech Blockchain*

RegTech

Breakdown of fintech firms in Vietnam in the first nine months of

2021, by category Share of fintech firms

Vietnam was the country where cryptocurrency was most heavily used globally in 2021, and the number of cryptocurrency users has kept rising exponentially in the past few years While remittances were the main reason behind the adoption of cryptocurrency, specifically Bitcoin, among early Vietnamese users, these digital assets are now often seen as a form of

investment

As the market for digital coins expanded, blockchain startups started to emerge in Vietnam In

2021, cryptocurrency firms accounted for almost one-fifth of the total number of Vietnam-based fintech companies

19 (1) Note(s): Vietnam Source(s): Statista; Statista Digital Market Outlook; ID 1311576

(2) Note(s): *blockchain in financial services only, Vietnam; 9M 2021 Source(s): PwC; Singapore FinTech Association; Tracxn Technologies; United

Overseas Bank; ID 1286711

Source(s): Chainalysis

Online entertainment is the new normal for many

Video games market revenue in Vietnam from 2017 to 2026

Note(s): Vietnam; 2017 to 2026; *forecast

Source(s): Statista; Statista Digital Market Outlook;ID 1283309

20