Vietnamese staff working at the French IT company Linkbynet in Ho Chi Minh City. Ten years ago, app technology would likely have been developed in California’s Silicon Valley, but today these apps are being produced by the Vietnamese startup industry, an industry driven by local technicians trained abroad who return home in quest of opportunities.
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Vietnamese tech startups are benefiting from this as the country goals to rework it into a totally digital society by 2030.
In 2020, the government announced a national digital transformation strategy that goals to extend the share of the digital economy in gross domestic product from the current 14% to twenty% by 2025.
Southeast Asian nation hope change into a high-income economy by 2045 by specializing in its digital economy.
In keeping with the World Bank“If the digital sectors grow by about 10 percent annually, the cumulative monetary gains to the economy will exceed $200 billion from 2021-45, roughly equal to the country’s current GDP.”
That is why officials are rolling out a red carpet for tech entrepreneurs.
In 2021, recent startup support centers in Hanoi, Da Nang and Ho Chi Minh City were established announced. A yr later a road map to stimulate innovation in science, with the promise of spending 1% of GDP on research.
Last yr, the country pledged to launch a business innovation survey to watch the development of startups.
In keeping with recent information, Vietnamese start-ups enjoyed a number of interest from investors in 2022 report of the enterprise fund Do Ventures and the National Center for Innovationgovernment entity under the Ministry of Planning and Investment.
In keeping with the report, it ranked third by way of the variety of deals in Southeast Asia and fourth by way of deal value last yr. It’s price noting that domestic funds were the essential investors in local startups last yr, accounting for 45% of the total deal value.
Nonetheless, total investment in Vietnamese startups was just $634 million in 2022, down 56% year-on-year from a record $1.4 billion in 2021, in response to the report.
Fintech, retail, healthcare and payments were the most sought-after financing sectors.
Current tech unicorns in the country include e-payment solution provider VNPay, VNG turned gaming conglomerate, smartphone e-wallet Momo and Blockchain player Sky Mavis, developer of the NFT-based game Axie Infinity.
Other names that are making waves include M Village, which offers co-living apartments for young professionals, and TopCV, which focuses on CV tools for job seekers.
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Digitization is especially necessary for agriculture, one in every of the most significant sectors of the country’s economy.
In 2022, the Ministry of Agriculture and Rural Development announced plans to construct smart rural areas by 2025, aimed specifically at improving production efficiency and introducing specialized digital infrastructure for farmers.
“Without the transition to digital technology, the transformation of farming operations and integration between stakeholders across the value chain can be a downward spiral for Vietnamese agriculture, affecting not only the lives of farmers but everyone else,” said Tran Thi Nguyen, founding father of Koima, an agro-technical startup. .
It helps small farmers increase their income, convert traditional farming to agroforestry, which improves biodiversity, and access finance without high rates of interest through a crowdfunding platform.
Noteworthy sectors
In an interview with CNBC, many local investors identified their essential areas of interest, starting from retail to logistics.
Enterprise capital firm ThinkZone Ventures has invested in 17 local tech start-ups with a combined valuation of nearly $200 million since the company was founded in 2018. He believes that healthcare, food and logistics, including transportation and delivery solutions, are particularly ripe for disruptive technology. Each boasts attractive growth potential based on rapidly increasing consumer activity from Vietnam’s burgeoning middle class, an organization spokesperson said.
VinaCapital calls itself one in every of the first enterprise capitalists in Vietnam. He has invested in 18 early-stage tech startups through his $100 million VinaCapital Ventures platform, and holds 58 direct investments through his portfolio corporations. Priority is given to startups that provide technological solutions to enhance existing systems in agriculture, financial services, logistics, media and retail. Emerging technologies reminiscent of blockchain, artificial intelligence and electric vehicle infrastructure are a few of the areas she believes will drive the ongoing economic transformation.
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VIC Partners said it has invested in around 15 revolutionary corporations since 2017, injecting around $100,000 to $200,000 for the first check in each deal, followed by one other $100,000 to $200,000 in the next round.
Managing Director Tung A. Tran said VIC is especially optimistic about e-commerce.
“We’ve got invested in B2B SaaS corporations that enable e-commerce corporations to recruit, sell, market, pay, customer support, logistics and success,” he said, referring to the cloud-based programs that serve the corporate world.
“We are also investing in revolutionary e-commerce corporations that sell on to consumers through social media and implement technology in seamless business operations.”
Upcoming Challenges
Despite the influx of capital into the digital sector, investors warn of several structural hurdles that would limit growth in the future.
Topping the list were regulatory frameworks reminiscent of taxation, mental property rights and data protection required to create the most enabling environment for technology.
“An absence of world-class human resources can be a standard problem,” noted ThinkZone. “Although Vietnam has expert and experienced specialists in programming, development, design and various other roles, they’ve not yet reached the pinnacle of excellence.”
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“The limited investment of huge corporations in R&D is a big obstacle for Vietnamese startups,” says VinaCapital.
“This limits the potential for cross-industry collaboration and innovation, making it harder for startups to search out potential buyers or partners focused on their services or products.”
VIC Partners is most concerned about the global economic slowdown. The corporate expects money flow issues to wipe out many tech startups in 2023 and 2024, while forcing more young people to pursue traditional business models, which might deprive the startup market of recent ideas.
Once capital inflows are injected again into developed markets, it’s going to take a while to achieve emerging countries like Vietnam after which from the stock market to non-public equity and enterprise capitalists, said Tran of VIC Partners.
“I predict that 2023 and 2024 can be superb years for pre-IPO and [private equity] possibilities. Then, in 2025-2026, Vietnam’s VC market could boom again with one other batch of great