The Vietnam tech scene has been in the spotlight recently, gaining attention from international investors for its expansion of digital industries. Thanks to countries like Vietnam, the number of unicorn startups in Southeast Asia is steadily increasing, with 19 startups attaining the status in 2021 alone.
This upswing indicates a growing market and an increase in the value of startups in the region. Fifteen of these unicorns originated from Singapore, but investors are now beginning to turn to other countries, including Vietnam, in the hopes of creating the next big thing.
Factors contributing to growth in Vietnam
In 2019, Vietnam was already being heralded as Southeast Asia’s new rising star with more than 3,000 startups, many of which received significant investments. Fintech companies Momo received $100 million USD from Warburg Pincus, and VNPay received $250 million USD through combined investments from Japan’s SoftBank Vision 1 Fund, General Atlantic and Dragoneer Investment Group. These massive funding injections bring both Momo and VNPay into the unicorn category.
We explore if Vietnam be the next AI hub in ASEAN by 2030?
Thanks to the foundation provided by these investments and the positive environment created by the Vietnamese government, the tech sector has continued to grow steadily. This growth has attracted more big investors from overseas with international investment funds. This influx of funding culminated in 2020 when during the Vietnam Ventures Summit, venture capital firms made the promise to invest $815 million USD towards startups across Vietnam for the next 3 to 5 years. The digital market in the country has expanded at an astounding rate and is not showing signs of slowing down. VNG’s CEO, Le Hong Minh, stated that in 17 years, the number of internet users has grown from less than a million to almost 70 million.
To top off all of this, Vietnam’s population is relatively young, with a median age of 32.5 years old. Much like previous growth markets in Singapore and Indonesia, where they have a young population of tech-savvy people, it will likely see quick adoption and tremendous growth amongst startups. As it continues on this growth trajectory, more investors and entrepreneurs will become interested in building startups in the region.
What is the government doing to help this growth?
The Vietnamese government has launched various programs and funds to help startups grow at every level. On top of this, they have worked to build an infrastructure that supports entrepreneurship and startup endeavours. To achieve this, they have worked with banks to develop finance initiatives and provide mentorship, loans and technical training to anyone who wants it. A large part of this move to provide increased support for enterprise began as a response to the drop in investments thanks to the COVID-19 pandemic.
The idea was to target growth markets within the country and encourage innovation within those markets. To achieve this, they rolled out tax benefits for IT-based companies by reducing their CIT tax rate to 10% for ten years, a 50% tax reduction for the next nine years and a four-year exemption to CIT taxes.
With the recent development of the Hoa Lac Hi-tech Park, Vietnam has begun to solidify its aims to become Southeast Asia’s next tech giant. The park is a national venture with the goal of becoming a science city. Spanning 1,586 hectares, it hopes to attract investors from across a wide array of sectors. However, if this venture succeeds and gains the investment it needs, It could very well become the tech industry hub not only for Vietnam but also for Southeast Asia as a whole which would see the country’s tech scene jump to the very forefront of innovation across the region.
How will Vietnam’s growth help the rest of Southeast Asia?
With Singapore and Indonesia both now having minted a fair number of unicorns, Vietnam’s growth and the positioning of its economy around these tech startups will allow it to catch up and perhaps, one day, even surpass its neighbouring markets. This nascent market will boost competition and shine an even brighter spotlight on the Southeast Asian region, doubling down on its already growing status as a hub for tech startups.
With more investors comes more growth, and thanks to the young population across the region, this age of innovation in Southeast Asia shows no signs of slowing down. Through these international investors, startups all across the region will have more of a chance of getting the funds they need to make their mark on the market.
With more competitive startups coming up with new, innovative ideas, there is also an increased likelihood of more unicorns emerging in the region. In turn, their success will bring even more attention to the market, helping it grow even further. The future looks very promising for the Vietnam tech scene and the unicorn startups in Southeast Asia, despite the economic issues resulting from the global pandemic.