Vietnam is standing out as a leading member of the Southeast Asia Startup Golden Triangle, which also comprises Indonesia and Singapore. The term was coined by venture capital (VC) firm Golden Gate Ventures (GGV) and refers to these three key markets in the Association of Southeast Asian Nations (ASEAN), where the largest unicorns—companies valued at over US$ 1 billion—are anchoring their businesses in a three-pronged approach.
According to Vinnie Lauria, the managing partner of GGV, the VC trends in Vietnam show that the country will be the growth driver of startups among the three countries and the rest of the region.
Singapore and Indonesia have shown considerable growth year-on-year (YOY), with Singapore’s digital economy having a Gross Merchandise Value (GMV) of US$ 15 billion in 2021, up 35% YOY, and predictions see it reaching US$ 27 billion by 2025. Indonesia had a GMV of US$ 70 billion, up 49% YOY, with expectations of it topping US$146 billion by 2025.
2022 has been an amazing year for VC funding in Southeast Asia so far
Meanwhile, Vietnam’s digital economy last year was valued at US$ 21 billion, according to the Vietnam Innovation and Tech Investment Report 2021. This figure represented a 31% YOY increase and 7.6% of the Gross Domestic Product (GDP). A record US$ 1.4 billion sum was also invested in Vietnam tech startups, 1.6 times higher than the previous record of US$ 874 million set in 2019. Furthermore, the number of funds investing in startups went up by 60%.
Factors contributing to and affecting Vietnam’s rise
The rise of Vietnam is a result of its attractiveness to investors, as well as its current government’s support for the startup ecosystem. Some factors making the country an option for startup investments include political stability, a young and talented workforce, infrastructure developments, digitisation, and knowledge of English. In addition, the economy’s forecast shows growth despite challenges like COVID-19, inflation, rising interest rates, and supply chain disruptions.
Also, there is a favourable and welcoming business climate, and no large conglomerates are blocking startups from establishing themselves. Listing startups on the stock market in various regional markets has become a viable exit option for investors, giving them a pathway to recoup their money. Vietnam has positioned itself as an international trading and manufacturing hub, with large global corporations setting up shops in the country.
The US-China Trade War forced companies to move from China and find viable countries that were not at risk of sanctions. Vietnam was a key beneficiary of those realignments and organisational diversifications. Moreover, China’s crackdown on businesses has led many to look for more business-friendly environments, with Vietnam standing out.
Finally, there has been a post-pandemic surge in demand for digital solutions and innovation. Many companies consider Vietnam the ideal place to finance startups in multiple sectors.
Looking ahead at Vietnam’s growth
As per the Vietnam Innovation and Tech Investment Report 2021, the country has several things that will work in its favour moving forward. First, the government changed its approach to dealing with COVID-19 by opting to fight the pandemic while simultaneously getting the economy back on track. Thus, the National Assembly provided US$ 15 billion for socio-economic recovery for 2022-2023.
Vietnam is also continuing the digital transformation that has been occurring throughout ASEAN, which will spur the economy and create startups, thereby providing job opportunities to the citizens.
Tech investment in Vietnam will continue despite the state of the global economy. Startups are innovating and delivering vital technologies and solutions, aiding the economy and serving the public. For example, the VC trends in Vietnam show that payments and retail sectors are doing well, with the eConomy SEA report 2021 by Google, Temasek, and Bain & Co. showing that more than 8 million Vietnamese have become digital consumers since the pandemic began. Now, Vietnam tech startups in the healthcare, education, environmental, gaming, and business automation sectors are getting a lot of funding from investors.
Given the country’s stable socio-political climate and thriving VC scene, investor confidence in Vietnam remains high. Several VC firms have launched funds and raised billions of dollars to invest in the country. Moreover, technology is ingrained in the citizenry, so much so that the adoption rate is high, meaning there are ample opportunities for many emerging sectors, such as web 3.0 and blockchain, to keep growing.
According to a press release by Golden Gate Ventures, Vinnie Lauria has settled in Vietnam as the VC firm has opened two offices in Ho Chi Minh City and Hanoi. The firm has agreed to a Memorandum of Understanding (MOU) with Vietnam’s National Innovation Centre (NIC) to invest in, support, and grow the country’s startup ecosystem.
As things stand, Vietnam will remain the primary driver in the Southeast Asia Startup Golden Triangle. However, Singapore and Indonesia will also play a significant role, thereby boosting ASEAN.