VIETNAMActionable Startup Ecosystem Report 06/2016

by Recorp for SECO EP

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The purpose of this report is to help the Vietnam Startup Community and SECO EP

Partners to achieve greater economic impact. The first part of this report is a Macro analysis that is applicable to all partners. The

The feedback is based on my personal experience as co-founder of Startup Weekend and Up Global as well as some of the latest ele

Feel free to share.

PLANPLAN

I. ECOSYSTEM

II. ACTION PLAN

PLAN

STARTUP

ECOSYSTEM

1. COMPARATIVE ANALYSIS

We can benchmark any ecosystem by comparing it with its

surrounding startup ecosystems. We’re using a geographic,

population and GDP referential to analyze Vietnam and South East

Asia. The data is gathered using angel.co. We’re defining startups

here as ventures with high growth potential who have been seeking

venture funding.

v

COUNTRY VIETNAM MALAYSIA MYANMAR SINGAPORE THAILAND INDONESIA PHILIPPINES

POPULATION

(millions) 89.71 29.72 53.26 5.399 67.01 249.9 98.39

GDP/Capita

(USD)1910 10538 1200 55182 5778.98 3475 2765.08

# Startups

on angel.co226 636 37 1781 483 901 555

Startup Density

(#Startup / pop)2.52 21.40 0.69 329.88 7.21 3.61 5.64

DATA ANALYSIS

0

5.5

11

16.5

22

27.5

VIETNAM INDONESIA PHILIPPINES THAILAND MALAYSIA

STARTUP DENSITY

Potential

Vietnam is behind its surrounding startup ecosystems.

The Philippines is a comparable country by population,

demonstrating that Vietnam should be able to produce 2.2 times

more startups.

INTERPRETATION

TALENT POOL:

Graduating students per year : 400,000 (source)

Qualitatively, we observed talented students who were eager to

learn. A pattern emerged: Students who speak English fluently

perform better at launching successful startups. Not speaking

English at a sufficient level is a handicap to raise capital and to

compete at an international level. It is equally a handicap to find a

job in large corporations: unemployment among students is rising.

The 2014 EF English Proficiency Index confirmed this observation

listing Vietnam among the group of countries which have “low

proficiency” in English.

SUCCESS PATTERNS

Consistently, all success stories started with entrepreneurs

who studied abroad. Overall this is coherent with our

previous observations. The amount of capital needed to

bootstrap in Vietnam is low (around $10k - $30k). Most of

the successful businesses / founders we met invested in

simple local businesses or copy-cats they scaled locally.

They usually had a financial background and partnered

with Japanese, Korean or Singaporean investors.

According to Brad Feld, one of the founder of Techstars,

ecosystems need to develop a 20+ years vision at a

community level. Startup ecosystems are by nature

grassroots.

It is important to help the local entrepreneurial leaders.

We share this advice, and recommend a long term vision

versus a race to create startup Unicorns.

WHAT MAKES A GREAT

ECOSYSTEM?

2. HIGH LEVEL MAPPING

We used the Entrepreneur’s Journey (EJ) as a base for the Ecosystem mapping.

DISCOVER

HEALTHY STARTUP

ECOSYSTEM

DISCOVER

[ 1,000+ Startups]

[ 10,000+ Founders]

VIETNAM STARTUP

ECOSYSTEM

[WEAKNESSES]

Lack the volume of startups needed (goal is 1000+)

Lack of local capital to support scale

(mainly shifting to Singapore)

Vietnam is not capturing its champions! Leading

to a lack of success stories and mentors

There is a lack of educational structure

like GA / Galvanize in the ecosystem

Startup Weekends and other

community events exist, but need to increase

Few people are informed about the

potential of becoming an entrepreneur

National programs needed

Typically a good ecosystem has a solid base, and then builds on the top of it.

Vietnam as a country needs to focus on the base of its ecosystem.

The low English proficiency is weakening access to best practices and external

investors. Currently, Vietnam is developing an upside down startup

ecosystem, where VC and accelerators are numerous and compete for a low

volume of startups.

As a comparison, Singapore has 130x more startups per capita! Neither

Silicon Valley nor Singapore should be copied. Instead we recommend a long

term vision of 10 to 20 years to build: focusing on English and computer

science education; leveraging grassroots- and entrepreneur-led programs.

VIETNAM ECOSYSTEM

3. STARTUP ECOSYSTEM ANALYSIS

HarmfulHelpful

GROWING ECONOMY

LOW COST

CENTRAL TO THE REGION

TECH TALENT

LOW STARTUP DENSITY

LACK OF ENTREPRENEURIAL “LEADERS”

LOW LEVEL OF ENGLISH PROFICIENCY

LACK OF M&A / CAPITAL EXITS

SLOW INTERNET / NO LTE / LACK OF GOOD INFRA

LACK OF EXPERIENCED INVESTORS

ATTRACTIVE / FOREIGN TALENT

DIASPORA

ONE OF THE FASTEST GROWING

ECONOMY IN THE REGION

LARGE MARKET (90M+)

GROWING ECOSYSTEM (NEW SPACE)

JAPANESE / SINGAPOREAN / US /

AND AUSTRALIAN BUSINESS ANGELS

Strengths Weaknesses

Opportunities Threats

BRAIN DRAIN

MOVING TOO SLOW

STRENGTHS

Vietnam’s strength relies on the quality and volume of its

tech talent: developing at low cost ($500-$1000 per month).

The country is also a hub for Asia and has attractive and

active cities.

WEAKNESSES

The Vietnamese startup ecosystem is new (3 years ago

there was just one co-working space)! It is moving fast, but

it is important to focus on building a solid base of talent and

infrastructure currently lacking. Mainly broader access to

fast internet and English speaking talent.

THREATS

The country is already facing a brain drain. The opportunity

is to stay connected with the talent who left. The main threat

here is to move too slowly on important structural changes

needed and described as weaknesses.

OPPORTUNITIES

Clearly there is an opportunity to attract top talent to the

region to leverage and boost the local ecosystem. Digital

travelers could be a target but the slow network

infrastructure in more remote areas is an issue. As for larger

hubs, like HCMC and Hanoi, the main opportunity lies in

leveraging foreign capital and diaspora talent.

PLANACTION PLAN

PARTNER ANALYSIS

SECO EP Partners are concentrated around the Founder and Startup steps

of the ecosystem. As expected by the Macro analysis, they face a “startup

dealflow” issue.

Currently Vietnam is lacking a solid base. We will generally recommend to our

partners to explore the earliest stages to truly support the future of their

ecosystem.

CONCLUSION

CONCLUSION

Vietnam needs to focus on high volume startup education; starting with

a better english base. Subsequently attracting foreign investors and

startup talents.

Most of the partners have the challenge of attracting startups

that could return large exits. This is not sustainable and difficult at the

current stage of the ecosystem.

By focusing on the base and attracting successful mentors and digital

nomads, as well as leveraging the “vn diaspora,” VN will be able to do

great things. But all our partners need to build a 5 to 10 year vision …

BIBLIOGRAPHY

BOOKS TO READ

BIBLIOGRAPHY / SOURCES

http://castleventure.com/wp-content/uploads/2014/04/SW-White-Paper-Entrepreneurs-

http://www.paulgraham.com

http://www.startupschool.org

https://www.udacity.com/course/how-to-build-a-startup--ep245