No points for guessing what the Vietnam Silicon Valley (VSV).- the government-backed accelerator founded in 2013 – seeks to achieve. Like the name indicates, it aims to pitch the Southeast Asian startup ecosystem on the global digital map.
Vietnam, whose startup ecosystem is less than a decade old, has produced a handful of successful enterprises mostly without the active support of government.
The VSV initiative seeks to build the ecosystem and give a direction to the fragmented venture capital market.
While its intentions are ambitious and noble, active ecosystem players are not too enthused.
Execution is the only thing that matters, said experts, while discussing the future of the country’s ecosystem at a recent “Startup School” event.
Hosted by Nguyen Thanh Nhan, a Vietnamese engineer currently working with tech giant Google, in a packed university hall attended by over 100 young Vietnamese, the panel argued that while the country has robust talent and a vibrant economy, its startup ecosystem is nowhere near that of the Silicon Valley.
Filling the Gap
VSV typically invests $10,000-20,000 in startups for 5-10 per cent equity stake.
“By the time that VSV Accelerator (the project’s business bootcamp) was introduced in 2014, and even currently, no Vietnamese organisations had done such investments,” said Han Ngoc Tuan Linh, executive coordinator of the project.
“Topica (an education platform) was born before us and created successful grads, but it focused on training. Meanwhile, incubator HATCH! focuses on providing mentorship before young startups can get to the next level. In late 2015, 500 Startups entered our market but their investments were quite remarkable for Vietnamese early-stage startups, although they are just seed funding. They tend to invest in companies that have already created traction, those equivalent to our bootcamp grads,” he explained.
Thus, VSV was introduced to fill that gap.
Does VSV help?
The local startup community thinks it is great news that the government is paying attention to this space. But they also question the effectiveness of the programme. Will it be enough, they ask.
The project has been operational for more than two years, but it still remains to be seen if VSV will facilitate subsequent rounds of funding for its portfolio. Vietnam’s tech industry is, in fact, looking for more later stage investors to actively participate in the ecosystem.
In a recent interaction with DEALSTREETASIA, Truong Manh Quan, founder and CEO of 500 Startups-backed marketing platform Beeketing, observed that “the funding scheme of the project (VSV) makes the valuation of startups unfair and unattractive.”
“Also, the project is run by entrepreneurs from established, large corporations instead of those close to the startup community. At 500 Startups and other accelerators in the US, mentors are entrepreneurs who have exited several startups and come back to join the programmes. In Vietnam, there are people like that, Binh Tran and Eddie Thai (the new investment partners of 500 Startups). If those guys are invited to run such initiatives, the results will be achieved faster,” he advocated.
Sponsored by the Ministry of Science and Technology, the VSV is run by Hanoi-based investment consultancy firm ATV, where Linh is an executive.
“We think the foremost and important step in building an innovation ecosystem is to nurture the growth of startups. When the technology ministry talked about forming an innovation and startup ecosystem, ATV was really excited. This is a chance for us to be a forerunner in supporting startups as well as propose appropriate changes in investment policies to the government,” Linh clarified.
Adding depth and connectivity to the market
Prior to the launch of VSV, Vietnam’s startup space was less than a decade old and very fragmented. Investment in startups has been long associated with IDG Ventures, which is much connected to Global Shapers Vietnam and Launch (a social media platform for startups), he added.
“However, there are also new companies that are doing the same but do not really understand the concept of startup, hence do not realise there are such communities to join. So one of the targets when ATV forged partnership with the government is to diversify participants in the ecosystem.”
As per funding, the grants that VSV has invested in its startups come from the private sector, operated just like a venture capital firm. “The differentiated factor of VSV Accelerator is that with the sponsorship from the ministry, we can easily work with experts from various countries to learn from their prolific experience in building the ecosystem,” Linh said.
Mentors at VSV Accelerator are mostly executives at established firms. The project believes that by diversifying the background of mentors, startups will have the chance to learn more about strategy building and management, because technology is just a part of the business.
VSV Accelerator has invested in 15 startups, including six from the 2015 bootcamp, which has not ended and called out for external investment yet. Linh revealed that four from the 2014 bootcamp had raised funding from VCs, most recently social app for food Lozi, which bagged 7-digit series A investment from Golden Gate Ventures and Japan’s DesignOne.
A representative from Lozi told DEALSTREETASIA that although the size of the VSV was not large, the startup had enjoyed major support in terms of connection with mentors and investors, and legal procedures.
While Vietnam may not be anywhere close to building another Silicon Valley soon, its entrepreneurs would stand to benefit from exchange programmes with the US tech hub.
While the VSV has just recently worked to address this piece, Nhan and another angel investors have already contributed to the Dream Project Incubator programme, which helps Vietnamese startup founders go to the US every year to be “better thinkers and doers” and learn from the Valley ecosystem.
Likening Vietnamese startups to “gold hidden in sand”, Nhan said, it would take time to mine them and create successful startups.