20:39 (GMT +7) - Friday 18/10/2019

Business

Looking outwards from the outset

Released at: 16:50, 22/09/2019

Looking outwards from the outset

Photo: VET Magazine

Startups with global potential from the beginning, or "Global Born", are an emerging trend in Vietnam's startup ecosystem.

by Ngoc Lan & Hoang An

Vietnam’s startup ecosystem has grown impressively in recent years. The country had about 400 in 2012, which rose more than four-fold by 2015, to 1,800, and after major development in the 2017-2018 period now stand at 3,000, according to the Ministry of Planning and Investment (MPI). 

Local startups are also entering into the global digital economy with their innovations and breakthroughs. Mr. Robert McClelland, Head of the Management Department under the School of Business and Management at RMIT Vietnam, said that in the context of Vietnamese enterprises becoming more active in the digital economy, the concept of global startups, or “Global Born”, is now an emerging trend.

Positive signs

Global Born startups are defined as “a venture launched to exploit a global niche from the first day of its operations; a powerful group with great potential in international business,” according to Dr. Nguyen Quang Trung from RMIT Vietnam. Based on recent rankings from many international organizations, he noted that there was not much in the way of improvement to the country’s competitiveness, ease of doing business, corruption perception index, and e-government, but added that if Vietnam maintained its e-government rankings at under 30 then other elements may improve. The country’s high ranking in the latest Global Innovation Index 2019, where it was in the top 50, and in the digital index are positive signs for the country participating in the global economy, he explained.

Mr. McClelland pointed out that the global digital economy is estimated to be worth $11.5 trillion already and will continue to grow in the future. “According to the World Bank, success in Vietnam has already been achieved in disruptive ride-hailing services, e-commerce platforms, accommodation platforms, fintech, and payment solutions companies,” he added. “Many of these firms are immediately connecting with customers and suppliers around the world.”

Dr. Nguyen Quan, former Minister of Ministry of Science and Technology, said that although there are still many challenges in developing a startup, the ecosystem in Vietnam has improved a great deal due to prompt action from government and proactive approaches being adopted by businesses. According to his own research, there are three major policies in Vietnam for becoming a startup country. 

First, international economic integration is transforming to the digital economy within Industry 4.0. While the e-government project in 2007 failed, it was restarted in 2018 with the goal of the country’s e-government rankings improving over the next few years. Second, Vietnam is interested in information and communications technologies (ICT). It has among the best telecommunications infrastructure in the region, with a range of national-scale data already digitized. At this pace, the country will have even better ICT infrastructure in the future. And third, the legal framework for ICT, including the Law on Information Technology, the Law on Internet Information Security, and the Law on Cyber Security, is in place and there will be certain impacts on this framework from digital transformation by businesses.

He added that the National Innovation Center is being developed and is expected to be the nucleus for promoting the country’s economic development, based on innovation and science and technology in the context of rapidly changing Industry 4.0. “It will prioritize work on smart factories, digital content, network security, smart cities, and environmental technologies,” he said.

He also noted examples of small and medium-sized enterprises (SMEs) developing in-house research and development centers, as Vingroup and Rang Dong have also done. The upcoming policy around venture capital will also encourage more foreign venture capital firms to invest in Vietnamese startups.

To overcome

Many difficulties still face Vietnamese startups in reaching a global scale. They still lack experience in a market economy while the country itself is still poor, so setting up a venture capital fund for startups is problematic and local credit institutions have lingering concerns about investing in startups. The “brain drain” from Vietnam to overseas also presents challenges for its startup ecosystem. 

According to Dr. Quan, Vietnamese startups have talent but they also face obstacles due to Vietnam not having a full and complete legal framework for startup investment, especially venture capital. Few local investors choose to pour funds into Vietnamese startups, while many foreign venture capital funds are willing to do so through business registration in Thailand, Singapore, Hong Kong, or elsewhere, where profits will head. This puts Vietnam at risk of losing substantial tax revenues if these businesses succeed abroad.

He said the government should therefore complete the law for startups as soon as possible, especially regarding venture capital. Solutions would include setting up a venture capital fund that uses the State budget in the early stages, to learn about operational mechanisms in venture capital and then issue regulations to guide the establishment and operation of private venture capital funds. “When these State funds are operating stably, they can divest and allow the private arena to support startups,” he explained.

Meanwhile, attracting international startups to Vietnam would also help the ecosystem become developed and perfected. Mr. Shannon Leahy, Trade Commissioner of Australia in Vietnam, said the greatest challenge for a business when entering Vietnam is finding a suitable strategic partner and a leadership team that understands the culture and way of working in the country. “There are many enterprises with 100 per cent foreign investment now in Vietnam, so this problem becomes even more pressing,” he said.

Mr. Vu Minh Tri, former CEO of a number of tech companies in Vietnam, including Sony Ericsson Vietnam, Yahoo Vietnam, and Microsoft Vietnam, and Vice President of Cloud Services at the VNG Corporation, shared five common factors of companies that can be successful on a global scale: addressing global problems, scaling quickly, growing with the ecosystem, going beyond innovation, and choosing the best of all worlds. Through the business story of Kodak and Instagram, he also encouraged startups to break from the boundaries of conventional innovation.

For those who ask about starting a Born Global company, Dr. Trung gives a set of questions extracted from his research, “Born Global: Do you have what it takes?” These include a passion for adventure, an international outlook and international entrepreneurial orientation, a differentiation strategy, good health, comfort with risks, people skills, a willingness to embrace failure, an ability to leverage advanced information and communications technology, the right formula for corporate governance, and decision-making power. 

User comment (0)

Send comment

Latest

Vietnam HR Awards Forum 2019 set for November in HCMC
Vietnam HR Awards Forum 2019 set for November in HCMC