For newcomers to Vietnam, impressed by the scores of companies with their engineering teams and outsourcing wings housed in the two major cities of Ha Noi and Ho Chi Minh City, Vietnam somehow seems like a safe bet if you’re looking at startup and technology. And yet, folks who have worked in Vietnam for the past decade know that Vietnam has perpetually been in a state of great potential, while the rest of the region has sped past it on a macroeconomic level. Indeed, enthusiasm for Vietnam should be tempered with an awareness of its history.

When outsiders are confronted with the revelation that a large Vietnamese engineering team was behind the rise of Misfit Wearables, the company acquired by Fossil in 2015 for $260 million, Vietnam looks much more appealing. And yet, claims that Vietnam as the next Silicon Valley are exaggerations. To be fair, no ecosystem can hold a candle to the Valley, besides China.

But Vietnam does have bright spots. VNG, a gaming, media and communications focused company are rumored to have a unicorn valuation. Momo, a local payments and online wallet company, raised an unprecedented $28 million from Standard Chartered and Goldman Sachs. The list goes on. There are a handful of these companies that can compete at a global or regional level. But these bright spots do not necessarily signal a healthy ecosystem, and are anomalies borne of the aggressive culture, technical background, and relationships unique to themselves and Vietnam.

Vietnam’s M&A frontiers

One of the biggest economic shifts in Vietnam right now is the steady privatization of state-owned businesses. But an even larger macro-trend is taking place, a rise in mergers and acquisitions in traditional sectors from real estate to retail. Historically, the technology sector has not had enough consolidation. This means Vietnam is full of mid-sized players, but rarely will you find large players like VNG. If Vietnamese tech companies follow the example of traditional industries, giants will come. Indeed, if Vietnamese tech companies don’t go that route, they may sink into irrelevance.

It’s this lack of consolidation that indicates an ecosystem that is too unwieldy, bloated and not nimble enough to handle the oncoming storm of companies abroad. But there is hope yet, consolidation and Vietnam’s stealthy startups.

Hiding in the shadows

When you take a step back from Vietnam, and look at the best performing companies, you will likely find that the least loud companies and founders are the best performing ones. This is the best kept secret of Vietnam’s startup ecosystem. The best startups are not borne of the ecosystem. They are born of isolated events, maybe a group of Ph.D.’s from the U.S. come together and develop a new technology cursorily connected to Vietnam. Maybe a former Facebook engineer decides to leave Facebook and start his own company. Maybe a group of engineers and designers who met in Singapore go onto start an app company. Maybe a pair of strangers, with a strategic mindset and financial set, go on to build a gaming company.

It means these isolated events cannot be replicated, nor successfully accelerated, but is this really so different from any other ecosystem? The unique point here is that Vietnamese successful companies don’t participate in the ecosystem, they hide from it. They don’t impact the ecosystem and the ecosystem doesn’t impact them. It isn’t replicable, but these companies are findable.

Tread carefully through muddy waters

At the end of the day, it’s important to approach Vietnam with a realist lens. Progress in Vietnam happens in steady paces, not in leaps and bounds. Although the government is getting more involved in the startup ecosystem, like via a new $45 million fund from Ho Chi Minh City, we need to remember that these systemic signals, from large conferences to funding announcements are potential noise in a maturing and complex market.

This is why Vietnam is not punching above its weight. The companies that Vietnam produces exist in their own bubble, surviving despite a thorny system around them. They leverage unique relationships, technologies, and people that only they have access to. It’s also the interesting thing about Vietnam. Would Misfit Wearables, founded by a Vietnamese-American founder with strong connections to Apple’s former CEO and to his home country Vietnam likely build his company anywhere else? But can anyone else replicate the success of Misfit Wearables? Likely not.

There is no doubt that Vietnam can produce companies of Misfit and VNG quality and size, but there’s always a grain of salt. But it also makes this startup ecosystem so fascinating to watch.

Leave a Reply