The nation is rapidly emerging as a regional magnet for attracting investment in start-ups, with this being driven by a convergence of a young consumer and workforce base, as well as increasing demands for digital technology moving into the post-pandemic period.
According to details given by Vu Quoc Huy, director of the National Innovation Centre (NIC), the nation enjoyed robust development in terms of start-up firms last year and was on track to become the next main growth driver in Southeast Asia and play a vital role in the wider region’s start-up golden triangle.
He cited statistics which highlight investment into start-ups hitting a record high of US$1.4 billion last year, despite the impact of the COVID-19 and strict social distancing measures put in place, duly breaking the previous record of US$874 million set in 2019.
The number of new businesses set up during the initial four months of the year increased by 12.3% over the same period last year, which combined with positive growth momentum in foreign investment inflow, clearly demonstrates the country’s large potential for the development of the start-up ecosystem, he said.
He therefore anticipates that investment in start-ups will double over the next three years.
Boasting a crowd of young consumers and a workforce that has a high demand for digital technology moving into the post-pandemic period, the country’s start-up market is predicted to take off over the next few years. In line with this, the nation boasts many demographic advantages, with roughly 70% of the national population is below 35, whilst the literacy rate of 95.4% is among the highest in Asia.
Domestic consumption is anticipated to grow at an annual rate of 20%, which would make the country a vital driver of Asia’s consumer market over the next decade. The middle-class population is also growing at the fastest pace in Southeast Asia, accounting for approximately 40% of people today, up from just 10% in 2020. By 2030, the middle-class population is expected to make up 75%.
There has also been a noticeable increase in digital consumers, with more than eight million being added from the beginning of the pandemic to the first half of 2021, with 55% coming from non-urban areas.
Moreover, the Vietnamese Internet economy was estimated to be at US$21 billion in 2021, up by 31%, with this largely being driven by the e-commerce market, which grew by 53%. Indeed, Internet economy is forecast to hit US$57 billion with a compound annual growth rate of 29%.
Kim Ngoc Thanh Nga, head of the NIC’s Ecosystem Development Department, said that the country would develop at an unprecedented rate over the next decade. This will primarily be fueled by high Internet penetration, a huge domestic market, and innovative ideas, which can be expanded abroad through the presence of funds to promote start-up development.
On May 30, venture fund Golden Gate Ventures (GGV) and NIC signed a co-operation agreement aimed at strengthening the long-term relationship that exists between the two sides and provide support to the development of the local start-up community and innovation ecosystem.
Accordingly, GGV will seek to increase its investment in the Vietnamese market, promote exchanges, encourage new ideas and innovations, and act as a catalyst to promote the position of Vietnamese start-ups in the region.
GGV has since announced the opening of two new offices in Hanoi and Ho Chi Minh City, as well as its offices in Singapore and Indonesia, affirming that these three countries form a Southeast Asia start-up golden triangle.
Golden Gate Ventures is a venture capital firm investing across Southeast Asia. Since 2011, the firm has launched various funds and invested in more than 60 firms.