Potential needs to be awakened
One of the most important goals for developing an innovative startup is to create a favourable environment that encourages investors and funds to seek cooperation and investment in businesses with potential for rapid growth based on the exploitation of intellectual property, new technologies and innovative business ideas. Startup development policies have been confirmed in several documents by the Party and State, which stress the role of the Government in synchronising a legal framework and policies needed to support startup activities and startup investments.
Currently, laws have a number of provisions related to startups, science and technology businesses and innovation. A series of national programmes and projects related to supporting startups have been launched for incubating, incubation consultancy, training and developing the commercialisation of technology supporting loans to startup businesses.
Vietnam has witnessed the presence of more than 20 venture capital funds active in providing foreign investment for startups, such as IDG Ventures, CyberAgent Ventures and VinaCapital. However, since the startup market in Vietnam only stands at "potential", tax incentives are not adequate and with the lack of a clear legal environment, these funds only opened representative offices in the country to seek investments rather than establish a fund with 100% foreign capital in Vietnam.
Recently, many funds have realised the potential of startup businesses in Vietnam, resulting in an increased number of funds likely to make investments. In February 2016, Triip.me, a startup business, mobilised capital of VND10 billion; in March MoMo received VND600 billion; in May, Gotit received VND200 billion and Vntrip.vn received nearly VND70 billion in July. Such investments have opened up a bright future for startup and innovative activities in the country.
In 2016, the country had 21 incubators and seven business boosting organisations. The incubators support startup ideas and technologies, while business promotion organisations bring comprehensive support, training in business skills, mentoring programmes and investment connections for potential startup businesses. Startup coaches and mentors have also formed support networks in Ho Chi Minh City and Hanoi.
Many activities in support of startup
In the past, there was a series of startup and startup ecosystem connection events in the country held by relevant units with active exchange of information on Facebook’s social network, namely Launch, the current largest startup network in Vietnam, with more than 30,000 members. A series of training courses and communication campaigns have been held to promote startup culture and awareness on opportunities and a culture of accepting risks in running a business. There are other international programmes and projects such as the Vietnam-Finland Innovation Partnership Programme (IPP), the Fostering Innovation through Research, Science and Technology (FIRST) project and Support to the Innovation and Development of Business Incubators Policy (BIPP).
In addition, Vietnam Joint Stock Commercial Bank for Industry and Trade and the Joint Stock Commercial Bank for Foreign Trade of Vietnam supported the organisation of the national startup ecosystem festival (Techfest) held in mid-December 2016 to seek cooperation with startups in the field of financial technology (fin-tech).
Prime Minister Nguyen Xuan Phuc launches a startup programme for youngsters hosted by the Ho Chi Minh Communist Youth Union. (Credit: thanhnien.vn)
It can be said that connecting components of startup ecosystem has not been confined to domestic connection but heading to support businesses in commercialising their products and services in international markets. Moreover, Vietnam’s start-up ecosystem is still in its initial steps, requiring international connections to learn from efficient startup and startup support models in the world. Especially, since venture capital in Vietnam is limited, international connections are the only way to mobilise venture capital from the region and the world.
Uninstalling barriers, promoting potentials
Currently, there is no official definition of a startup or startup ecosystem and their components in the legal documents. This is the cause for the unfinished building of specific provisions on the issue of startup to support startup ecosystem development.
On the other hand, the current provisions on supporting science and technology businesses on land use and taxation are not really reasonable, meanwhile current programmes and projects mostly focus on the stage of researching and applying technologies, without concern for the projects’ post-finished stage to introduce such technologies and products to the market.
The need to attract investment for startups is great, but investment is risky, requiring initial funding from the State to create platforms to attract other sources. In addition, at present, the current laws are insufficient to facilitate growth of forms of startup investment. The startup investment funds and intermediaries for mobilising capital for startup have yet to be recognised in the legal text.
In addition, Vietnam has not yet developed regulations on incentives for investors (both individuals and organisations), leading to requirements on investment conditions from several foreign investors that Vietnam’s startups must carry out business establishment registration abroad, mostly in Singapore and Hong Kong (China).
Moreover, administrative procedures for investment certificates for foreign investment in Vietnam are still cumbersome and incompatible with the nature of "venture capital", while there are no visa arrangements to encourage startup investors, experts and businesses around the world to come to Vietnam to exchange and make investment connections for improvement of both the qualification and competence of a domestic startup ecosystem.
In the past 10 years, Vietnam had several successful startups, such as VNG, Tiki, VC Corp and Coc Coc. In particular, the Vietnam-Finland IPP has invited international experts to train 12 startup coaches and 20 startup lecturers at faculties in universities across the country. In addition to that, newly graduated students are considered abundant human resources for startup businesses. Each year, there are about 400,000 graduates while Vietnam has only around 1,500 startup businesses, showing that human resources have not yet met expectations and corresponding potential.
The reason is that technological universities in Vietnam only focus on issues related to technology, not to equip students with knowledge needed in the area of starting a business, such as business planning, market demand assessment and calling for investment. Therefore, many students cannot immediately start a business but need more time to work before getting involved in startup activities. The State should have additional policies to support and attract more investors, while making use of potential in the startup ecosystem and creating a favourable environment for startup business development.