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Young startups an age apart

Released at: 07:30, 13/10/2018

Young startups an age apart

Millennials in Vietnam's startup community tend to have their own way of doing things.

by Hong Nhung & Ngoc Lan

Two Vietnam-based logistics startups, Logivan and EcoTruck, had successfully raised $1.75 million and $1.7 million by end-August and mid-September, respectively, from a number of foreign investors. Founded in 2017 by Ms. Linh Pham, a former Goldman Sachs technology analyst and Cambridge University graduate, Logivan offers a marketplace that directly connects freight with truckers. The B2B logistics service providers EcoTruck, meanwhile, was also established a year ago by Mr. Le Hoang Anh, who earned a PhD and Master of Science (MS) in computer science from New York University. Prior to this bridge round it had already raised $300,000.

Vietnam’s startup community has attracted huge amounts of investment from both local and foreign private equity (PE) funds in recent years, with a total of 92 raising $291 million in 2017, according to data from the Topica Founder Institute (TFI). “Startups is a very trendy term in Vietnam these days and is used widely as a replacement for entrepreneurs or businesspeople, given Vietnam is an entrepreneurial country with 98 per cent of businesses being medium, small or micro,” said Ms. Ninh Do, Country Marketing Manager (Vietnam) at Google Asia Pacific. The passion among many Vietnamese millennials for business and novel, feasible ideas that attract interest from foreign investors are contributing to turning Vietnam into an incubator for startups with major potential.

Startup deals in Vietnam, by year

Source: TFI, 2018

Rising stars

Another successful case in calling for investment, Vntrip.vn, a Vietnamese online travel booking service provider founded in 2014, now has more than 11,000 hotels nationwide on its books that are updated with the best price. It completed fund raising of an undisclosed sum in August from Swiss investor IHAG Holding, which put its valuation at $45 million. It previously completed a Series A funding round of $3 million from the FengHe Group and Hancock Revocable Trust and also announced in 2017 it had raised up to $10 million in capital from Hendale Capital. 

On September 12, Vntrip.vn also announced it had completed the merger of Atadi.vn, one of the leading providers of cheap airfares in the country. “Vntrip.vn has successfully called for capital three times, indicating the trust of investors in the field of e-commerce in Vietnam in general and Vntrip.vn in particular,” said Mr. Le Dac Lam, Co-Founder and CEO of Vntrip.vn. “I want to build a Vietnamese company for local people to show that, in our market, Vietnamese have the ability to be able to build a business that can compete with big foreign firms.”

Vietnamese organic soya chain Soya Garden, meanwhile, successfully raised $880,000 in June from Egroup, an education-focused corporation, on the first season of the startup show “Vietnam Shark Tank”. It then signed a memorandum of understanding (MoU) for a strategic partnership with Singapore’s Mr. Bean Group, which has 65 retail outlets in Singapore, Japan and the Philippines. Soya Garden now has 15 outlets in major cities and this is anticipated to expand by 40 this year. “Young Vietnamese customers seem attracted by coffee and milk tea chains but an organic soya chain promises to be a breath of fresh air in the food and beverage (F&B) industry,” said 29-year-old Mr. Hoang Anh Tuan, Founder and CEO of Soya Garden.

While not having a private startup, Ms. Le Canh Bich Hanh, CEO of Vascara, a popular Vietnamese shoe, bag and accessories brand for local women, was honored as a prominent young entrepreneur last year. As CEO for six years at Vascara, she was behind its impressive business performance in 2017, when revenue grew 60 per cent against 2016 and outlet numbers rose from 40 to 100. Online sales soared five-fold year-on-year in the fourth quarter of 2017 and it opened an additional 15 stores in the first half of this year, Ms. Hanh revealed.

Growing the private sector

Vietnam is now home to more than 3,000 startups in sectors such as e-commerce, healthcare, fintech, and food tech, according to TFI. In the first nine months of this year there were many that completed fund raising from investors. It’s worth noting that all founders and CEOs are millennials (Generation Y), born between 1980 and 1998. “Millennials are quite different from the previous generation,” said Mr. Lam. “We have Vietnamese cultural ideas applied in business and they innovate and stay abreast of trends around the world to develop businesses.”

In the context of global economic integration and the ongoing digital revolution worldwide, Vietnamese millennial entrepreneurs are in the “golden age” of development. “The ability to master technology and foreign languages together with flexibility and adaptability are significant strengths that help them approach the world,” said Mr. Tran Bang Viet, Senior Consultant at Dong A Solutions. “Great ambition and a fearless mentality help them get going again right away after any unexpected difficulties, without any pause. These factors help them secure success.”

There is nothing more important for the long-term health of Vietnam’s economy than the growth of startups and small and medium-sized enterprises (SMEs), according to Mr. Jason Lusk, Program Director at Mekong Innovative Startups in Tourism (MIST). “Today’s small employers are tomorrow’s large employers,” he said. “And home-grown companies are less likely to cross borders in search of cheaper labor as per capita income grows.” 

No pain, no gain

In a report on a survey on Vietnam’s Generation Y released in late 2017, the Navigos Group noted that many young workers in the country don’t feel any special attachment to their organization. This leads to multiple regular job changes, while employers are finding it more difficult and more expensive to recruit and train new employees and see a low level of engagement with their organization among Generation Y. Among respondents seeking to start a business, 66 per cent said the biggest reason was a desire to become successful and wealthy.

Generation Y opinions on careers

Source: Navigos, 2017

There is, it seems, a lack of understanding about millennials in Vietnam and many misunderstandings about startups. Ms. Ninh from Google said that the strength of millennials lies in the characteristics of Vietnamese people: being forward-looking and willing to strive for a better life and better future. “We are creative and flexible and we learn quickly to adapt to changes,” she said. “Sometimes we leapfrog trends to move to the latest. I think, however, that weaknesses also stem from this, like a lack of patience in laying concrete foundations and the absence of a long-term vision.” 

The success rate for Vietnamese startups is still quite low, at 3-5 per cent, according to the Vietnam Chamber of Commerce and Industry (VCCI), and most last about a year. Dezan Shira and Associates Vietnam identified the major challenges facing Vietnam’s startup community as being a lack of talented personnel and funding, continued small scale, and slow regulatory reform.

Mr. Lam pointed out that the previous generation’s way of work was influenced by traditional thinking, so they have the ability to build better relationships. “Many people succeed thanks to good relationships,” he said. “Millennials, meanwhile, have little concept of building relationships and only focus on their own abilities.” 

“The early bird gets the worm, as they say, and the faster you are the easier it is to be first in the market and set the trend,” Ms. Ninh said. “There seems to be a fine line between adopt-localize and copy-paste and it seems to be very difficult to differentiate these days, however, and this also hinders the creativity and innovation of Vietnam’s startup and entrepreneur community.”

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