While 2020 will go down as one of the most grueling years in recent human history, there is positivity in Vietnam’s startup industry. In advance of the annual Saigon Startup Year-End Party on January 17, Saigoneer sat down with some local VCs to look back at the Vietnamese startup scene in 2020, and how things are shaping up for 2021.

This stems from the country’s world-class handling of the COVID-19 pandemic, which allowed many people to carry on their business in a relatively normal fashion, in addition to spurring economic growth while most nations witnessed regression. At the start of the outbreak in Vietnam, however, it wasn’t clear which direction things would go in.

“As COVID-19 hit early in the year, just like the rest of the world, everyone was scrambling to understand what was going on, how would it impact them and their stakeholders,” says Eddie Thai, General Partner at 500 Startups. “So investment activity was largely frozen and existing investors were sort of circling the wagons around their existing founders.”

Within a few months it became clear that Vietnam had a handle on the public health situation, and this allowed both investors and entrepreneurs to resume their work, though with the caveat that it would be difficult or impossible for outside investors to actually visit the country. “As an example, Q3 was our busiest investing period ever in terms of deals; we closed 11 investments in that quarter,” Thai shared.

Certain parts of the startup ecosystem, particularly any company working in tourism or those farther down the food chain that relied on revenue from tourism-related activities, were severely impacted by the pandemic, a problem that will continue through 2021, but industries such as food delivery, e-commerce, and health and education technology have boomed.

Eddie Thai speaking at a 500 Startups event.

Thai also found that the disruptions caused by COVID-19 actually pushed some people to enter the startup scene: “Lots of individuals got to reassess where they were, what they wanted to do going forward and I actually saw a lot of people start to explore setting up their own company… Obviously in uncertain times some people get risk-averse… but others are like ‘Hey, actually, the world is changing, life is short,’ whatever thoughts go through their head and they decide to try something new.”

Quynh Vo, Program Director at Zone Startups Vietnam, saw a lot of good in 2020, and has high hopes for 2021 as well. “Although we didn’t receive a lot of international investors like in other years, still we closed many big deals, and foreign investors were actually more active: they hired representatives here, they opened offices here, and they realized it’s easy to meet with founders online,” she shared. “Investors and startups also realized how important incubators and accelerators are.”

Pandemic winners

It’s a given in the startup world that many ventures will fail, and the pandemic certainly didn’t change that, but it did create conditions, especially in Vietnam, for certain outfits to thrive.

“Healthcare and online entertainment have done very well, with one company in our portfolio posting 300% growth in 2020,” Vo said. “Generally it was very good for healthcare and education, and some companies didn’t even need to spend a lot of money on market expansion because customers came to them.”

Moving into 2021, she expects to see significant growth in fintech and property tech, in addition to a wave of international investors and startups once regular business travel resumes.

The year ahead

“There will be continuing investment and new ventures launched; there have been a few funds launched in the last 12–18 months focused on Vietnam, and they will help spur another wave of prospective investments,” Thai explained. “In terms of segments, I think it will be continuing what’s been attractive around the world: ed-tech, healthcare tech, productivity and remote work solutions, things like that.”

He also noticed the beginning of a move up the startup ladder, though it’s unclear whether that has been spurred by the pandemic.

“Anytime an economy goes digital, there are some things that always come first: content, digital wallets, e-commerce players, etc.,” Thai said. “Ten years ago there was VnExpress and VNG, to Lazada and Tiki fighting it out now or Momo and VnPay competing, that’s been a lot of the focus in the last several years.”

Now there is growing interest in what Thai calls second-generation categories such as fintech, agriculture tech and healthcare, which are more complicated but much-needed for a market to mature.

Founders and startups are also adjusting to the global financial belt-tightening caused by the pandemic, though Vietnamese startups have a track record for operating with limited budgets.

Quynh, meanwhile, hopes to see Vietnamese startups continue to learn from more experienced international investors and entrepreneurs.

“Vietnam’s market is big so it’s easy for Vietnamese entrepreneurs to start something, but the gap between developed countries and Vietnam is still huge, so we really welcome international players to come here and erase that gap,” she said. “Some may see foreign entrepreneurs as a threat, but they will help create a good marketplace for startups who are going to expand into international markets.”

Quynh Vo at Zone Startup's Founder Night.

In fact, Thai has heard from some investors that a reluctance to expand internationally is a notable shortcoming among Vietnamese startups: “It seems like a smaller portion of Vietnamese entrepreneurs are aggressively thinking about international expansion. I think they have an opportunity to enter the Philippines or Indonesia, but they want to focus on Vietnam, and that’s fine. We support whatever outcome they desire.”

Quynh adds that it makes sense for Vietnamese entrepreneurs to avoid expanding too rapidly, especially given the size of the domestic market, though she noted that one company in their program did successfully expand to India in 2019, proving that it can be done.

Party time

Given the overall success of Vietnam’s startup community in 2020, and strong potential for a good 2021, founders, investors and entrepreneurs could be forgiven for celebrating.

That will take place in Saigon on Sunday, January 17 at Zumwhere on Ngo Thoi Nhiem Street, under the banner of the fourth Saigon Startup Year-End Party, under the theme ‘resilience.’ While previous editions welcomed international visitors, that won’t be the case this time, given COVID-19 flight restrictions, but organizers still aim to have around 400 founders and investors from across sectors.

Zone Startups Vietnam is one of the event’s supporters, and Quynh is excited for its appearance on the calendar. “It’s a playground for all of the startups,” she shared. “So at the end of the year each company has their own year-end party, but we want to gather all of the ecosystem players in the same place. It’s not a showcase for any particular company, but for everyone to come, meet up, and make some elevator pitches. We didn’t have a lot of big gatherings last year, so it will be good for everyone to come together for the party.”  

Those interested can buy a ticket here, and expect to enjoy a snapshot of the ecosystem in 2020 with panel talks from founders, while also meeting members of the community to share stories of 2020 and visions for 2021. A pre-party roundtable starts at 5:30pm, while free-flow beer and food starts at 7pm.

Highlights from a previous year-end party.

Saigoneer is the media sponsor of the Saigon Startup Year-End Party.