Can Vietnam Create the Next Silicon Valley?
The Communist Party's multimillion-dollar plan to develop the world’s next tech hub.
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I’d come to Indochina Plaza, one of the newest malls in Hanoi, on a Saturday morning to attend Vietnam’s first startup fair. Despite the lack of heating and bare ceiling pipes, the room was filled with aspiring entrepreneurs hoping to connect with investors. The woman next to me carried a stack of papers: her business plan, she explained, eyes anxiously scanning my scribbled notes. “What’s your idea?” she asked me.
When it comes to high-tech breakthroughs,
Silicon Valley has long been the dominant model for the rest of the
world. But as the pace of American innovation slows, Asia is ramping up its own tech industry. Following the lead of China, Japan, and the “Asian tigers,” Vietnam recently launched the ambitious Silicon Valley Project:
a comprehensive plan to transform the country from a top producer of
electronic components to a major player in the global digital economy.
Sponsored by the Ministry of Science and Technology, the project aims to
launch internationally competitive technology firms and eventually turn
one of the country’s major cities—either Hanoi, Ho Chi Minh City, or Da Nang—into a tech hub.
“The big goal would be to have tech startups that can IPO in the U.S.,” Han Linh, the project’s executive coordinator, told me. “But that’s in maybe seven or eight years, best case.”
“It encourages Vietnamese developers that they can make a good product even with only one guy and very simple design,” said Quan Dinh, the founder of Digi-GPS, which produces products like SmartBike, a theft-prevention device for motorbikes that lets you text your motorbike to turn it off and track the bike via GPS. “It also teaches young entrepreneurs that they need to prepare for copyright and tax issues and communication to the press when [their products] become successful.”
For Vietnam, cultivating a startup scene where products like Flappy Bird can succeed represents a potential step up from being an offshore manufacturing hub for foreign companies like GE, which has a $61-million wind turbine parts factory in Hai Phong, and Intel, which has invested $1 billion in its Ho Chi Minh City chip plant. As Le Dinh Tinh, deputy director general of the Diplomatic Academy of Vietnam’s Institute for Foreign Policy and Strategic Studies, argued in a recent article, the country needs to “overcome the middle-income trap” by boosting its competitiveness in both agriculture and information technology. The Silicon Valley Project’s mission statement frames the stakes more starkly: “This is the time for Vietnam to join in the technology race. Countries which fail to change with this technology-driven world will fall into a vicious cycle of backwardness and poverty.”
Vietnam’s competitors in the “technology race”
had a significant head start. When Linh started working on the project
two years ago, he recalled, “the government had no idea what venture
capital was.” Under increasing pressure to modernize the
economy, however, Vietnam’s Communist government has adopted a series of
reforms, including allowing foreign investors to own larger shares in
local banks and privatizing state-owned enterprises. At its sixth plenum in 2012, the Central Committee of the Communist Party resolved to “encourage the private sector, in collaboration with state-sponsored sources, to set up new VC funds.”
The Silicon Valley Project takes a methodical
approach to building a startup ecosystem—one that includes offering
programs to help entrepreneurs develop their ideas and starting a
business accelerator. “We want to create something like [the American seed accelerator] Y Combinator,” Linh said. “Even in America, that’s quite new. We’re not so far behind.” According to Linh, the Ministry of Science and Technology has earmarked $3 million for the project, as well as $50 million per year for “the application of technology through startups” and $100 million to develop the tech industry through a joint project with the World Bank.
Starthub.vn, one of the websites funded by the
Silicon Valley Project, describes itself as the “heart of Vietnam’s
startup ecosystem.” Its database lists hundreds of tech startups, from
the Amazon-like Tiki.vn to the Yelp-like Foody.vn. Founder Anh-Minh Do expects
to feature at least 1,000 homegrown firms on his portal by the middle
of 2014. “Vietnam has seen quite a few startup successes. We’re kind of
in the third generation now,” he said.
Interest in startups is hardly unique to Vietnam. As in many other countries, from the U.S. to Ireland to Japan,
high unemployment rates have triggered renewed interest in the DIY
approach to business. But in Vietnam, that motivation is coupled with a
new entrepreneurial drive. In the words of Starthub founder Do, the
country is “more ambitious than its neighbors.” Today’s young
entrepreneurs grew up in the 1980s and 90s, as Vietnam was transitioning
from a centralized, state-run system to a
market economy. For the first time, people were allowed to own their own
businesses, and they took full advantage of that economic freedom—a
lesson absorbed by their children.
“Most Vietnamese young people want to be entrepreneurs,” said American entrepreneur Chris
Zobrist, founder of the START Center and Saigon Hub and an advisor to
the Silicon Valley Project. “A lot of their parents started businesses
that did really well, and that created an image in young people’s minds
that being an entrepreneur is a real path to success in life.”
Dinh, the founder of Digi-GPS, says young
Vietnamese are also taking their cues from the U.S., where “they see
successful people … take an idea and make it work.” This dynamic
contrasts sharply with the climate in China, where university graduates
tend to be risk-averse, seeking jobs at state-owned companies rather than setting up their own. And unlike India's
new wave of startups, many of which are founded by Americans, this boom
is led by young Vietnamese. At the startup fair I attended, many of the
speakers were expats. But I didn’t see a single Westerner in the
audience. New websites like Action.vn and TechDaily.vn cover the latest
startup happenings—with no English translation.
“A lot of people in America still think of
Vietnam as rice paddies,” said Aaron Everhart, one of the founders of
Hatch, the startup incubator that organized the fair. “But the startup
ecosystem is vibrant. There's potential here for a knowledge economy.”
I met Everhart and co-founder Dat Le Viet in
the Hatch office, located on the seventh floor of a Hanoi karaoke
lounge. Outside the window, traditional tube houses stood in winding
alleys, with a few outcroppings of tall buildings in the distance. The
small room, a jumble of laptops and iPads, spoke to Everhart’s vision of
the future.
“The strength of an economy is in small- and
medium-sized enterprises. But in Vietnam, these lack sustainability and
scalability,” Everhart said. “People have ideas, but they don’t
understand how to make a business last. So we thought there ought to be
an organization to help them.”
Dan Shupp, who worked for IBM in the U.S. and
China before moving to Ho Chi Minh City to start Free Range Technology,
conceded that interest in entrepreneurship in Vietnam was “at least as
strong as in the States” but pointed out that the country faces a
significant disadvantage in comparison with its larger neighbor to the
north.
“Vietnam is a small country that knows it’s a
player in a larger world, so people look to the outside a lot more. You
hold an event for entrepreneurs here, and you’re going to have a packed
house every single time,” he said. “But there’s just not as much
investment money here as in China.”
Moreover, while young Vietnamese might have both entrepreneurial drive and technical skills—high-school students recently outscored
their U.S. counterparts in math and science assessments—startups
struggle to succeed without access to experienced professionals.
“From a talent perspective, it’s going to be a
very big challenge. In Silicon Valley, you have a lot of people who have
successfully started companies. Here you don’t have that depth of
experience,” said Jonah Levey, an American who founded Vietnam Works,
the country’s first online job-recruitment website, in 2002.
But the Silicon Valley Project’s most serious
challenge may be even harder to resolve. While official backing makes
things easier in many ways, depending on the state to nurture a startup
culture poses its own risks. Chien Cong Nguyen, the founder of a
soon-to-launch network for sports fans called Parlayz, pointed to a recent ban on sharing news online as “the opposite of encouraging entrepreneurs.” Can
an initiative funded by a government known for restricting freedom of
speech succeed in a sector that’s all about unrestricted creativity?
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