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How to groom Vietnamese ‘non-rockstar’ startups into rockstars? Contemplating an ecosystem beyond typical VC-supported startups

The first story coming out of Swiss EP Vietnam Partner Summit 2022 at Phu Quoc island in March will look into a plethora of startups that are often far away from the VC spotlight.

The first story coming out of Swiss EP Vietnam Partner Summit 2022 at Phu Quoc island in March will look into a plethora of startups that are often far away from the VC spotlight. They include women-led businesses, early-stage startup projects at universities, innovative SMEs, and high-tech startups with regard to hardware and clean energy.

Given that the Vietnamese startup ecosystem has roughly 3,800 startups, only around 100 companies are able to receive funding from venture capital firms (VCs) each year. The remaining 3,700 startups are nowhere to be found in the media, which totally makes sense. The question is did we fail to grasp their potential due to our unconscious biases and old-fashioned mindsets?

At the Summit, Swiss EP’s hawk-eyed partner organizations (POs) sought to bring those non-rockstar agents to the central stage, while realizing the need to improve their own capacity and revamp supporting programs to effectively nurture startups within a nascent but burgeoning ecosystem.

Designing supporting programs with a gender lens

In Swiss EP’s most recent Progress Report for Vietnam 2022, looking at results from July 1, through December 31, 2021, 35% of the 243 startups supported by our POs had female founders, but only 6% of the total capital landed in companies with at least one female founder. This number is actually better than the world average, which stood at 2.8% in 2019 and fell to only 2.3% in 2020, Crunchbase figures show.

Meanwhile, a study by BCG and MassChallenge found that female-led businesses generated 12% higher revenues annually, using an average of a third less capital than male-led startups.

“Female founders are often less confident than male founders when it comes to pitching. During fundraising meetings with investors, they also receive more prevention questions rather than promotion questions as compared to that of male founders, remarkably affecting investment decisions of VCs,” Hien Tu, founder and CEO of non-profit social enterprise Women's Startup and Entrepreneurship Support Initiative (WISE), explained at the conference. “But if VCs reevaluate those startups without biases and encourage the participation of women in the founding team, it is likely that their portfolio will perform much better.”

Some other reasons contribute to the mix, including the modest number of female investors, mentors, and decision-makers, as well as the low percentage of women joining startups as compared to that of traditional SME models.

VIISA, a Vietnam-based accelerator cum seed-stage fund, takes a different approach as the firm is reported to have nearly 40% of its portfolio startups involving female founders.

“We look at their problems as founders’ problems, regardless of genders,” stated Phuc Nguyen, senior program manager at VIISA. “Those are specific life issues that each founder faces. Our role is to empathize with them, provide tailor-made assistance and keep on learning to accompany them to overcome their own gender-associated challenges.”

Matchmaking corporates and startups

Another group of startups that are underrepresented is hardware developers, which often find it hard to attract funding from VCs due to long product development cycles, high technical and execution risks, and high early-on capital requirements.

“Most startups incubated at our center involve hardware for chipmaking or IoT devices,” said Ly Phan, deputy director at Saigon Hi-Tech Park Incubation Center (SHTP-IC). “They are all at the death valley stage, hence, struggling to raise capital.”

This issue was also rampant in startup projects arising from technological centers such as Information Technology Park of Vietnam National University Ho Chi Minh City (ITP) or Hanoi University of Science and Technology (HUST).

Addressing the problem, Dung Nguyen, CEO of BK Holdings (which is established under HUST), suggested the triple helix model of innovation which refers to a set of interactions among universities, government and the industry to employ technology transfer as an attempt to bring industrial innovation closer to public R&D.

“Universities’ greatest assets are talent and science and technology research results,” said Nguyen. “Instead of constantly poking around for venture funds, universities should assess and leverage the true value of those assets as well as connect with appropriate corporate partners to take advantage of their abundant capital resources, expertise, and customer base.”

This links to the open innovation concept of which our POs, including New Energy Nexus (a nonprofit organization supporting clean energy entrepreneurs), TMA Solutions (a big company in software outsourcing), NATEC (a governmental agency under the Ministry of Science and Technology of Vietnam), and ThinkZone (an accelerator-cum-venture capital firm), are pioneering different schemes.

Those organizations are blazing a path in collecting corporations’ hardships and needs, then incubating, accelerating, and providing initial funds to support compatible startup solutions and turn them into scalable business models in different industries, including but are not limited to logistics, manufacturing, environment, and energy.

Bringing ideas into practice, at the Summit, SHTP-IC, and TMA Solutions announced their partnership with KPMG, a “big-4” accounting firm, to provide an innovation program for big corporations. In this all-in-one service package, KPMG offers strategic consultations, TMA Solutions supports the digital transformation process, and SHTP IC incubates startups to deal with specific requirements from firms.

Accelerating SMEs with innovation

Tuoc Huynh, founder and CEO of Saigon Innovation Hub (SiHub), spots another underserved area when he recognizes the short supply of quality and diverse startups for global financial investors flocking into Vietnam.

With nearly 600,000 SMEs across the country, the segment plays a major role in Vietnam’s economy, accounting for 98 percent of all enterprises, 40 percent of GDP, and 50 percent of employment or 1.2 million jobs.

“It is common knowledge that SMEs face growth roadblocks after every five to ten years. If we can break the mold, there will be a large number of SMEs who can accelerate, scale up, and be ready for venture funding,” said Huynh.

So far, SiHub has run eight batches of its SME-IPO accelerator program, with graduated companies catching the fancy of various securities companies and VCs, claimed Huynh. The program caters to startups and SMEs at the post-accelerator stage, offering hands-on training in corporate management, technology standards, profitability and scale-up strategies, filing requirements, compliance, among others.

“SiHub positions itself as a broker for innovative businesses,” added Huynh. “It’s important for each stakeholder to focus on their greatest strength and expertise, as well as identify their position within the ecosystem.”

In summing up the Swiss EP Vietnam Partner Summit 2022, Werner Gruber, Head of Cooperation at the Embassy of Switzerland in Vietnam, stated, “No innovation without cooperation,” which echoed the viewpoints of many ecosystem leaders and Swiss EP partners at the Summit.