Thoughts on Vietnam Tech Scene

I spent 3 days in Saigon earlier this week, 1 of which was spent attending e27’s Vietnam Echelon 2012 satellite event. I’ve always wanted to visit the country since our fund started investing from May 2010 on, but was unable to tear myself away from other priorities until now. I’m glad I was able to break my Vietnam duck with this trip.

Donning my investor hat, I had a couple of hypotheses I wanted to test on the trip. I met entrepreneurs, investors and observers from the Saigon ecosystem. I think I’ve validated most of my hypotheses now, but was also pleasantly surprised on a few other fronts.

On first impressions, Saigon felt a lot cleaner than Jakarta, despite the cityscape appearing to be less developed. Transport infrastructure appeared less advanced, yet the equal blend of cars and motorbikes never came to a standstill. Someone told me about the analogy of traffic in Vietnam resembling “water flowing around logs” as you try to cross the road, which I thought “held a lot of water” ;-).

The two largest venture investors in Vietnam are IDG Vietnam (US$100M) and DFJ Vina Capital (US$30M). CyberAgent and DeNA were also mentioned to have presence in Vietnam.

The two largest Internet companies by revenue are Vinagames (gaming, scratch cards) and VietnamWorks (jobs classifieds). I was told that there was a large gap in the revenues between Vinagames and VietnamWorks, and an even larger gap when you compare them with the rest of the companies after them.

I had a delightful time placing calls and browsing the net using a pre-paid SIM from Vinaphone, standing still or on the go. This compares starkly to my family’s situation in Singapore; we’re on Singtel and have had to live with an increasing number of call errors, dropped calls, poor call quality, no throughput, etc.

I also couldn’t resist putting on my “Social Engineer” hat as I spoke to various elements in the Saigon tech scene.

The average graduate in Vietnam takes home between US$300 – US$500 each month. The national per-capita GDP amounts to ~US1,200.

I was told that there are very few grassroots tech events in Vietnam. Most revolved around pitching, which imparted little in the way of the how-to of building products and ventures, which some folks felt were more important if the tech scene in Saigon/Vietnam is to leapfrog instead of meander its way forward. The Echelon 2012 satellite event was also heavy on the pitches, and even then the hall at the Saigon Star Hotel was packed.

I also came to know of Vietnam-based software outsourcing companies set up by Vietnamese returnees and foreigners to service offshore companies. They came in all sizes, from the small setups in the tens of employees, to the big fish who were several hundred strong apiece. Web, mobile, agile, lean startup, RoR, Python – ask and you shall find. The wage arbitrage coupled with a steady supply of technical graduates yearning for a westernized work environment that encouraged personal growth has allowed these pioneers to carve out a comfortable niche for themselves, even as they’ve had to wean their Vietnamese employees away from Java, VB and .NET, towards more in-demand frameworks and platforms.

It is in this last trend I noticed – the software outsourcing to Vietnam – that I think is what will give its tech scene the kindling firewood for the next generation of tech companies. It reminded me of India during the years leading up to 2000. The sheer volume of technical work sent to the Indian subcontinent gave its large engineering talent pool the exposure. The inanity of an endless stream of client work gave its participants an important leg up the socio-economic ladder, but at the same time left them wanting more. The more risk-loving amongst them – augmented by returnees from the Valley – then went out and built their own companies.

Some of that is already happening on the ground in Vietnam. Google offered to acquire Socbay in 2009 but was rejected by its CEO Nguyen Xuan Tai in 2009. Ebay bought a 20% stake in PeaceSoft for US$2M in 2011. DeNA acquired Punch Entertainment’s Vietnam gaming studio, also in 2011. Yet, few of Vietnam’s younger generation understand English, much less speak it. The government has also vacillated between light and extreme episodes of Internet censorship. I was told Facebook was unblocked only days before I’d arrived. It is true that Vietnam has a large proportion of young populace, yet a majority of its 91M population reside beyond the boundaries of Hanoi and Ho Chi Minh City and subsist as farmers. All these come together to make Vietnam an intriguing and complex market to operate or even deploy venture capital in.

I’m hoping to visit Hanoi during my next trip to Vietnam, which should certainly be sooner than later. I think what I currently know about Vietnam isn’t all there is to it, so this article isn’t really complete, but I’ll stop for now until I learn more.

About James Chan

James Chan is an entrepreneur, investor, geek, photographer and husband/father based out of Singapore. Apart from frequent travels to Vietnam, Myanmar and Indonesia for work, James can also be found online via his trusty 15" Retina MacBook Pro or iPhone 6+.