Encounters of innovators: tech-driven and tech-enabled Vietnamese startups [Part 1]
While startups are often emerging from existing technologies (tech-enabled) rather than making innovative technological products/services (tech-driven), big venture capitalists and corporates are likely to take high risk in financing the latter, which usually yield greater value once achieving product-market fit.
Which ones among the intellectual property, promotions, outsourcing, funding, customer service, etc. are the focuses of a tech startup? Defining whether the company is tech-enabled or tech-driven would presents its strengths and weaknesses, its core competencies, and set the plan for the future growth.
This year, the annual most famous Vietnamese national startup competition’s (Techfest) preliminary round is going to end in a few weeks, startups are selected in two groups: tech-driven and innovative business model-oriented. Many are wondering which type of startups would be the final winners.
“If we look at the two recent champions of the Vietnamese national startup competition at Techfest event, Abivin and MultiGlass, we can see clearly that they are all tech-driven businesses,” said Pham Dung Nam, Director of National Startup Support Center (NSSC) — the organizer of Techfest 2020, assigned by the Ministry of Science and Technology of Vietnam.
CEO of Abivin stated in 2018 that he had devised the AI-powered vehicle routing optimization app with proprietary algorithms satisfying 20 parameters. It is described as the most optimal supply chain optimization solution for companies in various sectors and hard to be caught up by even big tech giants in the world.
The same situation happens with MultiGlass’s products, recently granted an exclusive patent for eyeglasses that could measure distance and body temperature by Iris Recognition, IoT and AI technologies. The products are applied to help disabled people control computers, and prevent drivers from falling asleep while on the road.
“These tech companies demand more time-consuming and big-budget trials, tests and research,” Pham said. “Success then relies on the ability to create clear and compelling value propositions for customers by pushing technology advancements, which would makes it hard for other competitors to emulate.”
Last year, Abivin succeeded in increasing the parameters that its proprietary algorithms satisfied into 30, focusing on resolving strict criteria of shipping in ASEAN’s countries where transportation roads are narrow, traffics are unpredictable, and shipping fleets consist of a variety of vehicles. Established in 2015, the company has been expanding its markets into four countries within the region.
“Instead of taking on multiple types of risk (e.g., execution, real estate, inventory), a VC [venture capital firm] will typically take the other risks off the table, and focus on technology startups where the risks are much reduced,” noted George Deeb, Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook. He added that technology-driven startups are easier to scale with less people and produce higher return on investment potential.
Although tech-driven companies would yield strong returns, Dries Buytaert, founder of the Open Source web site building platform Drupal, mentioned that technological innovation might only gave a company a 6 to 18-month competitive advantage.
If tech-driven startups fail in timely, economically and agilely innovating technologies to commercialize products and services, they risk losing the game.
In other cases, applying for patent protection would be a solution against copycats. This, however, poses other challenges for founders.
“Within 31 months from the priority date of the first filing of patent application in Vietnam, we have to apply for exclusive patents in other countries that we are likely to run businesses in,” said Le Hoang Anh, CEO of MultiGlass. “Not to mention the fact that applying and extending patent protection overseas is so costly that a startup could hardly afford it.”
To overcome these hardships, many chose to collaborate with big corporates, which used to be widely seen as threats to new companies in Vietnam before.
MultiGlass are working to win the support in overseas markets from Qualcomm through its technology competition and incubation program in Vietnam. Abivin also said at the 2018 Shark Tank gameshow that it was partnering with the U.S.-based global technology giants Oracle Corporation to develop its services.
“Partnerships between incumbent players and startups are the way forward for the Fourth Industrial Revolution to be sustainable in the long term,” The World Economic Forum cited sharings from Enrica Sighinolfi, Head of New Proposition Initiatives at Opportunity Network, in its 2018 White Paper on collaboration between startups and corporates.
“I’m talking about a model where start-ups use technology to add value to existing players without necessarily disrupting them,” Sighinolfi emphasized.