The popularity of tech-enabled startups in Vietnam

The popularity of tech-enabled startups in Vietnam

Encounters of innovators: tech-driven and tech-enabled Vietnamese startups [Part 2]

Although technical innovation may give a company a 6 to 18-month competitive advantage, the advantage from verified business model innovation in tech-enabled companies could last for a much longer time and highly attract lower-risk startup investment.

The tech-enabled startups, or businesses that utilize existing technologies, platforms, tools, constantly rethink user experience, improving and optimizing its business models to provide more efficient solutions for customers’ problems.

Finhay, the “Promising Fintech startup” prize winner at Techfest’s competition 2017, has constantly been exploiting cutting-edged technologies in delivering electronic contracts, cybersecurity, and automated distribution process.

Jeffrey Cruttenden, Co-founder of the popular U.S. savings app Acorns, told Tech in Asia this May that he had jointly invested seven-digit U.S. dollars into Finhay, valuing the company as a “modern, tech-enabled solution” which revolutionized access to wealth management resources for millennials through micro-investment.

He noted that Finhay’s competitive advantage was in its vital business model’s value of engaging millennials, mutual funds, and financial experts in boosting the investment portfolio management education for young users.

In terms of investment, “tech-enabled companies are generally less capital- and time-intensive than tech-driven companies,” said Paul A. Jone, Co-chair, Venture Best Group/of Counsel of Michael Best & Friedrich LLP.

Instead, tech-enabled startups often have greater market risk and related investments in customer acquisition and branding. They also have to keep up-to-date with the market and trends to uncover and address the additional needs of customers to be able to grow larger.

“For such founders, KPIs [Key Performance Indicators] and ROI [Return on Investment] should be keywords and areas of focus,” he suggested.

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Nghiem Xuan Huy, CEO of Finhay, received an investment of 7-digit U.S. dollars from several investors for his startup this May regardless of COVID-19. Photo by Jamille Tran

In Vietnam, more and more small and medium companies have innovated parts of their business models, especially those from local provinces outside the country’s startup hubs (Hanoi and Ho Chi Minh city). They are often called “lifestyle businesses” by international capitalists and are appealing to local angel investors.

“I’m not saying it is unique to Vietnam,” said Janice Y. Lederman, Director of Valhalla Private Capital based in Canada, who has been investing in few Vietnamese startups for more than two years. “I think it is unique to early-stage ecosystems that lots of really good “lifestyle businesses” need capital”.

Lederman added that venture capitalists do not take high interests in these companies because it would not grow quickly to earn the number of returns that investors expect to satisfy their limited partners.

“At Techfest, we are looking for lifestyle companies of which founders would be willing to adjust, pivot and apply existing technologies to be able to grow faster,” said Mandy Nguyen, Director of Ecosystem Development of Startup Vietnam Foundation (SVF) — the co-organizer of Techfest 2020’s startup competition.

One of the prominent startups that are developing in this trajectory is Cam Vinh Ky Yen. The company managed to enter the semifinal of Techfest 2018’s national startup competition.

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Le Na, founder of Cam Vinh Ky Yen, invited international experts to her farms for consultation in sustainable cultivation. Photo by Nhandan.

First launching her project as a lifestyle business selling organic oranges — a local specialty in Vietnamese central region’s Nghe An province, Le Na, founder of Cam Vinh Ky Yen, attended an acceleration program of Vietnam Silicon Valley Accelerator and earned a $20,000 investment deal. The company then pivoted into the combination of farm lab, farm shop and farm tour business model, exploiting technologies in processing data and tracing food origins in its eco-agricultural tourism village management.

Le Na’s adjusting business model for Cam Vinh expected to yield more than VND400 billion (approximately $17 million) per year in revenue for each 500ha village, securing estimated 3,000 direct and indirect jobs.

“It is important to find those innovators and connect them with the people in the big cities who can relate to them,” said Mike Ducker, Entrepreneurial Ecosystem Builder and Executive Director at Canada-based Valhalla Global Accelerator.

“Creating champions and finding champions in the cities are not just about the city entrepreneurs. Getting out in the provinces is what I have seen pretty successful,” Ducker acknowledged.

Since most of the startups are technology-driven, “it is noted that startup teams should explain further about their business models when participating in any competition”, Nguyen sent advice to candidates of the upcoming national contest. “Investors would probably want to hear about your plan in this time of uncertainty as well as the adaptation and pivot strategy in the new normal,” she added.