Navigating the Global Stage: Insights from ThinkZone and Aepsy on the Evolution of Vietnamese Start-Ups

I met with founder and CEO Do Bui to discuss the local start-up scene and their ambition to launch Vietnamese start-ups onto the global stage. Joining us are Thu Nguyen, a Swiss-based banker and ThinkZone’s Europe advisor, and Hiep Doan, co-founder and CTO of Aepsy, a Swiss start-up focusing on mental health. Let's dive in.

How have Vietnamese start-ups evolved, and what impact is the funding winter having on them?

Do Bui: Vietnam’s start-up ecosystem is relatively young but has evolved rapidly over the last 5-7 years. During the two years leading up to the pandemic, there was a lot of hype about local start-ups, with hopes that many would soon turn into unicorns. However, the situation has become more challenging, with global funding becoming tighter. Investors are more selective, forcing founders to be more disciplined about scaling and operations instead of simply burning cash.

While raising funds is generally harder now, it’s particularly true for those building things that other companies can easily copy. Therefore, founders need to spend more time thinking about their team’s strengths and how to find competitive advantages. These advantages are crucial for creating a start-up’s valuation.

How have Vietnamese founders evolved from the first generation to the new ones?

Do Bui: The first generation of Vietnamese founders, many of whom were overseas Vietnamese with experience in the US tech industry, brought frameworks from Silicon Valley. However, copying Western models that didn't suit local needs led to early failures. Recently, local founders have learned more from start-up experiences in China, Indonesia, and Singapore, given the proximity and cultural similarities.

What is your perspective on the differences between the Vietnamese and European markets?

Thu Nguyen: Vietnam is a frontier market, which means there are inherent risks such as an inadequate legal framework and a lack of systematic procedures. In contrast, Europe is a mature market that values transparency and credibility.

Hiep Doan: My observation is that European customers tend to focus on quality and show concern for the environmental impact of a product. While acquiring customers might be costlier, their loyalty is higher. Generally, European founders and investors seem more cautious and prioritize profitability over rapid scaling.

Do Bui: I want to build on the point that Thu just raised regarding the lack of legal framework in Vietnam. It is quite common that many start-ups, even those with 100% operations in Vietnam, register their businesses in Singapore for basic legal protection and legitimacy to attract foreign VCs.

Another challenge in Vietnam is competition. Given the rapidly changing technology and evolving market demand, a business model that works well initially can become less effective when new technologies arise. For example, e-wallets now face fierce competition from emerging technologies like QR payment, which is developed by many commercial banks themselves in Vietnam.

What do you think about Vietnamese start-ups competing overseas? What are their competitive edges?

Hiep Doan: Vietnam has a large population of about 100 million people, a young population, and a strong adoption mindset. This allows start-ups to quickly test and iterate their business models before going global. More affordable labor makes bootstrapping easier, and later, when raising funds from foreign VCs, it provides a cost advantage.

Additionally, many Vietnamese abroad are returning, bringing valuable international experience and ambition to build global Vietnamese brands, like the wave in China 20 years ago. With the current GenAI wave, Vietnamese start-ups have advantages like faster, easier data collection due to less stringent data protection regulations compared to Europe or the US, and cheaper, faster data labeling to improve accuracy.

Thu Nguyen: Recently, when Do Bui and I met with the CEO and co-founder of a Swiss IT provider company that has two offices in Vietnam and 300 employees. He said, "Vietnamese companies are affordable and deliver high-quality work. I have considered a few options: India, Indonesia, and Vietnam. Skill-wise, Vietnamese tech guys may not be as strong as India, but they work very nicely in a team set-up."

What are the challenges for Vietnamese start-ups going global, and what strategies can they adopt?

Do Bui: The first challenge is thoroughly understanding the target market. Even if founders succeed in Vietnam, expanding abroad can be tough. Understanding local markets, cultures, and customer behaviors is key because the knowledge that start-ups accumulate in Vietnam may not translate overseas.

I know one or two Vietnamese companies attempting to expand in Thailand, for example, face significant hurdles such as a lack of resources in the Thai market, unreliable local partners, and difficulties in managing a local workforce. Conversely, I have seen some Vietnamese entrepreneurs succeed abroad but struggle in Vietnam due to a lack of local market understanding. Therefore, a trusting partner who genuinely supports the business and has the company's best interests at heart is crucial.

So, how can we overcome these challenges? Do you have any ideas?

Do Bui: I can categorize founders into a few groups. The first includes start-ups that succeed in Vietnam and then expand globally. They need to learn, adapt, and find reliable local partners to break into the market. Operating in unfamiliar markets is tough but I don’t think it is impossible.

The second group includes Vietnamese founders starting overseas. They understand the local market and leverage Vietnam’s affordable labor for a cost advantage. Once they succeed, they expand to Vietnam. A few companies I know use this model and they seem quite effective.

The third group positions itself as a global entity from the start, serving global clients while developing products in Vietnam. However, this requires founders with global market experience and the resources to manage Vietnamese operations while handling overseas customers and sales. Besides, understanding international laws and regulations on cross-border transactions is also crucial.

Thu Nguyen: Absolutely, defining themselves as global companies from day one allows these start-ups to create scalable, adaptable products that appeal to a broader audience. This strategy drives innovation and gives a competitive edge by bypassing the transition from domestic to global markets. However, this requires founders with experience in global markets, a clear vision, and resources to manage Vietnamese operations while handling overseas customer service.

Final Note:

Vietnamese start-ups have come a long way. With the right strategies and support, we believe they will one day achieve global success. That said, going global takes continuous effort and some trial and error to find the best strategy. Like any start-up journey, they need to try, learn, and keep evolving. With this approach, global success isn't a far-off dream.