Vietnam start-ups: A tale of two cities

Vietnam is the only country in Southeast Asia whose capital city is not a disproportionately dominant center of business and culture. This could be a key advantage as the transitioning local economy seeks to build momentum through internationalization. 

Saigoneer, a Ho Chi Minh City-based (HCMC) online media company backed by 500 Startups, makes for an interesting case in point with its first expansion foray. A sister publication under the brand Urbanist Hanoi was officially launched last month and is already being positioned as a springboard for international follow-ups such as Urbanist Taipei.  

To some extent, the move is notable because Saigoneer’s business thesis is based on in-depth, hyperlocal content that implies an intercity scaling challenge for resource-poor start-ups. But for entrepreneurs across various industries, there is a more universal lesson.

Hanoi was noticeably out of Saigoneer’s comfort zone given the cultural subtleties that distinguish northern and southern Vietnam. As a result, the company was able to hone skills related to executing a socially delicate expansion before committing to its more complex cross-border agenda.   

“It could have only worked the way we did it, which was to start in Saigon where the money and the brands are, and where business is done in a much more Western way,” says Brian Letwin, co-founder of Saigoneer. “In Saigon, I invest two hours to close a deal with a client but in Hanoi, it’s more like 15 hours. So, in terms of becoming viable, having revenue and getting further along, I think you’ll do that five times faster in Saigon than you will in Hanoi.”

Contrasting natures

This viewpoint reflects HCMC’s reputation as a commercialized crossroads for international digital nomads versus the more cloistered and conservative Hanoi. Both local and foreign venture capital industry participants confirm the impression: company building in the south is a matter of liberal wheeling and dealing, while northern business advances at the pace of a thorough background check. 

Entrepreneurs suggest that Hanoi, as the center of government, suffers from stricter enforcement of rules and regulations. By contrast, the presence of hundreds of international companies in HCMC apparently dampens officials’ enthusiasm for pursuing comprehensive audits. Vietnam Silicon Valley, which operates government-backed accelerators in both cities, notes that HCMC also benefits from more government programs such as the recent SpeedUp initiative.

“People in HCMC are more open and more willing to try new products. So, there are more start-ups in HCMC than in Hanoi and the start-up ecosystem there is more exciting and dynamic with many events and activities,” says Thach Le Anh, founder and CEO of VSV. “Most larger funds are based in HCMC, so start-ups can find funding there more easily.”

Hanoi, however, is often touted as Vietnam’s pioneering VC environment, having hosted the country’s first accelerator, Hub.IT, as well as some of the more ambitious niche operations such as MIST, a seed fund and start-up bootcamp focused exclusively on the travel segment. As one industry participant put it: “Accelerator programs in the north are a lot more receptive and have a lot more participation. In the south, it’s always ‘what can you give me’ and ‘what can I get out of this.’”

Cultural insights

Leveraging domestic cultural discrepancies as a learning tool for early-stage companies requires not only an appreciation for how differences in transactional style can mistranslate in various scenarios, but also a closer look at the character of each sub-market. 

Bobby Liu, founder of Hub.IT, seemed to understand this point intuitively. While working in HCMC around 2010 in traditional brick-and-mortar businesses, the Singapore native decided to move permanently to Hanoi simply as an exercise in better understanding his adopted country. After settling in the capital city, he began working on creating AsiaStartups, a precursor to Hub.IT, as a way of taking the local co-working circuit to the next level. 

“It’s the usual thing for foreigners to go to a city and think they know the whole country, but that doesn’t work in HCMC, and I found Hanoi more representative of what Vietnam is all about,” says Liu. “Some of our entrepreneurs have never been down south or vice versa, so we tell them that there are things you need to be aware of. If you’re still bootstrapping, you don’t need to do it immediately, but basically, you need to travel.”

Topica Edtech Group acquired Hub.IT in 2016 and took on Liu as a senior direct and head of its Founders Institute accelerator in Hanoi. In that year, 26% of all Series A funding in Vietnam went to Founders portfolio companies. E-commerce was the dominant investment category, but B2B technology has proven significantly more pervasive in Hanoi than in the HCMC ecosystem. This bodes well for future crosspollinations between northern start-ups and southern multinationals. 

CyFeer, an apartment rental industry technology provider that operates across B2B and B2C models, is part of this developing trend. The company was incubated by VSV in Hanoi in 2016 but had a difficult run in its home market. CyFeer founder Phong Pham says that after he moved to HCMC, the more tech savvy culture helped the company win its first customers and made regional expansion a real possibility.   

Domestic repositioning and scaling optionality of this kind cannot be easily mimicked in the rest of Southeast Asia. For VIISA, a HCMC accelerator backing CyFeer’s renaissance as well as Saigoneer’s expansion, it offers a nationwide ecosystem with all the right ingredients a chance to mature at its own speed. 

“Vietnam has the start-up culture, the government support, a large, young population, and there are problems here that are waiting for entrepreneurs to solve, but we need to keep up this pace for 5-10 years to really get a good footing,” says Duc Tran, founder of VIISA. “At this point, all we need is time."   

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• Topics
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• Vietnam
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• TMT