You are here

Start-up virus hits Vietnam: ‘There is no stopping us now’

Incubators

In the Vietnamese coastal city of Da Nang, Lý Đình Quân helps future entrepreneurs set up innovative small businesses. But setting up a start-up school in an emerging market is not easy. Here we explore the obstacles and the enthusiasm. “I would never have dared do it without Quân.”

A twenty-something wearing trendy round glasses grips the microphone tightly in his hand. “Testing, one, two, three. Can you hear me?” It’s half past seven on Sunday morning and Lý Đình Quân (47) is preparing his team for pitch session in the coastal city of Da Nang. Armed with good ideas and slick PowerPoint presentations, the young hopefuls will soon compete for a place at Quân’s start-up school, Songhan. This is where he guides aspiring entrepreneurs in setting up innovative small companies in a short time frame. Quân copied this pressure-cooker method from start-up schools in the famous Silicon Valley in America, where Airbnb and Facebook first saw the light of day. But unlike Silicon Valley, at Songhan it’s not just about profits. Quân, who grew up in the aftermath of the Vietnam War, is a man with a mission: his aim is to groom a new generation of entrepreneurs. This Asian power-house made his decision ten years ago when he left his job at an oil company to venture out into the world of business. He tried to introduce fire safety products on the market, but couldn’t find any innovative business partners. “I realised”, says Quân, “that Vietnamese entrepreneurs pursue success by using their contacts instead of making a great product.” And that’s a real problem, the World Bank wrote in a recent report on the Vietnamese labour market. In the past thirty years the country has experienced impressive economic growth, while poverty rates have fallen and a middle class has emerged. The growth was so frenzied that Vietnam can now call itself a lower-middle income country. 

However, warns the World Bank, unemployment figures may be very low thanks to the economic spurt, but three in four Vietnamese workers perform unskilled work. This provides them with little financial gain and the work is often carried out in dire circumstances. To ensure that this large group can also go on to join the middle class, Vietnam must turn its many jobs into good jobs. In other words: ensure there are fewer day labourers screwing telephones together and more employees developing telephone software in well-paid employment. “To create these types of smart, well-paid jobs,” Quân explains, “we need more smart small businesses.” And this is precisely why in 2017 he opened the doors of his own private start-up school. Currently making his pitch is Taûn Bui Van (33). “In Da Nang, nature guides only care about money”, says the Master’s student in Ecology. His T-shirt features a photo of a red-shanked douc, an endangered species of monkey that lives just outside Da Nang. “But I’m different.” This wanna-be innovator works as a conservationist in a nearby nature reserve and gives guided tours to tourists for a fee. “But this doesn’t help the local residents, mostly poor farmers and fishermen. Therefore, I want to educate them and offer nature tours with residents as guides.” Quân, who is assessing the candidates this morning along with two fellow panel members, smiles broadly. Taûn is the type of candidate he is looking for: an enthusiastic individual with experience, knowledge and his own capital. “But”, he acknowledges later, “in Da Nang, such candidates are not there for the taking.”

A “swan” even emerged in Ho Chi Minh City, a company worth over a billion dollars

This is not surprising. Da Nang is untapped start-up territory. In the capital Hanoi, the movement is gaining ground and start-up schools, shared workplaces and investment competitions are springing up like mushrooms. This is also true in the business centre, Ho Chi Minh City. A “swan” even emerged there, a company worth over a billion dollars —the holy grail of start-up land. But if you venture beyond these two start-up paradises, you will find that the movement stops there. The Da Nang provincial government is trying to promote the coastal city as an upcoming start-up city, but it has just two start-up schools, a small handful of shared workplaces and a few government events. Or, as Jan Zellman, a German social entrepreneur and investor based in Da Nang, puts it: “There is a good vibe, but the start-up scene is still in its infancy here.” Due to the attraction of Hanoi and Ho Chi Minh City, talented individuals leave and Songhan is fishing in a small pond. “Those that are left are mainly hobbyists and imitators”, Zellman remarks. “They are enthusiastic, but won’t succeed in setting up serious small businesses. As a result, investors stay away because their preference is for established start-ups.”

In any case, the Vietnamese entrepreneurial culture is relatively new, which makes the situation more challenging. Until liberalisation at the end of the 1980s, collective farms and powerful stateowned companies dominated the economic landscape, and there was little room for entrepreneurship. Indeed: until 2000 starting your own business was formally prohibited, a legacy from the heyday of Communism. “The fact that you can build your own business around an innovative idea is relatively new here”, confirms Tran Tri Dung, who works for Swiss EP, an aid project that strives to boost the Vietnamese start-up movement. This means that young people are less likely to consider starting an innovative company, while they are not taught at school that a good idea can earn you a decent living. Until recently, Vietnamese further education, including Economics, did not devote any attention to entrepreneurship. In addition, young people often don’t have a previous generation of entrepreneurs they can look to as models. “This group mainly focuses on traditional business activities, such as running a simple food stall or being involved in the real estate market”, explains Tri Dung. But “modern entrepreneurship”, such as setting up a tech firm, is a totally different kettle of fish. “You have to be up to date with the latest developments in the world of programming or you need to know the state of affairs regarding online legislation.”

And then there’s the generation gap, too. Thanks to the Internet and popular TV programmes such as Sharktank, where new entrepreneurs compete for investment funding, an increasing number of young people in Da Nang seem to know what a start-up is. However, this does not per se apply to their parents. Driven by Confucianism and Communist doctrine, many parents believe the entrepreneur dangles somewhere below the social ladder—a view that can hamper future entrepreneurs because Vietnamese parents have a lot to say regarding their children’s choice of studies or career. This was also true in the case of 33-year-old Thang Truong Duc. His parents were furious when, after following a course at Songhan, he told them he had resigned from his prestigious job with a large company in exchange for the uncertain life of an entrepreneur. They immediately stopped his monthly allowance, which parents give to their children because entry-level salaries are so low. “I had to fight to regain their respect”, he revealed. Tri Dung of Swiss EP believes that these kinds of stories will decrease over time: “A cultural change takes time.” Entrepreneur Zellman agrees: “I am looking forward to the next generation, the children of today’s youth. They will truly be free to choose their studies and career.”

But there’s still a long way to go. In Da Nang, Songhan is at the forefront, and the frontrunner must begin at the beginning. Therefore, Quân scours universities with an “inspiration workshop” he uses to introduce entrepreneurship and encourage students to submit a pitch. Quân explains that it costs time and money, but is necessary: “The better the candidates, the better our result.” During this selection round, Songhan received fifty registrations, of which fifteen candidates were invited to pitch today. The panel finally selects ten participants. Will Taûn the ecologist be one of them? “Of course”, winks Quân. Nevertheless, a good selection is not the end of it. Whether Taûn and his fellow participants will prove to be successful entrepreneurs also depends on the quality of Songhan’s ten-week crash course, where those selected will learn how to set up a business. The first—and for the time being only—crash course took place in the spring. Former participants say it was “educational” and “very useful”, but the results are still modest. According to Songhan, eleven of the twelve participants set up a small business, good for dozens of jobs.

However: only two of the small businesses found investment and the lion’s share of the jobs appear to be neither full-time nor paid. This is partly because candidates misjudge the time and the capital needed to start a business. But it is also due to the Songhan curriculum, in the opinion of Maud van den Meiracker, who selflessly acts as a business expert for the Dutch volunteer organisation PUM Netherlands senior experts. Quân called her in to fine-tune the curriculum and she has travelled to Da Nang on several occasions. “The first round focused too much on theory and not enough on its application”, says Van den Meiracker, who was a partner at Accenture. It’s a shame because research conducted by Emory University and the Aspen Network of Development Entrepreneurs shows that entrepreneurs in emerging markets often participate in start-up programmes to develop business skills—such as writing a business plan. On the advice of Van den Meiracker, Songhan bases the new curriculum, which will be taught during ten weekend workshops, on the famous Lean start-up method. This methodology compels aspiring entrepreneurs to introduce a prototype directly onto market and then gradually adapt it. “It is useful”, Van den Meiracker says, “because you immediately see whether or not you can validate your business plan.” The new course also encourages participants to think carefully about the value of their product: why would a customer select your product rather than a competitor’s? Participants also seek direct contact with future customers under Songhan’s supervision. This is crucial, in the opinion of the PUM expert, because “it enables you to find out whether your product or service is something the market is looking for”. What about the results ten weeks later? The candidates know whether their product idea is viable.

But, warns Van den Meiracker, it’s the teachers that flesh out the course—and unfortunately they are not easy to find in Da Nang either. This means Songhan’s teaching team consists of academic teachers who have little affinity with entrepreneurship and speak limited English. Van den Meiracker has tried to familiarise them with the new curriculum, including start-up language, during a two-week course. “It was quite a task”, she admits, especially because most of the teachers tend to stick to the theory and transfer the information. “Consequently, my course was also a lesson in teaching. You don’t want teachers who are supposed to be motivating future entrepreneurs to just listen passively, but to actively engage in dialogue with students about their ideas and progress.”

Songhan receives shares in the new businesses in exchange for free guidance 

So will Songhan—which has taken the advice of the PUM to heart—manage to unleash a wave of entrepreneurship in Da Nang? “Absolutely”, Quân resolutely exclaims, then shrugs his shoulders in despair. “Well, we can’t do it alone.” Ultimately his start-up school is just a small cog in the larger start-up machine that needs to get off the ground in Da Nang. Quân believes it would help if the government did more. The Communist Party, which still governs the Republic, is positive about the start-up movement, and even named 2016 Year of the Start-up. But Quân is not yet impressed by the string of related measures and policy plans. “Most still only exist on paper”, he says. Quân cites the example of investment funds: because it is difficult to get a loan from the bank, we need a pot of government money entrepreneurs can turn to. “But that pot is still non-existent”, sighs this Vietnamese visionary. Therefore, Songhan, on the advice of the PUM, currently offers a follow-up course for the best aspiring entrepreneurs. During this course, Quân helps the participants find investors and further educates them in, for example, operational management. For the time being, Quân does a lot of the work himself, ranging from inspirational workshops to reeling in investment money, and he just about manages to fit it in his full agenda. This is because he is also working on expanding Songhan to other cities, and every month travels to the countryside, where he gives workshops commissioned by the authorities about entrepreneurship, which helps supplement the school’s coffers. After all, even though Songhan receives shares in new businesses in exchange for free guidance, the start-up school doesn’t earn very much from them yet. “I hope that other parties will step in soon”, Quân says. If Songhan could spend less time and money on activities to inspire people, Quân could focus more intensely on boosting and scaling up startups. “Because that is still the objective: to produce a generation of successful entrepreneurs.”

One person well on the way to achieving this is Thang Truong Duc (33), owner of a start-up helped on its way by Songhan, called Liberzy, an online platform where users can share travel tips and itineraries. “This is our headquarters: it’s where we all live and sleep.” Thang started out in a dingy room with doors that opened out on to the street. Now his team is sitting around a large wooden table, all in their twenties and thirties, staring at glowing laptop screens, frantically tapping the keyboards. “Our membership figure”, Thang continues, while unlocking his laptop and with a couple of quick clicks on the Liberzy website, “now exceeds 162,000.” In 2017, when Songhan was absorbed in preparations for the first crash course, Thang received individual support from Quân and a PUM expert. “I would never have dared do it without them”, Thang admits. Quân introduced him to a young IT company that wanted to invest a hundred thousand dollars in developing Liberzy’s app and website. Thang accepted the offer, gave up his permanent job and sold his successful hostel. He subsequently invested the capital in his dream: setting up Liberzy.

The company is currently ready for a second round of investment— a stumbling block for many entrepreneurs. “But growth is impossible without additional funding”, Thang acknowledges. What’s more, he soon wants to increase his employees’ salaries. As Liberzy is not profitable yet, at the moment he cannot offer them more than some shares and 250 dollars a month. A modest wage, which makes it difficult to recruit good employees. “See her? I had to spend six months convincing her before she agreed”, he says about a programmer who joined Liberzy a week ago. He doesn’t pay himself a salary, which can’t go on forever either. How does he plan on getting the money? “Hopefully, via the Vietnamese version of Sharktank, which I will participate in next season.” The young entrepreneur thinks he has a good chance, if only because he is not scared of delivering his pitch. “I can deliver my pitch in my sleep, because I have done it so often at Songhan.” If he loses out on the main prize, the plan is to sell Liberzy to a larger company. A gloomy scenario? “Not at all”, replies Thang, stealing a glance at his team. “We already have three new start-up ideas ready to go. There’s no stopping us now.” •

Do you want to learn more about PUM's incubator programme? Please visit our website.

Text: Eva Huson

Photography: Pixabay / PUM experts

This article has been published in the special jobs report 2019 of Vice Versa