In the context of starting a startup in Vietnam, the regulatory framework stands as a crucial consideration. Moreover, the landscape for startup opportunities in Vietnam is expanding.
Vietnam Emerges as a Dynamic Hub for Startups in Asia
As an emerging economy, Vietnam presents abundant opportunities for foreign investors and entrepreneurs, especially within the startup sector. Boasting a population exceeding 96 million and a progressively educated workforce, Vietnam holds immense market potential.
Vietnam is rapidly attracting foreign venture capital firms with an estimated 3,500 businesses. Startups have also gained popularity. They have got a significant investment of US$ 902 million since 2013.
Incorporate a 100% Foreign Owned Vietnam Startup
Similar to other components of Vietnam’s entrepreneurship ecosystem, accelerators and incubators are primarily concentrated in Ho Chi Minh City (HCMC), Hanoi, and Da Nang. For instance, Fintech startups have garnered considerable attention and secured investments amounting to US$1.013 billion from 2010 to 2021.
The COVID pandemic didn’t end the momentum and while sectors such as tourism and hospitality were failing because of protracted closures, the startup ecosystem in Vietnam was flourishing.
Vietnam received four times as much capital for startups in 2021 as it did in 2020, or approximately US$1.4 billion. Since the implementation of the Europe-Vietnam Free Trade Agreement (EVFTA), EU firms have invested more than US$26 billion in roughly 2,250 projects in Vietnam.
Choosing Vietnam, the Future of Southeast Asia?
- Vietnam has a young and tech-savvy population, with a median age of just 31 years old. This population is increasingly connected to the internet and mobile devices, which creates opportunities for startups in areas such as e-commerce, mobile apps, and digital marketing.
- Vietnam has relatively low labor costs compared to other countries in the region, which can make it an attractive destination for startups looking to hire talent and keep costs low. However, Vietnam has a large and growing pool of young, tech-savvy workers, but there is still a shortage of skilled talent in certain areas, such as software engineering, data science, and digital marketing.
- Vietnam’s startup ecosystem is rapidly growing and evolving, with a growing number of incubators, accelerators, co-working spaces, and other support organizations that can help startups access funding, mentorship, and other resources.
- Vietnam is at the core of Southeast Asia, which makes it an ideal location for startups looking to expand into other countries in the region. Its proximity to other major markets such as China and major maritime trade routes also create opportunities for startups.
Opportunities of doing business in Vietnam
Vietnam has undergone significant economic reforms over the past few decades, resulting in a more open and market-oriented economy and Vietnam’s regulatory landscape for startups evolving.
There are also many opportunities including the establishment of the Vietnam Silicon Valley project and the issuance of the Law on Supporting Small and Medium-sized Enterprises.
Startups : Vietnam’s definition and regulatory landscape
One of the most important considerations for start-ups in Vietnam is the promotion of start-up ecosystem by the government.
The government’s definition to regulate this legal form:
“First, startups are considered as “innovative small and medium enterprises (‘doanh nghiệp nhỏ và vừa khởi nghiệp sáng tạo‘ in Vietnamese language) which is further identified according to one of the following criteria:
(i) – Production, sale of products derived from inventions, useful solutions, industrial designs, integrated circuit (IC) designs, computer software, cell phone applications, cloud computing, new animal breeds, plant varieties, aquatic organism breeds;
(ii) – Production, sale of products that are created from trial production projects, prototypes and technology completion; production, sale of products that win national, international prizes for entrepreneurship, startups and science and technology prices in accordance with regulations of laws
(iii) – There are new technological solutions or business models that might increase the enterprise’s revenue by at least 20% in 2 consecutive years on the basis of analysis of market share, prospective development of the products and competitiveness of the enterprise.”
Receive Legal Support for your Vietnam Company
For instance, the Resolution 569/QD-TTg released on May 11, 2022 by the Strategy for the Development of Science, Technology, and Innovation Ministry defines a program for encouraging creativity in science and technology. The Decision’s specified objectives are:
By 2025:
An investment in technology and scientific research of 1.2 to 1.5 percent of GDP; The nation will allocate 0.8 to 1 percent of GDP overall on technology and scientific research.
By 2030, the strategic priorities will be reached:
Investment in science and technology will represent 1.5 to 2 percent of GDP; Overall national spending on science and technology will contribute to 1 to 1.2 percent of GDP.
Others decisions Decision No. 1269/QD-TTg, coming into force in 2019, create the NIC (National Innovation Center), the platform to train and support young enterprises and partners with international companies.
Decree No. 94/2020/ND-CP from 2020, supports mechanism and exemption for the NIC: in exclusive geographical area, priorities in real estate for science and technologic startup, subvention for raw material, etc.
The Decree 95/2014/ND-CP, of 2014, is still applicable, regarding scientific and technological activities. The decree sets tax incentives for development funds in science and technology; the scientific and technological activities are prioritized by geographical locations such as economic zones and industrial parks.
Why Vietnam is a great destination for startups and how to get started
With a growing middle class, a young and tech-savvy population, and a government that is supportive of entrepreneurship and innovation, Vietnam is an attractive destination for start-ups in a variety of sectors.
To get started with setting up a company in Vietnam, it is critical to structure the startup to benefit from the diverse governmental incentives and schemes. Since the regulations and decrees are drafted to apply only to certain types of companies and structures, we recommend working with a reputable legal or accounting firm that has experience with the Vietnamese regulatory landscape.
