Technological startup ecosystem in vietnam

Recognizing the importance of technological startups, that promoting the development of these firms through the development of a favourable technological startup ecosystem is one of Viet

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

HA VIET CUONG

TECHNOLOGICAL STARTUP ECOSYSTEM IN VIETNAM

MASTER’S THESIS

Hanoi, 2018

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

HA VIET CUONG

TECHNOLOGICAL STARTUP ECOSYSTEM IN VIETNAM

MAJOR: PUBLIC POLICY

SUPERVISORS:

Dr NGUYEN CAM NHUNG

Hanoi, 2018

I would like to express my gratitude towards my family for the encouragement which helped me in completion of this paper I would like to thank all of my classmates for their support and encouragement to me

I also place on record, my sense of gratitude to one and all who, directly and indirectly, have lent their helping hand in this venture

DECLARATION

I hereby declare that this master thesis is my own research and has not been published in any other study I also make sure that the figures, examples and quotations in the thesis are accurate, reliable and truthful Besides, I have completed all courses and financial obligations in accordance with the regulations of VJU-VNU

I write this declaration to request the VJU to consider and allow me to defend the master thesis

I sincerely thank!

Student

Ha Viet Cuong

ABSTRACT

Technological startup plays an increasingly important role in promoting the economic development of each country, contributing to the formation of knowledge-based economies For developing countries, the rise of startups will help them quickly catch up with other developed countries Recognizing the importance of technological startups, that promoting the development of these firms through the development of a favourable technological startup ecosystem is one of Vietnam's top priority tasks In order to contribute to understanding the technological startup ecosystem in Vietnam, the thesis focuses on clarifying the current status of the ecosystem through six important components of the ecosystem including: culture, finance, support, policy, human capital, and market Overall, the technological startup ecosystem in Vietnam has received great attention from the Government with many policy measures designed to support the development of technological startup, a favorable cultural environment for technological startups, as well

as the large domestic market for the development of technological startup However, it can

be clearly seen that the two major challenges of Vietnam's technological startup ecosystem are the lack of potential technological startup projects as well as the lack of seeding capital resources for the development of technological startups

Key words: technological startup, ecosystem, Vietnam.

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

DECLARATION ii

ABSTRACT iii

TABLE OF CONTENTS iv

LIST OF TABLES vi

LIST OF FIGURES viii

CHAPTER 1: INTRODUCTION 1

1.1 Rationale 1

1.2 Research Question 2

1.3 Scope and Objective 2

1.4 Study Structure 2

CHAPTER 2: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK 3

2.1 Theoretical framework for startup ecosystem 3

2.1.1 Definition and life cycle of technological startup 3

2.1.2 Startup Ecosystem 5

2.2 International Experience 16

2.2.1 Experience in supporting to pre-creation and early development stages of technological startups 16

2.2.2 Experience in finance support for technological startups 17

2.2.3 Experience in promoting the access to global market 17

CHAPTER 3: RESEARCH METHODOLOGY 18

3.1 Selection and rationale of research method 18

3.2 Data Collection 18

3.3 Research Process 19

CHAPTER 4: FINDINGS 21

4.1 Overview of technological startup in Vietnam from 2000 to 2017 21

4.2 Assessing the elements on technological startup ecosystem in Vietnam 23

4.2.1 Assessing the culture elements of technological startup ecosystem 23

4.2.2 Assessing the finance elements of technological startup ecosystem 27

4.2.3 Assessing the support elements of technological startup ecosystem 33

4.2.4 Assessing the policy elements of technological startup ecosystem 36

4.2.5 Assessing the human capital elements of technological startup ecosystem 41 4.2.6 Assessing the market elements of a successful technological startup ecosystem 42

4.3 Assessing achievements and limitations of the technological startup ecosystem in Vietnam 43

4.3.1 Achievements 43

4.3.2 Limitations 44

CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS 46

5.1 Conclusion 46

5.2 Policy Implications 46

5.3 Implications for further study 47

REFERENCES 49

Appendix 1 53

LIST OF TABLES

Table 2.1: Summary elements for the technological startup ecosystem and

assessment criteria Error! Bookmark not defined Table 3.1: List of interview partners Error! Bookmark not defined Table 4.1: The indicative list of TV shows relating to startupError! Bookmark not defined

Table 4.2: The indicative list of information pages for startup activities Error! Bookmark not defined

Table 4.3: Indicative list of active investment funds operating in Vietnam Error! Bookmark not defined

Table 4.4: Indicative lists of investment funds in term of investment strategy Error! Bookmark not defined

Table 4.5: Indicative list of incubators and accelerators operating in Vietnam Error! Bookmark not defined

Table 4.6: The indicative list of events and startup competitions in Vietnam Error! Bookmark not defined

Table 4.7: The indicative list of coworking spaces in VietnamError! Bookmark not defined

Table 4.8: Number of articles published in the ISI magazine in the period 2011 -

2016 Error! Bookmark not defined

Table 4.9: Main policies and regulations promulgated to promote technological

startups Error! Bookmark not defined

Table 4.10: The goals of the project No.844 on promoting startup ecosystem in

Vietnam Error! Bookmark not defined

LIST OF FIGURES

Figure 2.1: The life cycle of startup 5

Figure 3.1: The Research Flow 20

Figure 4.1: The number of investment deals in the period 2011 - 2017 22

Figure 4.2: Deal value by top 6 sectors in 2017 (million USA dollars) 23

Figure 4.3: The percentage of adults in Vietnam having fear of business failure 24

Figure 4.4: Total of deal value for startups in Vietnam (million USA dollars) 27

Figure 4.5: Deals count by local and foreign investors in 2017 28

Figure 4.6: Deal value of local and foreign investors in 2017 ($US million) 28

Figure 4.7: The number of deals in term of deal size in $US million in 2017 28

Figure 4.8: The percentage of nations in the Southeast Asia region in the total amount of startup funding in 2017 (Based on $US) 29

CHAPTER 1: INTRODUCTION

1.1 Rationale

“Startup” has been becoming a hot term all over the world, every nation wants to promote the development of the startups, including both developed countries and developing ones Successful startups in the world such as Facebook, SpaceX, or Uber have been really inspired for the development of startups

In many countries, startups have played an increasingly important role in fostering the economy, being a significant factor in the knowledge economy There are two main reasons why the startups have been taken more and more notice First of all, startups offer untapped means of transforming knowledge resources into economic opportunities, helping to promote the development of applied technology and creative products These creative and unique products could lead to the breakthrough in supplying products and services Secondly, the startups could be major source of employment creation In the period of economic crisis, startups could have many positive effects on hindering the negative side of the economic depression

In Vietnam, that fostering the development of startups as well as building the favorable startup ecosystem is one of the major development strategies of the Government The development of the startups would contribute to the development

of the private sector, which has been identified as an important driving force in economic development That developing startups would help to create the new generation of businessmen for Vietnam, who able to adapt to the conditions of the market economy and to the context of international economic integration Therefore, that promoting startups, especially technological startups, is an important prerequisite for Vietnam to have the sustainable development

The startup ecosystem or technological startup ecosystem in Vietnam is at the very first stage of development, so there are many issues that need to be fulfilled in order

to truly become a suitable environment for development of startups In addition, there has not been much research on startup ecosystem in Vietnam, so it is essential

to have an overview of the ecosystem and the current level of ecosystem development in Vietnam, which helps to find out achievements and strengths of the startup ecosystem in Vietnam, as well as the limitations and shortcomings hampering the development of startups

In conclusion, for the above reasons, the thesis will focus on clarifying the current situation of the technological startup ecosystem in Vietnam, finding the pros and cons of the ecosystem, thereby giving hints for policy makers to further promote the development of startups

1.2 Research Question

There are two main research questions for the thesis in the following:

2.1 What is the current situation of technological startup ecosystem in Vietnam? 2.2 What are the achievements and limitations of Vietnam technological startup ecosystem?

The study will focus on the current situation of the ecosystem for technological startups in Vietnam, mapping the main features of its ecosystem Moreover, study will giving the achievements and limitations of the technological startup ecosystem

in Vietnam, then provide recommendations for government to create more favourable conditions for the development of technological startups

1.3 Scope and Objective

The study would examine the situation of startup ecosystem in Vietnam in the period from 2000 to 2017, finding out the advantages and disadvantages of the startup ecosystem in Vietnam From that, the study could give the policy makers some recommendations for promoting the development of startups in the future

1.4 Study Structure

Chapter 1: Introduction

Chapter 2: Literature Review and Conceptual Framework

Chapter 3: Research Methodology

Chapter 4: Findings

Chapter 5: Conclusion and Policy Implications

CHAPTER 2: LITERATURE REVIEW AND CONCEPTUAL

FRAMEWORK

2.1 Theoretical framework for startup ecosystem

2.1.1 Definition and life cycle of technological startup

Definition of startup

The term of “startup” has been bandying around in recent years, accompanying with the appearance of more and more successful startups Moreover, many governments have been making the plans for promoting startups Therefore, what a startup is and whether there are differences between a startup and a small business

“Startup” began to be mentioned much in the 1990s, referring to companies which are small, newly-founded (Manigart&Struyf, 1993; Castrogiovanni, 1996) and have the growth orientation being associated with their technology and innovation orientation (Price & Chen, 1993)

According to Investopedia, startup is a company being at the first stage of its operation “These companies are often initially bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand” Besides, the additional funding from venture capitalists is vital for sustaining their growth in the long run (Investopedia, 2016) The Oxford Dictionaries defines that “startup is a company that is just beginning to operate” (Oxford Advanced Learner‟s Dictionary, 2017), whereas The Cambridge Dictionaries explains that start-up is „„the act or process of starting or making something start” or more specific meaning is “business that has been started” (Cambridge Dictionaries, 2015)

According to Steve Blank, a Silicon Valley serial-entrepreneur and academician, startup is an organization formed to search repeatable and scalable business model (Steve Blank, 2010) Paul Graham, a founder of one of the top startup accelerators

in the world, defines that a startup is a company designed to grow fast Being newly founded dose not in itself make a company a startup Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit” The only essential thing is growth Everything else we associate with startups follows from growths” (Paul Graham, 2012)

From the perspective of revenue, profit, the number of employment and the number

of operation years, there are some definitions for startup According to Kris Gopalakrishnan, startup is any business within the first three years of its existence, employing 50 people or less and gaining the revenue of $10 million dollars or less (Kris Goplakrishnan, 2016) The government of India also set the particular criteria for a business to be called a startup: (i) the number of operation year is less than 7 years; (ii) the its turnover for any of the financial years since incorporation/registration has not exceeded Rupees 25 crores; (iii) it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation (Government of India, 2016)

As can be seen, there are many definitions of startup, and each definition recognizes startup in different aspects In general, it can be said that the startup is a company that is newly-established (the number of operation year is less than 7 years), is working towards innovation and aims to grow rapidly Therefore, the biggest difference between a startup and a small business is that while the startup aims to grow quickly, based on the scalable business model, a small business rarely aims to grow bigger, but to remain its profit

Definition of Technological Startup

The technological startup also has the characteristics of a startup, which are mentioned above However, the technological startup focus more on the technology innovation, and their rapid growth is based on the innovative technology they own According to OECD, technological startups are “Enterprises less than 5 years old, whose creation and development are based on a novel exploitation of an existing or newly developed technology or scientific discovery” This new technology or scientific discovery may or may not have been developed by the institution or individual at the origin of the firm but represents an intangible asset of the firm (OECD, 2010a, 2010b, 2010c)

To sum up, the researcher supposes that a technological startup is a firm that just

begins to operate and has high potential for turning into bigger one, aiming at commercializing new technology

The startup life cycle

The startups also experience the different stages of development, with each stage having different challenges and requirements In order to promote the development

of startups, it is very necessary to understand the development process of a startup

There are many approaches for splitting the development stages of startup According

to David Borward, there are six stages for the development of a startup, namely Discovery, Seed, Validation, Efficiency, Scale and Sustain (David Borward, 2014)

NewCo Factory, a business acceleration service model designed specifically for startups seeking international markets, also launched the different phases of a startup This division consists three main phases, with each main phase having two smaller stages The first stage is called Pre-Startup, including Ideation and Concepting; and the second stage – Startup consists Commitment and Validation; and the final stage – growth includes Scaling and Establishing (NewCo Factory, 2015)

Startup Commons has another way of dividing startup‟s development stages, which includes three main stages: formation, validation and growth (Startup Commons, 2018)

Figure 2.1: The life cycle of startup

Source: www.startupcommons.org

In this thesis, the researcher will use the division of Startup Commons to clarify the challenges and requirements of each stage

2.1.2 Startup Ecosystem

2.1.2.1 Definitions of Startup Ecosystem

It can be seen that start-up ecosystem is a part of the business ecosystem, so first of all the thesis will study about business ecosystem

Business ecosystem

The term ecosystem was first introduced in 1930 by Roy Clapham, and in 1935 Arthur Tansley gave a full definition of the ecosystem: “The whole system including not only the organism-complex but also the whole complex of physical factors forming what we call the environment” (Ellis, 2014) The term ecosystem initially was introduced to refer to biological ecosystems, but later economists have found that there is much in common between biological ecosystem and business ecosystem The term ecosystem began to be used in the economic sphere Rothschild in his book, "Bionomics: Economy as Ecosystem", shows the similarity between biological ecosystem and economy ecosystem Similar to the organism defined by genes and its relationships with prey, competitors and predators, businesses are also determined by not only internal capabilities but also interactions with suppliers, competitors and customers Moreover, as time passes and evolution proceeds, businesses grow or be replaced by other new ones (Rothschild, 1990) Moore (1993) first proposed the strategic concept of a “business ecosystem”, which

is an “extended system of mutually supportive organizations; communities of customers, suppliers, lead producers, and other stakeholders, financing, trade associations, standard bodies, labor unions, governmental and quasi-governmental institutions, and other interested parties” “These communities come together in a partially intentional, highly self-organizing, and even somewhat accidental manner” (Moore, 1998) This definition insisted the significance of the mutual relationship between companies and other stakeholders Hakansson and Ford also supposed that businesses are significantly affected not only by their own capabilities or relationships but also by their interactions ties with other parties within the ecosystem even though many parties not directly involve in the business operations (Hakansson and Ford, 2002) According to Townsend (2009), “business ecosystem”

is the relationship between a business and its environment Gobble (2014) also supposed that in a business ecosystem, companies have the similar role to the biological species in the biological ecosystem, and they are supported by a variety

of stakeholders in the ecosystem

From the above statements, the business ecosystem should be seen as a living and evolving entity, and it includes businesses and other stakeholders relating to businesses in both direct and indirect way, and the mutual relationships between them

Startup Ecosystem and Technological Startup Ecosystem

Similar to business ecosystems, startup ecosystem includes people, startups and other relating organizations in a location (physical or virtual), with these actors

interacting with each other in order to support the creation and development of startups In the technological startup ecosystem, the goal of this ecosystem is to focus more on technological startups rather than all startups, aiming at promoting the creation and development of the technological startups

2.1.2.2 The life cycle of the startup ecosystem

According to Genome Startup (2017), the startup ecosystem will go through four stages of development, each with distinct characteristics in terms of scale, strengths, and challenges, namely activation, globalization, expansion and integration Policymakers need to clarify what ecosystems are at a certain stage of development

so that appropriate policies are in place to promote the development of the ecosystem

The first stage is the activation At this stage, there are about 1000 startup businesses, lack of local experienced mentors, lack of generalized resources for startup development such as finance, policy incentives These shortages lead to the brain drain, or people will go to other startup ecosystem to start a start up in order to utilize the favorable conditions And the main objective of the government in this stage is to promote the participation of local enterprises, investors and talents involved in the startup process

The second stage is the globalization At this stage there are about 2,000 startups, and there are a number of large startup exits, which value more than $ 100 million Resources for startup development have basically formed, but are still lacking The main objective of this stage is to strengthen the connectivity of the ecosystem with global markets, to promote the emergence of world-leading startups

Expansion is the third stage At this stage, there are more than 2,000 startups, and there have been several startup exits worth several hundred million dollars Besides, there is appearance of unicorns entering the global market Moreover, the ecosystem has the potential to produce a series of unicorn worth billions of dollars However, there is still a lack of financial resources as well as a connection to the global market for the development of startups The main objective of this stage is to increase the attractiveness of foreign investors, strengthen the connection with the global market to promote the further development of the startups

The final stage is the integration At this stage, there are more than 2000 startups, with enough resources for the development of startups The main objective of this stage is to continue to optimize policies and taxes to sustain the development of

startups, and to spread benefits of startups to promote overall economic development

2.1.2.3 Components of the startup ecosystem

There are different views on the components of a startup ecosystem One view lists all the people and organizations relating to the startups According to Startup commons (2015), the startup ecosystem would include ideas, inventions and researches, startups at various stages, entrepreneurs, start-up team members, angel investors, startup mentors, startup advisors, other entrepreneurial minded people From a different perspective, the startup ecosystem involves aspects such as ideas, inventions, research, education, startups, entrepreneurs, angel investors, seed investors, mentors, advisors and events and is supported by universities, incubators, accelerators, facilitators, investors, coworking spaces and venture capitalists (Spruijt, 2015)

Another approach is to consider startups as the center of the startup ecosystem and

to list other organizations based on the level of relevance to the startups Moore (1993) supposed that there are layers of interactions surrounding the core business,

in which each layer corresponds to a different level of commitment to the business The first layer could include a company, a supply chain, or a network of several companies taking care of the core business, which are the parties having the close relation to the core business Extended enterprises, the wider view of the supply chain, complementors and second-layer suppliers make up the second layer And, the final layer consists of associations, unions, researching institutes and universities as well as investors and stakeholders (Moore, 1993)

Another perspective is to group organizations into different key groups Sipola (2014) supposed that the components of a startup ecosystem could be grouped as entrepreneurial startups, regional and national policy agencies, incubators/accelerators, business angels and venture capitalists, while Bahrami and Evans (2000) was based on the study of the most successful startup ecosystem – Silicon Valley Ecosystem to claim the core components of startup ecosystem, which includes venture capital, a talent pool of knowledgeable professionals, universities and research institutions, professional service infrastructure, and customers and lead users of innovation

Isenburg (2011) supposed six key domains of the business ecosystem, including: (1)

A Culture; (2) Finance; (3) Support; (4) Policy; (5) Human Capital; and (6) Market

- In the culture domain, a successful startup ecosystem is built on two elements: societal norms and success stories Societal norms means that everyone in the ecosystem has a positive attitude to risk and failure, has creative and innovation thinking, has respect for the entrepreneurs, and the founders of startups must be ambitious entrepreneurs Besides, it is necessary to have visible successes of startups in the ecosystem

- In the finance domain, a successful startup ecosystem needs develop different sources of finance for startups, including micro-loans, angel investors, friends and family, zero-stage venture capital, venture capital funds, private equity, public capital markets and debt

- In the support domain, it includes the following three elements: non-governmental institutions, support professions and infrastructure Firstly, non-governmental institutions include entrepreneurship promotion in non-profits, business plan contests, conferences, entrepreneur-friendly associations Next, support professions consist of advisors on legal and accounting field, investment bankers, technical experts and mentors Moreover, a successful startup ecosystem needs to build necessary infrastructure, including telecommunications infrastructure, transportation and logistics infrastructure, energy infrastructure and zones, incubators, co-working spaces and clusters

- The policy domain in a good startup ecosystem is considered in two aspects of leadership and government In terms of leadership, the policy must demonstrate unequivocal support, ensure the social legitimacy, have open door for advocate, and have entrepreneurship development strategies In terms of government, there should

be support organizations, financial support, regulatory framework incentives, research institutes, and venture-friendly legislation

- The human capital domain should be considered on two aspects of labor and educational institutions In terms of labor, a good startup ecosystem needs skilled workers as well as business entrepreneurs In terms of educational institutions, there should be general degrees as well as specialized training courses for entrepreneurs

- The market domain needs to be considered in terms of early customers and networks For early customers, a good startup ecosystem needs early adopters for proof-of-concept, expertise in productizing, customer references, first reviews and distribution channels In terms of networks, startup ecosystems need to establish entrepreneur's networks, diaspora networks and multinational corporations

To sum up, there are many different views on the components of a startup ecosystem, but with the way of grouping the organizations into the key groups will help to facilitate the study of a startup ecosystem Therefore, in this thesis, the startup ecosystem in Vietnam would be analyzed and assessed according to the six key domains of the business ecosystem of Isenburg

2.1.2.4 The role of the startup ecosystem

To examine the role of startup ecosystems, it is first necessary to consider the role

of each component in the development of startups

A conducive culture

Cultural environment surrounding the entrepreneurs has great impact on the entrepreneurial activity The culture in the startup ecosystem means that people in the ecosystem are willing to do business, be desperate for looking business opportunities, and are not plagued by the fear of failure when starting a business Moreover, in the conducive culture, the successes in the startup activity are highly visible in the media These elements of the conducive culture would be a good indicator of the population‟s entrepreneurial intentions and early-stage entrepreneurial activity (PWC Report, 2013)

The success of the Israel in promoting startup activity is derived from their traditional culture, in which Israeli people are very creative and willing to take risks

to start business People in Israel always look for the better way to solve the problems; therefore, they have many creative ideas which are the source for starting business (Dan Senor and Saul Singer, 2009)

Policy reform and incentive planning

Policy reform and incentive planning include the regulatory framework incentives and the existence of public research institutes and public universities Conducive regulatory framework incentives play an important role in promoting the startup ecosystem, and Singapore is a good example of this Singapore's success in boosting the development of startups comes from the fact that the Singapore government has created favorable policies for start-ups Specific procedures for setting up a new business in Singapore are simple and fast, and the government has a number of policies to support start-ups such as capital support and founder capacity building support Although the focus has only been on startup in recent years, Singapore has risen to the 17th place in the global top startup ecosystem ranking in 2014 by Genome The lightweight policy mechanism in business that has helped not only to

propel the startup of Singaporeans, but this also helped to attract the potential startup founders to come here to start business (PWC Report, 2015)

Startups, especially tech startups aim at commercializing new technologies that offer better products and services to consumers And for startups to do this, there is a great need for innovation, and universities are where technology ideas come in Bharat Rao and Bala Mulloth (2017) have listed the theories relating to the role of universities, which include (1) the source and the catalyst for developing new technologies as well

as a crucial source for talented and qualified employees; (2) the integral for knowledge creation process; (3) contribution to the transfer of knowledge; and (4) commercializing intellectual property generated from university researches It can be seen that universities play an important role not only in creating technologies that are a source of commercialization, but also play an important role in the creation of high quality human resources for startup ecosystems

Availability of dedicated finance

The financial capital for startups in the ecosystem mainly consists of the grants, angel investors and venture capitalists Grants play an important role in formation stage in the startup cycle, while angel capital and venture capital make great contribution to the growth of startups in validation stage and growth stage Capital

is very important for a thriving startup ecosystem, and from the startup‟s perspective, when they are asked about what they need, their answers are always capital (Stebbins, 2017) However, it should be noted that capital need to be compatible with the capacity of startups in the ecosystem, and having too much capital in the startup ecosystem will increase the risk for venture capital investments because weaker projects will also be funded Therefore, a restricted pool of financing distributed through the rigors of the market will help to wipe out the weaker and unfeasible ideas, contributing to reduce the risk for venture capital investments (Isenburg, 2010)

Incubators and Accelerators

Incubators and accelerators have big impact on promoting startup network, and enhance the capacity of the supported startups, leading to a thriving startup ecosystem The accelerators often have the following five major functions: (1) Seed funding; (2) Cohort; (3) Co-location; (4) Programme; and (5) Mentoring (Report of Business School of University of New South Wales, 2016) With the support from the incubators and accelerators, the startup will operate more efficiently, having the higher revenue Moreover, with the startups in the earlier stage, the support from the incubators and accelerators will help them to overcome the initial difficulties in

forming enterprises and commercializing products, facilitating the expansion of enterprises in the next stage (Gerald, 2016) It can be said that in earlier stages in the startup life cycle, the role of incubators and accelerators is very important

2.1.2.5 The interactions within the startup ecosystem

The role of interactions between components is very important for the development

of the startup ecosystem The startup ecosystem with closely-connected components will help promote the development of startups This framework focuses on three key connections within the startup ecosystem, including (1) interactions between entrepreneurs; (2) interactions between formal support organization; and (3) interactions between entrepreneurs and key support organizations

Interactions between entrepreneurs

The links between businesses are very important and extremely valuable It can be said that having many connections with other businesses is a invisible asset of every business, especially for startups when they face a lot of difficulties in the earlier stage of doing business When businesses have connections, they will be able to learn from each other by constantly observing each other's progresses as well as providing feedback to each other In addition, as businesses get connected, young entrepreneurs learn valuable experiences from more experienced entrepreneurs (Motoyama, Y.Watkins, 2014)

Interactions between formal support organization

Support organizations coordinate and link together to varying degrees These support organizations may have common board members as well as the same development strategies and functions At a lesser degree, these organizations can jointly organize events or participate in events organized by other organizations The linkage between these support organizations will help avoid unnecessary and unintentional overlaps in supporting startups (Motoyama, Y.Watkins, 2014)

Interactions between entrepreneurs and key support organizations

Connections between startups and support organizations play an important role in promoting the development of startups A good startup ecosystem needs to create a strong link between startups and support organizations Support organizations provide supportive activities such as mentoring and connecting or financial and functional support like incubation, business model assistance, and pitch practice In the early stages of startups, the support of the support organizations will help startups overcome the initial challenges of starting a business, helping startups grow

and mature With mentoring activities, support organizations offers guidance base

on startup‟s situation, needs and passion (MentorDoctor, 2002), and the startups could learn many valuable knowledge and skills from their mentors (Wild J et al, 1999) Moreover, when a startup is supported by a support organization, they could join the grant recipient community, which helps them to expand their connections with other startups, mentors, advisors; and to have bigger chances in impressing the potential investors or business partners (Pavlova, 2014)

2.1.2.6 The Startup Assessment Criteria

According to the Global Startup Ecosystem Index in 2012 by Genome, startup ecosystems are evaluated based on the following eight criteria: Startup Output Index, Funding Index, Company Performance Index, Mindset Index, Trendsetter Index, Support Index, Talent Index and Differentiation Index

- The Startup Output Index reflects the total activities of startups, evaluating the population size and the maturity of startups in the assessment region

- The Funding Index assesses whether the risk capital in the startup ecosystem is active and comprehensive or not

- The Company Performance Index makes evaluations of the total performance and performance potential of startups in a given startup ecosystem, considering the revenue, job growth and potential growth of startups

- The Mindset Index assesses how well population in a given startup ecosystem want to become an entrepreneur, and how people face to failures and risks

- The Trendsetter Index evaluates how quickly the new technologies, management processes and business models are adopted by a startup in a given ecosystem

- The Support Index evaluates the quality of the startup ecosystem support networks, for example the quality of the incubators and accelerators

- The Talent Index evaluates the talent of the startup founders, based on the following elements: age, education, startup experience, industry domain expertise, ability to mitigate risk and previous success rate

- The Differentiation Index evaluates the differences between other startup ecosystems and the Silicon Valley startup ecosystem in terms of demographics and the types of companies starting in the Silicon Valley

By 2017, however, there has been a shift in the way ecosystem startup is assessed

on the Global Startup Ecosystem Report by Genome The startup ecosystem is measured based on the following criteria: Performance, Funding, Market Reach, Talent, Startup Experience and Resource Attraction

- The Performance of the ecosystem is assessed by the startup output (the number of startups in a given startup ecosystem), the exit value and overall startup ecosystem value of a given startup ecosystem

- The Funding of the ecosystem is assessed in two ways: the access of startups to finance source and the quality of the finance source The access of startups to finance source is based on the total amount of investment funds for startups and the investment funds per startups in a given startup ecosystem And, the quality of the finance source is identified by the presence of experienced venture capital firms

- The Market Reach of the ecosystem is assessed by both the local and global market reach of startups These measures are based on the proportion of foreign customers, the National GDP as well as how well the startup ecosystem helps startups go global

- The Talent of the ecosystem is assessed in three ways: the access of startups to the labor force, the quality of the labor force for startups and the cost of the labor force for startups

- The Startup Experience of the ecosystem is assessed in two ways: team experience and ecosystem experience The team experience is based on founder hyper-growth

or unicorn experience, advisers with equity, and startups providing options to all their employees The ecosystem experience is based on the number of exits above

$50 million USA dollars within the last 10 years

- The Resource Attraction assessed how attractive a startup ecosystem is to the foreign startup founders as well as investors

Based on these assessment criteria combined with the elements of a startup ecosystem, it is possible to provide assessment criteria for each of the components

of the ecosystem as shown in the Table 1.1

Table 2.1: Summary elements for the technological startup ecosystem and

assessment criteria Parts should be set up Assessment Criteria

2 The exit value of startups

Culture Societal Norms

Success Stories

1.Tolerance of failure, risk 2.Innovation, creativity 3.Social status of entrepreneur 4.Ambition, drive, hunger of startup entrepreneur

1.Visible successes of startup 2.The media exposure of startup achievement

Finance Micro-loans

Angel investors Friends and family Zero-stage venture capital Venture capital funds Private equity

Public capital markets Debt

1 The access of startup to finance resources

2 The quality of the finance resources

Supports Support Organizations

Support Activities Research Institutes

1 The access of startup to supports

2 The quality of the supports

1 Support institutions

2 Finance support

3 Regulatory Framework Incentives

2 Collaborate with outside businesses to develop startups

Market - Local market

- Global market

The National GDP The proportion of foreign customers

Source: Decomposed by author

First of all, many OECD countries have issued policies which support for proof of

concept, patenting, technology and commercialization services Constructing

conceptual proof is an important step in the transformation from research results to possible commercial applications In addition to the advantages of protection, patents provide an intangible asset that makes access to angels and venture capital easier Take Australia for example The government of Australia implemented Commercialisation Australia which is a government initiative started in early 2010, helping researchers, entrepreneurs and innovative firms turn their intellectual asset into successful commercial projects This scheme support successful applicants in the commercialization process, providing assistance being suitable with each applicant in order to assure the success of applicants in the commercialization process There are also case manager who take responsibility in guiding successful applicants through the commercialization process (OECD, 2011)

Secondly, governments in European nations have policy for promoting the role of

universities in promoting the formation of startup businesses by encouraging the third mission of the university For example, the university's role in Germany has

evolved to an „entrepreneurial university‟ due to its „third mission‟ of economic and social development (Fuerlinger at el, 2015) In addition to research and teaching, the universities must promote the birth of new companies which develop based on advance technology In order for universities to pay more attention to the implementation of their third mission, the allocation of budget to the university in many OECD countries depends on the results of third missions (OECD, 2011)

2.2.2 Experience in finance support for technological startups

Firstly, the government should actively participate in supporting the initial

investment capital for technological startups According to OECD‟s report 2011,

the government should play the bigger roles in supporting the startups in the first development stages, and the private sector should participate in the later growth periods Moreover, it is necessary to have the cooperation between public and private sector to promote the development of startup One of the key measures in promoting startup development in OECD countries is the formation of private equity funds with the participation of the state, calling the “fund of fund” model This model has helped to promote the development of private venture capital funds

as well as to utilize the state capital more efficiently The examples of Israel‟s Yozma Fund, Finland‟s Finnvera and New Zealand‟s NZVIF are typical of the success of the “fund of fund” model (Lerner, 2009; OECD, 2011)

Secondly, governments in OECD nations also focus on promoting angel

associations and networks so as to promote the access to angel investors of startups The networks of angel investors play an very important role in promoting

the development of startup According to OECD report, “National angel associations, or federations of networks, play a very important role in developing the angel market by raising awareness about angel investment, collecting data, providing training and liaising with policy makers” (OECD, 2011) For instance, the government of Spain has issued policy which subsidises the creation and development of business angel networks in order to connect groups of private seed capital companies with firms looking for financing, promoting the development of startups The supported networks will be covered the wages and operation costs for technical personnel running the network (OECD, 2013)

2.2.3 Experience in promoting the access to global market

In order to promote access to the international market of startups, startups need the support of the government to increase their understanding of foreign markets In Germany, the government has had one initiative that aims at increasing the chances

of international expansions of German startups is the German Silicon Valley Accelerator (GSVA) The project was founded in 2012, helping to connect startups

in Germany and Silicon Valley The startups coming from Germany could have chances to get insights about the US market and to be guided by the mentors coming from the Silicon Valley (OECD, 2013)

CHAPTER 3: RESEARCH METHODOLOGY

This chapter explains the research methodology which is used to answer the research questions It first discusses the selection and rationale of research method, the data collection, and the research process

3.1 Selection and rationale of research method

The study is aim to map the current situation of the technological startup ecosystem

in Vietnam, finding out the achievements and limitations in the ecosystem This study is as a formulative and exploratory study because the technological startup ecosystem in Vietnam has been an early stage of the development process, and there have been limited researches on this subject Therefore, qualitative methodology is most suitable for the study; and the reason for this choice of method is because it is most suited for social and cultural phenomena and good for exploratory research (Myers, 2013) With the qualitative method, the study could describe in detail the phenomenon, providing deep understanding and reflecting the phenomena from different points of view

3.2 Data Collection

Collis & Hussey (2014) supposed that primary data are “generated from an original source such as your own experiments, surveys, interviews or focus groups” In this research, primary data is collected from the in-depth interviews with stakeholders of the technological startup ecosystem in Vietnam The author conducts the semi-structured interviews, which give the author much greater freedom to ask, in case of need, supplementary questions or at times he may omit certain questions if the situation so requires (Kothari, 2004) Meyers (2013) also suggested that this type of interview sits somewhere in between structured and unstructured interviews as it consists of key questions to be covered but it does not force the interview to go precisely as the prepared questions instruct Moreover, semi-structured interviews also provide the researcher with the opportunity to „probe‟ answers, encourage interviewees to explain, or build on, their responses (Saunders, et al., 2016) A list

of interview topics and suggested questions were prepared beforehand for the structured interview (See Appendix 1)

semi-According to Myers (2013), the quality of interviewees is very important in qualitative research as it will help to avoid the collecting of irrelevant data Therefore, selected interviewees are people who have much experience in the field

of technological startup, coming from different elements in the technological startup ecosystem This can help to provide different perspectives on technological startup ecosystem in Vietnam, helping to provide a comprehensive picture of the technological startup ecosystem in Vietnam All interviews had the length ranging from 15 to 30 minutes, and were taken notes with permission from informants Interviewees‟ information is presented in the table 3.1

Table 3.1: List of interview partners

No Position/Role Institution/Organization

4 Event Specialist Innovation Partnership Programme (IPP)

6 Angel Investor

7 Startup Co-founder Smile (Fintech Startup Project)

8 Startup Co-founder Lalala (Online Travel Startup Project)

9 Coordinator Officer Hatch Coworking Space

Besides, in order to insure anonymity, the researcher used pseudonyms to identify interviewees, for instance – IN1, IN2, and IN3 These codes were established according to the following rules: IN = Interviewee And, the number indicates interviewees‟ serial number shown in the Table 3.1

Secondary data are based on a large amount of trustworthy database including books, documents, company reports, organizations websites and also newspaper

The study was performed according to the schedule in the figure 3.1

Figure 3.1: The Research Flow

- International experience in promoting the technological startup ecosystem

- Current situation of the technological startup ecosystem

- Reviews of the technological startup ecosystem

- Proposed solutions for the development of the technological startup ecosystem

- Mapping current situation of each component in the technological startup ecosystem

- Compiling achievements and limitations of each component in the technological startup ecosystem

- Suggesting policy implications to overcome the limitations of the

technological startup ecosystem

CHAPTER 4: FINDINGS

4.1 Overview of technological startup in Vietnam from 2000 to 2017

By the end of 2016, according to Techinasia, Vietnam has about 1,500 startups, being more than China, India and Indonesia in term of the density of technological startup per capita (2,100 startups in Indonesia; 2,300 startups in China and 7,500 in India) By the end of 2017, Vietnam has about 600,000 enterprises, including about 3,000 startups, the majority of which is the technological startups, according to the Ministry

of Science and Technology It can be said that after a year of launching the startup nation program, the number of startups as well as technological startups in Vietnam has increased dramatically, from 1500 to 3000, partly reflecting the efficiency of development policy on technological startups and marking a milestone in the development of technological startups in Vietnam

Looking at the development of technological startups in Vietnam to date, this can be divided into four main waves of startups

The first wave of startups began in the early 2000s, with the emergence of technological startups in the information technology sector The prominent names in this first wave of start-ups include VNG, VN Corp and Vat Gia, and so far these companies are still prominent technological startups in Vietnam, especially VNG with

a market capitalization of nearly $ 377 million (ThanhThuy, 2017) The success of the three companies mentioned above is the contribution of IDG Venture Vietnam, as all three companies received investment from IDG In the period of 2004 - 2006, IDG Venture Vietnam poured capital into a number of startups with a total investment of $

100 million (Do Anh Minh, 2014)

The next wave of technological startups started in the late 2000's, with the participation of the Cyber Agent Ventures in Vietnam The technological startups generated in this period were oriented towards the provision of online services This period saw the birth of a number of e-commerce companies such as Vatgia, 5giay, Cungmua, Nhommua, Muachung, Hotdeal, then Lazada, Zalora The period from 2012

to 2014 also witnessed the growth and then the fall of a series of startups that resembled the model of the American e-commerce company - Groupon Typical technological startup businesses for this period include Tiki.vn and Nhac Cui Tui (Do Anh Minh, 2014)

The third wave of technological startups focused on the development of mobile application software and the expansion to the international markets This phase was inspired by the success of the application for the mobile phone - Flappy Bird in 2014, which was the most downloaded application on the App Store as well as on Google

Play in just 26 days Another typical startup for this period is Appota, which has begun

to expand to a number of countries in the region after establishing its market share in the domestic market (Hoang Nam Le, 2016)

The fourth wave of technological startups started in 2016 with the milestone being the startup nation program launched by the government Having received government attention for the development of startup businesses, technological startups have had the opportunity to shape and develop into a more productive and vibrant startup ecosystem Startups have been accompanied with more and more stakeholders in the ecosystem like support organizations, the investors, the media to help them grow and mature The dramatic rise in the number of startups from about 1,500 in 2016 to nearly 3,000 in 2017 was the clear demonstration of this new wave

According to the annual report of the Topica Founder Institute (TFI) in 2017, the number of investment deals or the number of technological startups who received investment increased significantly in the period from 2011 to 2017, surging from 10 to

92 Having started at just 10 in 2011, the number of investment deals increased to 24

in 2012, remaining at this point till 2014 The last three year in the period experienced the substantial rise in the amount of investment deals, hitting a peak of 92 in 2017 These figures show that the startups in Vietnam have been developing, increasingly getting more attention from investors

Figure 4.1: The number of investment deals in the period 2011 - 2017

Source: Report of the Topica Founder Institute (TFI) in 2017

Not only did the increase in the number of investments, the value of investments also increased rapidly According to report of the Topica Founder Institute (TFI) in 2017, the value of investment deals has risen sharply from $ 137 million in 2015 to $ 205 million in 2016 and $ 291 million in 2017 This indicates that investments in startups