Greening Vietnam: Australia and Vietnam’s path to sustainable start-up success

What is the current state of Vietnam’s start-up ecosystem? 

Vietnam’s start-up ecosystem has experienced substantial growth in recent years, positioning itself as a favourable destination for investors. With a young and increasingly educated workforce, entrepreneurial culture, and a rapidly developing economy, Vietnam is a rising start-up hub in Southeast Asia. Home to under 1,600 start-ups at the start of the COVID-19 pandemic, there are now more than 5,000, according to start-up data platform Crunchbase. Start-ups secured over $7 billion in funding from 2022 to 2023, almost triple the $2.4 billion received in 2021. Fintech is the most funded start-up sector, accounting for 38% of all VC investments in 2023. Other popular sectors are education tech, property tech, e-commerce, and enterprise solutions. 

Green climate start-ups are a small but growing cohort. According to Crunchbase, there are 122 sustainability related start-ups in Vietnam. The number is likely higher as some set up headquarters in Singapore but operate in Vietnam. These ventures are characterised by a focus on eco-friendly technologies and solutions aimed at addressing environmental challenges. 

Venture capital investors are showing a keen interest in climate start-ups. Vietnam Silicon Valley (VSV) Capital – a government initiative established to stimulate the growth of technology starts-ups – has invested in over 80 start-ups with an interest in the green sector. Touchstone Partners has invested in prominent green start-ups including Selex Motors, a smart electric motorcycle manufacturer, agritech firm Forte Biotech and the energy digital platform Stride. And Earth Venture Capital, a VC firm headquartered in Ho Chi Minh, invests in early-stage climate tech start-ups in Vietnam and globally. 

The government has also launched a range of programs to support development of the start-up ecosystem, including incubators, accelerators and universities. Notable programs include National Program 844, Vietnam Silicon Valley, National Innovation Centre, and the National Innovation Start-up Portal. 

What are the challenges? 

However, there are several challenges hindering start-up growth in Vietnam. Vietnam currently lacks a strong policy and regulatory framework that promotes an innovation environment and needs to invest more to overcome weaknesses in the job readiness of graduates. This presents challenges for start-ups in securing funding, attracting, and retaining talent, and navigating complex regulations. Administrative barriers have caused some start-ups to set up a parent company abroad, particularly in Singapore, to receive capital from investors. 

Additionally, despite the potential for corporations to provide significant support to start-ups, there is currently minimal corporate investment in the ecosystem. Getting pre-seed and seed funding is one of the biggest challenges for eco-focused startups. Entrepreneurs lack access to the right technologies, training, network, mentorship, and strategies. 

What are the opportunities? 

Start-ups and investors can build on the momentum of the close bilateral relationship, recently elevated to a Comprehensive Strategic Partnership, to help foster innovative approaches to the green transition. There are multiple ways this can occur. 

Start-ups and investors should be aware of Australian Government initiatives aiming to foster green innovation. Initiatives include a $2 billion finance facility to help fund green energy and infrastructure investment in Southeast Asia, the establishment of Landing Pads in Ho Chi Minh City and Jakarta and the Aus4Innovation Program, among others. The Landing Pad in Singapore in particular serves as a successful model for businesses, having facilitated technology scaling and market entry for 120 companies, resulting in 61 commercial outcomes valued at $17.5 million. 

Venture capital firms and incubators can create targeted funds for climate investment. Such funds are already gaining traction. Australian early-stage investor Investible has launched a global climate tech fund with VC investor Mandiri Capital Indonesia. And Asian Development Bank Ventures is aiming to raise $300 million for a new fund to back climate focused start-ups in Asia. Investors should remain informed about new funds that are being established and seek out co-investment opportunities, taking advantage of their knowledge of the region and specialist expertise. 

Start-ups considering Vietnam should tailor their offerings and business model to fit the Vietnamese market and its demands. The agricultural sector in particular stands to gain significant advantages through the application of climate technologies by start-ups, as covered in the Asialink Business-Beanstalk report: Accelerating AgTech: Australia’s opportunity in Vietnam. Given Vietnam’s agricultural sector accounts for around one third of Vietnam’s greenhouse gas emissions and one third of employment, greening agriculture will help meet targets, boost productivity, and diversify the livelihoods of farmers. The report highlights the potential for smart agricultural technologies to drive sustainable growth, for key exports such as coffee, rice, and seafood. 

It is becoming increasingly important to give eco-focused startups the support and investment they need to make Vietnam’s net-zero transition possible. Australia is well placed to help grow Vietnam’s green tech start-up ecosystem and contribute expertise, resources, and collaboration opportunities to accelerate the development and adoption of sustainable solutions in the country. 

Antonia Robson is a Senior Associate in the Advisory & Insights team at Asialink Business.