Vietnam has a huge young population that is very active on internet, mobile and with highly national enthusiasm for technology, startups and entrepreneurship, and as a result, vietnamese startup ecosystem is rapidly growing in cities like Ho Chi Minh, Hanoi and Da Nang, aiming to become a modern industrialized state by 2020.
In order to achieve that, the national government has planned to develop a functioning national innovation system, fostering its startup ecosystem and supporting the growth of innovation via Startups and SME's. The project has set the following targets for 2020:
Complete the main legal framework for a startup ecosystem; run an online portal for the National Innovative Startup Ecosystem; support about 800 startup projects and 200 startup enterprises, of which 50 will raise follow-on investment from private venture investors or will undergo mergers and acquisitions worth about 1 trillion VND (about 50 million USD). By 2025, the project is expected to have supported 2,000 startup projects and 600 startup enterprises, of which 100 will have raised follow-on investment from private venture investors, or will have undergone mergers and acquisitions worth about 2 trillion VND.
One key actor to support these goals is the Innovation Partnership Program (IPP), that is an Official Development Assistance (ODA) program financed jointly by the Governments of Vietnam and Finland. IPP has been supporting the project draft “National Program to Support Innovative Startup Ecosystem in Vietnam by the year 2025” by working with policymakers.
One of the identified top priorities along with the national government is to get in place a solution to enhance partnering, online information sharing, matchmaking, communication and benchmarking to mention. All of this should be done in a global context reaching out international innovation and startup networks.
Problem to solve
One of the key challenges in this work is to maintain a holistic picture of the constantly developing and evolving ecosystem and measure the results of different actions and sub projects and to share these openly for the benefit of everyone in the ecosystem.
Digital online services and solutions play a key role in scaling knowledge sharing and training functions, as well as to increase reach, accessibility and transparency of many of these service functions. Several actors within the ecosystem have identified online solutions as important element to bring reach, efficiency and scale to their services and for most basic online tools, like newsletters, event management, community management, application management, CRM etc. are crucial part of their basic operations. At the same time new talent, potential innovative startups, business angels, mentors, etc. are expecting to get all relevant information online and on time.
Due there is usually no single enabling or coordinating party taking holistic responsibility of the complex digital and online aspect of the ecosystem connectivity and development, the digital aspect of the ecosystem thinking and development leds this key dimension to be overlooked, and as a result, online presence and functions remain disconnected and siloed within the ecosystem. It’s also common that this problem is usually identified only at much later stage of the ecosystem maturity. After the ecosystem thinking have already spread in other cooperative levels and cooperative activities have really started to work, as that is the natural time when the sharing of the information related to mutual coordination, connecting service processes etc. are happening. At that point the problem with disconnected services and processes starts to be identified, along with realization to start harmonizing terminology and KPI’s of similar service functions across startup development phases.
Also typically at later ecosystem maturity level, it becomes more difficult to start replacing and connecting various existing digital tools, due software limitations, software license agreements in place, wanting to use familiar tools already in use etc., than it would be to have been able to start this connectivity thinking at the earlier ecosystem maturity level.
When the online and digital tools are considered and designed with more holistic ecosystem thinking and implemented and coordinated alongside with other ecosystem enabling and development actions, it is possible to avoid facing many of the problems later on and instead use the digital side to speed up the ecosystem development - and best scenario, to help a new or early maturity ecosystem to “skip ahead” several years of development.
Startup Commons team, due to our proven international track record on startup ecosystem development, supporting tools and holistic digital ecosystem solution used by ecosystems, was selected to carry out this national pilot project.
The collaborative work for Vietnam digital ecosystem is being conducted step by step in very transparent manner to achieve consensus and solid progress within the key stakeholders of innovation ecosystems and it has been splitted into three different phases:
From phase 1 in June, two weeks full of meetings, workshops and one-to-one discussions with local/national public and private players in the vietnamese ecosystem, some outcomes deserve to be highlighted:
As we are moving to actual pilot phase to implement digital ecosystem solution in Vietnam context, by setting up the base version with geographical scoping in Da Nang, Hanoi and Ho Chi Minh ecosystems, along with Vietnam national ecosystem to showcase these local startup ecosystems and Vietnam as a whole also for further deployments, implement related communication framework and roles to support the platform at core level, define needed key operative roles needed to support the development and management of the different ecosystem functions at different levels, train and empower local teams and people to key roles to take “ownership” of the key functions, showcase how platform implementation and different development tracks can be managed to further accelerate the progress, and support in finding a good balance for PPP (Public Private Partnership) regarding the digital platform in different cities going forward. And eventually, to pass on the ownership and core responsibility of the platform the logical entity, entities or consortium to conclude the pilot phase.
The progress of the Vietnam Digital Ecosystem pilot will be followed closely on our blog.
If your city or your country has a current action plan in place to support entrepreneurship, startups, innovation and you want to enhance the use of data and evidence to improve startup supporting services, inform local decision-making and engage all key players that are part of the startup ecosystem concept, contact us and let's get started.
National and local governments around the world often struggle to design and implement new policies to foster the creation of new firms. The rationale is that small- and medium-sized enterprises (SMEs) are engines of labor creation. For example, in the U.S., according to the Census Bureau, SMEs employ about half of the labor force. This share is typically higher in developing nations.
Nowadays, some of these policies focus on hi-tech start-ups. Start-ups can not only create employment in the medium run, but can also innovate and push the world’s technology frontier further. Furthermore, some would claim that the externalities generated in a vibrant start-up environment would justify a market intervention.
But, how do you get the entrepreneurship ball rolling in a developing country? Clearly, limited financing is an important market failure that keeps small firms from emerging more frequently in developing countries. Volatility and weak institutions in developing nations imply lending risks are high even for large and already established firms. Entrepreneurs often lack collateral or other guarantees required by formal lending institutions. On the other hand, equity investors could make sizeable profits by hedging funds in several start-ups. It’s a classic “chicken-and-egg” problem: Lack of financing constrains the cultivation of entrepreneurs, and without entrepreneurs there are not enough hedging opportunities to attract investors. This “failure,” together with the possible externalities that the existence of these start-ups could generate, could be a good enough reason to justify government intervention. But, what is the optimal policy here?
There are two possibilities: Fund the firms or fund the funds. The former implies the government could act as an investor in the market by selecting and investing in new start-ups. This is one way the government could share a big chunk of the aggregated risk. This, in turn, could attract private investors to also join the game once there is enough deal flow (i.e. a big enough mass of start-ups waiting to be financed). The latter actually implies that the government would invest in venture capital funds, incubators and accelerators which will be the ones selecting and investing in new firms. This is another way for the government to share the risk with the private investors, thus solving the supply problem. Yozma, a fund of funds established by the Israeli government and later privatized, is an example of how this policy can be made to work (you can read more on the Israeli innovation ecosystem here).
Which policy is the right one? It is an open debate. Critics of “funding the firms” would say that the government incapable of deciding which firms should be funded and which should not, and such a policy generates risks of rent-seeking and corruption. They would claim that the private sector would do a much better job of selecting projects to invest in, and therefore “funding the funds” is the better approach. However, “funding the funds” is also problematic: The government would be subsidizing already wealthy investors, possibly crowding out some private investment.
All in all, both policies face a common issue: Taxpayers do not directly benefit, at least in the short run, from either strategy. As resources are limited, particularly in developing countries, it can be highly unpopular for a government to devote public resources to innovation and not to more pressing social issues. But at the same time failing to do so will keep us on our current path of increasing inequality between rich and poor countries. Policymakers understand this, and that is the reason innovation policies are becoming more and more important in the agenda for many governments in developing nations.
Financing, though, is only one of the elements required for a vibrant entrepreneurial environment. The more we see governments tackling the innovation conundrum, the more evidence we will be able to document, thus getting us closer to finding the right policy mix that will boost entrepreneurship and innovation in developing countries.
The author of the text is Dany Bahar, (@dany_bahar), PhD, Nonresident Fellow at the Brookings Institution’s Global Economy and Development program. It was originally published at http://www.brookings.edu/blogs/up-front/posts/2015/05/20-innovation-policy-conundrum-developing-countries-bahar by The Brookings Institution. All rights reserved by The Brookings Institution. Photo credit: Boegh. The photo was originally published on Flickr. It has been used to illustrate this text under Creative Commons Attribution 2.0 License terms. No changes have been made.
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