B2B SaaS Landscape in Vietnam
Summary
Software as a service (SaaS) is popular globally because it is less expensive and time-consuming to adopt SaaS than to have the software installed on local servers. 73% of organisations say nearly all (80%+) of their apps will be SaaS by 2020. Companies use on average 16 SaaS apps every day.
In Southeast Asia, the cloud computing market revenue is estimated to reach $40.32B by 2025. Among Southeast Asian countries, Vietnam is the fastest-growing economy in terms of cloud computing spending. Between 2010 and 2016, Vietnam’s spending on cloud computing grew by 64.4%.
However, despite the upward trend of SaaS in Vietnam, the market is not yet very attractive. Vietnamese companies are still resistant to change, with only 5–7% of companies adopting SaaS to date. While this presents an opportunity, it means that SaaS providers need to put considerable time, capital and effort into educating the market. Vietnam’s decreasing cloud readiness may as well hinder the growth of SaaS in the country.
With regards to the current landscape of B2B SaaS startups in Vietnam, the most popular categories include collaboration software, sales (retail management) software and customer service software. There are also products in categories such as HR, marketing, logistics and cybersecurity and some others in the no-code space. Many companies offer several products (e.g. Base, Nhanh, Haravan, Sapo, Amis, 1Office) instead of specialising in one. Also, most companies do not target a specific vertical.
There are very few venture-backed startups. These few startups include KiotViet (POS management, $6M), Base (collaboration, acquired by FPT), Uiza (marketing, $1.5M), Haravan (retail management, $50K), Sapo (undisclosed amount), andAbivin (logistics, undisclosed amount).
Key Drivers
1) Businesses looking to reduce operational costs associated with setting up and maintaining on-premises software
2) Businesses looking for higher efficiency, productivity and scalability across different functions
3) The bring-your-own-device trend in the workplace
4) The development of Vietnam’s international connectivity. It is one of the core components of the infrastructure needed to develop competitive cloud services and to enable domestic users to use international cloud services. In 2019, Vietnam ranked 57th in the Global Connectivity Index (up from 101th in 2018).
5) Government looking to support the digital transformation. According to the Cloud Readiness Index 2018, Vietnam’s government regulatory environment has improved over the years.
Key Challenges
1) Vietnam’s cloud readiness is decreasing. It ranked 14th among APAC countries in the Cloud Readiness Index 2018 with a score of 41.1/100 (down from 47.9 in 2014 and 43.9 in 2016). The main weaknesses include power grid and sustainability, cybersecurity, freedom of information, and privacy.
- Power grid and sustainability (stable and continuous access to power, water and sustainability). Vietnam ranked 77th in the global Energy Architecture Performance Index Report 2017.
- Cybersecurity. Vietnam ranked 50th in the Global Security Index 2018 (up from 101th in 2017). Its state of cybersecurity is improving but still lags behind many countries.
- Freedom of information (freedom of data transfers across borders). Vietnam scored 24/100 in the Freedom on the Net Report 2019. A recent cybersecurity law led to more restrictions on the internet by giving the government greater surveillance and censorship powers.
- Privacy. Users will only adopt cloud if their information is secure and held privately without unexpected access by third parties. Vietnam has no unified act to regulate data protection.
2) Businesses are not fully aware of the benefits of SaaS. Many companies still find it a threat to continuity and not worth the effort. In Vietnam, only 5–7% of businesses adopt SaaS. → Difficult to even test and build MVP
3) The B2B sales cycle is long and usually challenging.
Competitive Landscape
Collaboration Software
A notable startup in this category is Base.vn. Base’s Wework has been used and recommended by many businesses. The startup was founded in 2016 by Stanford alumnus Hung Pham and has recently raised pre-Series A round from Nextrans, Beenext, Alpha JWC Ventures, VIISA, and 500 Startups Vietnam. The company had an early exit to FPT Software in 2021.
Other companies: 1Office, Amis, MyXteam, Winerp, WorkTime, UpUpApp
Sales (Retail Management) Software
KiotViet is the leading startup in this category. Last year, the startup raised $6M in Series A round from Jungle Ventures and Traveloka. As of August 2019, they have over 70,000 active customers, who pay a fee of VND160,000 ($6.95) a month.
Other companies: Cukcuk (for restaurants), Nhanh, Sapo, Haravan, TeamCrop, bePOS, Dcorp, ipos
Customer Service Software
There are quite many startups in this field, with Gcalls being the most notable one.
Other companies: Caresoft, AntBuddy, StringeeX, Subiz, Mitek
Conclusions
Should we invest in Vietnamese B2B SaaS companies that have Vietnam as a primary market? Not yet.
It’s difficult for a B2B SaaS company to achieve $100M ARR by being solely in Vietnam, since the market, despite being big, is not quite ready yet — I’ve already mentioned the low adoption and some barriers to growth.
Another reason is pricing. On average, companies pay $1K-$5K/year for a SaaS product, which means that they need 20K-100K customers to be able to achieve $100M ARR. I will leave it to you to decide whether it’s possible.
We should also note that the target customers of B2B SaaS companies are tech-savvy businesses, and tech-savvy businesses will look for global solutions. Thus, proximity or ability to provide customer service in local languages cannot be considered an unfair advantage of a startup. Startups should find other “moats.”
Should we invest in Vietnamese B2B SaaS companies that have clear evidence of being able to go global? Yes.
What we should be looking for in B2B SaaS startups
- People: Strong technical founder, ability to build a great product and an effective, repeatable sales model
- Product: Solves a massive pain point, is defensible (e.g. by leveraging proprietary data, by focusing on a specific vertical, 10X better than existing solutions), and creates immediate switching costs/lock-in.
- Price: Does the pricing strategy make sense? Please see this amazing blog post by Christoph Janz for more information.
- Profit: MRR, ARR (Annual Recurring Revenue, not Annual Run Rate), Gross MRR Churn, Paid CAC, CAC vs. LTV (unit economics), number of paying users (outside of founders’ inner circles)
Startups to watch
A startup that has really excited recently me is Palexy, an AI-powered in-store retail analytics tool. The problem they are solving is interesting: while it’s relatively easy for retailers to track the effectiveness of online marketing campaigns using Google Analytics, there is no way to track the performance of offline actions (e.g. re-arrangement of store windows, re-arrangement of product display, skills of salespersons).
To solve this problem, they use patent-pending AI & Computer Vision technology to transform surveillance camera streamings of retail stores into powerful customer analytics and actionable store health indicators.
In Vietnam alone, there are 800 supermarkets, 150 shopping malls and about 2.2 million retailers. Within one year of operations, Palexy has already had 30 customers who are leading retailers in Vietnam. But of course, the product has enormous potential to go global. The only issue they will probably have is the decline of physical retail, especially after the pandemic.
The team behind it is really strong. The CEO has a PhD in Electrical Engineering from Johns Hopkins University and exited his previous company to Panasonic US. The CTO is ex-Google and holds a Master’s degree in Computer Science from Iowa State University. Other core team members all did their master’s in the US and have unrivalled experience in their field.
Other few interesting companies to watch
- Base.vn (Collaboration): All-in-one platform for SaaS enterprise software, CEO is a Stanford alumnus
- Gcalls (Call Center): Integrated and cloud-based call centre management solution
- CyStack (Cybersecurity): All-in-one cybersecurity platform for businesses
- Uiza (Marketing): Video streaming operating system, Sequoia-backed
- Abivin (Logistics): Transportation management system, CEO is a Cambridge alumnus, winner of Startup World Cup 2019
- Holistic (Business Intelligence): a data platform that allows companies to set up an end-to-end, reusable, and scalable data analytics stack without engineering resources
If you have any feedback about this post or tips and hints about B2B SaaS Landscape in Vietnam, please feel free to comment below or send a direct message to my email: ptrang.ng@gmail.com
