Entrepreneurship in Frontier Markets: Key Takeaways from Vietnam and Myanmar
I recently took a trip to Myanmar and Vietnam to learn more about doing business in frontier markets. One will find varying definitions of ‘frontier markets’ but most can agree that this term applies to generally high-growth countries that are either too small or too under-developed to be considered emerging markets. MSCI provides the most widely accepted market classification.
In particular, my team spent a little over a week learning about the state of innovation and entrepreneurship in each country. We focused on three of the biggest driving factors that influence the entrepreneurial landscape.
- Cultural Norms & Support: Is risk-taking encouraged? Do educational systems support the type of skills that entrepreneurship requires?
- Government Influence / Regulatory Framework: How does the government support the startup ecosystem?
- Financing: What does the funding landscape look like? Which actors — amongst friends & family, angle investors or in venture capital, private equity, and debt markets — are most active?
We met with startup owners, venture capitalists, business incubators and at co-working spaces. I walked away excited about the future of these vibrant markets and impressed with the speed at which the startup culture is developing in the region. Here are some of my biggest takeaways:
- Low intrinsic motivation for entrepreneurship in Myanmar. Young people don’t find the startup scene alluring. There is a lacking entrepreneurial spirit. Stability and higher wages are valued more and those factors drive the workforce toward government or multinational employers.
- Human talent is the scarcest resource in Myanmar. Decades of military rule have left a severely under-resourced education system. Finding skilled labor is the biggest impediment to growth that startups face. Many firms resort to extreme retention practices such as monthly raises for top employees.
- The startup scene in Vietnam is overheated at the moment. Contrasted with Myanmar, the millennial Vietnamese population is crazy for entrepreneurship. There are pitch contests and incubators popping up everywhere. However, as one venture capitalist noted: the best startups never come from those contests.
- The Vietnamese government is only vocally supportive. While the government pronounced 2016 “The Year of Start-Ups”, there has been very little constructive action. The government has actually taken action with potentially negative impacts. For example, the introduction of Article 292, which criminalizes non-registration of companies, will likely stifle the start-up scene as the business registration process in Vietnam is time-consuming, onerous and convoluted.