Friday, December 11, 2009

Turning Down Google

What entrepreneur in his right mind would turn down an acquisition offer from Google? Nguyen Xuan Tai, the chief executive of Vietnamese-language search site Socbay, did. He is 26 years old and has no regrets. The self-described PC addict and programming whiz who grew up poor in northern Vietnam has made the gutsy decision to compete with Google.
The way Tai sees it, Eric Schmidt offered him about half what his start-up, formed in 2006 with classmates from the Hanoi University of Technology, is worth. He figures Google may eventually come back with a better deal as a short cut to developing a Vietnamese-language site.
Socbay isn't profitable yet, and operates out of a spartan office in an unfinished building in Hanoi alongside home-made servers. (See photo of Tai with Silicon Dragon's author.) Tai and his venture investors are betting that Socbay can break even within three years by focusing on search over the mobile Web--an area that Google doesn't dominate in Vietnam--and by refining Vietnamese-language search as local content on the Internet expands.
Tai has a chance. Doing local language search isn't simple, as Google discovered in China. And Chinese entrepreneur Robin Li of Baidu beat Google in the mainland. He too turned down an offer from the giant rival, back in 2005, before taking his start-up public.
The tech entrepreneurial spirit in Vietnam reminds me of the super-charged scene I've witnessed in China over the past decade. Many of the same forces--a young, switched-on population, a dedicated group of venture capital investors eager to fund enterprising start-ups, and a fast-expanding marketplace newly opened to commerce--provide a good base.
A digital communications revolution is underway today in formerly war-torn Vietnam. Of the country's 86 million people, a relatively high 26% have access to the Internet, 3 million surf the Web with broadband, and 32 million have a cellphone--with third-generation mobile service coming soon.International venture capital firms naturally have arrived to finance the same kinds of Internet, mobile and gaming start-ups they profited from during the earlier dot-com boom in China (including Baidu, Alibaba, Tencent, Focus Media, Shanda).
Since IDG Group Chairman Patrick McGovern opened IDG Ventures Vietnam in 2005, his firm, which made millions from investing in scores of China start-ups at an early stage, has backed 40 Vietnamese start-ups--including Socbay--from a $100 million fund. (See photo of yours truly with IDG's Henry Nguyen in the Ho Chi Minh City office.) Two other investors from well-known groups busily seeding Vietnamese start-ups with capital are Softbank China & India Holdings and DFJ VinaCapital Technology.I recently had lunch in Hanoi with CEO Nguyen Hoa Binh, 28, a programming ace who started online marketplace Peacesoft in 2001 as a second-year undergrad student at Vietnam National University in Hanoi and later earned a master's from Osaka City University. His fast-growing business, funded by IDG and Softbank, has more than 500,000 registered users, with a goal of 1 million by next year--boosted by an escrow-based online payment service in a market where credit cards and bank transfers aren't common. He was traveling the next day to Shanghai for a meeting with eBay about a possible investment deal to follow up on the partnership they'd formed the year before.
In a Ho Chi Minh City office near the Saigon River, I interviewed another Vietnamese entrepreneur with a story that has echoes of China start-ups in it. Nguyen Thanh Van An, 37, is the chief executive and founder of Internet bookstore, a clone of China's online bookseller a version of Amazon.
He's grown Vinabook to 200,000 customers in five years, and following the lead of Dangdang, aims to become his market's leading online retailer, selling not just books but also software, movies, music and calendars. He's dealing with logistics and deliveries headaches, and handling them in similar ways to Dangdang. Books are delivered by moped, and most customers pay by cash.
Next stop: VinaGame, a $50 million in revenues, profitable business that runs the country's leading gaming and social networking sites. It's being geared to become Vietnam's Tencent or Shanda, two runaway success stories from China's early start-ups.
An avid gamer, Le Hong Minh, 32, started VinaGame in 2004 with other players after getting an undergrad degree in finance from Australia's Monash University and giving up his investment banking career. His start-up, housed in a warehouse decorated with colorful posters of VinaGame's blockbuster hits, (see photos) is upbeat and reminds me of the funky spaces I've seen among leading Web businesses in China. The culture is based on Silicon Dragon entrepreneurship--it has venture capital funding, all employees have stock ownership and the team is like a family, even going on annual camping expeditions together.
The next step? Of course, Le says he's going to take the company public within a few years, ideally internationally so he can benchmark with the best in the business globally.
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