The draft, which is now being raised for public comments, would regulate the establishment, management and operation of venture capital funds for start-ups in Vietnam. The draft circular said that venture capital into start-ups was defined by investors contributing funds in a start-up or by buying stakes to launch the business or increasing equity when the business had not earned a pre-tax profit.
It would take only three days to launch a venture capital fund in Vietnam, according to the draft circular. In addition, the operation of a venture capital fund would not apply regulations on the equity investment fund. A venture capital fund could raise additional capital from existing members or new members but would not be allowed to borrow money for investments. The draft circular was raised amidst conditions that the wave of start-ups in Vietnam were in their infancy with several successful examples which managed to raise money from foreign venture capitalists. However, a majority of Vietnamese start-ups were still struggling to find funding.
The draft would trigger a wave of venture capital funds, especially from the private sector, in start-ups, according to the ministry’s Agency for Enterprise Development (AED). The AED said that while success stories of Apple, Facebook and Uber were proving that start-ups were changing the world and creating huge economic values, Vietnam saw start-up as a new driver for growth which relied on innovations rather than by undermining natural resources, labour and capital.
Facts showed that many angel investors wanted to start a fund for start-ups but the requirements for the foundation of an investment fund following the Law on Securities were very strict. In addition, an equity investment fund and venture capital fund were different. The former invested in firms with revenues, profits or those listed on the stock exchange, while the latter provided seed funding in the early-stage of start-up firms with perceived long-term growth potential.
At a conference on improving national competitiveness, Nguyen Quoc Toan, Deputy Head of the Party Central Committee’s Economic Commission, said that funds for start-up businesses should be developed to promote innovations and help develop a start-up nation. Deputy Prime Minister Vu Duc Dam said at the National Start-Up workshop held on March 30 that the Vietnamese Government was willing to invest and join hands with private investors to support the national start-up community.
Vietnamese start-ups need consultancy supports on tax policies, legal, finance and accounting, as well as training courses to help them become professional entrepreneurs. Specifically, an electronic platform would be established on the network infrastructure of the National Agency for Science and Technology Information (VISTA). The project would also build a database and a system connecting domestic and foreign specialists, especially overseas Vietnamese with experience in start-ups and successful entrepreneurs in the science and technology sector.
In addition, there would be training courses specialising in attracting funding and building business models for start-ups with support from the Government. A project would call for cooperation from institutes, schools and localities to build the best working environment for start-ups. The project would also propose a mechanism for the association between start-up centres and investment funds to help them access funds and facilitate them in divestment.
