Venture capital fund set up in Hanoi to foster  innovation ecosystem

THE HANOI TIMES — Hanoi is set to launch a venture capital fund backed by public investment to unlock private capital and accelerate the growth of its innovation, technology, and startup ecosystem.

According to Article 36 of the revised Capital Law, the venture capital fund is eligible for state budget funding.

Designed as a nonprofit "seed capital" model, the fund aims to stimulate private-sector investment, promote digital transformation, and bolster the capital's knowledge-based economy.

Le Hong Son, Standing Vice Chairman of the Hanoi People’s Committee, was quoted by Hanoimoi Newspaper as saying that the fund's profits will not go to the state coffers but reinvested in future funds aligned with priority sectors. 

"The state will not directly manage the fund, but rather delegate management to a qualified professional entity. Investment decisions will be made collectively by stakeholders to ensure transparency and effectiveness," he noted.

As outlined in the draft proposal, the city’s Venture Capital Fund will have an initial charter capital of VND2 trillion-VND2.5 trillion (US$76.4-US$95.5 million), and the city will hold no more than 49% of it.

The venture will also offer training, mentorship, and global connectivity to help innovative startups develop high-tech products and enhance their long-term competitiveness and sustainability.

Bridging the early-stage funding shortage

Though recognized as a national hub for scientific research, education, and innovation, Hanoi continues to face significant challenges in cultivating a robust innovation ecosystem. One such challenge is the shortage of early-stage venture capital for high-tech startups.

“We lack an investment tool for funding high-risk sectors where private venture capital is unwilling to do so,” said the standing vice chairman. "Establishing the city’s venture capital fund is a necessary step to unlock broader societal resources for innovation."

Although private funds such as IDG Ventures, ThinkZone, and VinVentures support Vietnamese startups, they often overlook Hanoi’s priority sectors, including AI, semiconductors, smart mobility, and urban tech, due to their profit-driven focus.

The planned venture capital fund will follow a “fund of funds” model, investing in specialized sectoral funds rather than directly in startups. This approach lowers risk, sharpens investment focus, and maximizes the mobilization of private capital.

A defining feature of the fund is that the government will set strategic priorities while leaving investment decisions to professional fund managers who will be selected transparently to ensure market efficiency and independence.

Local insiders have suggested tax incentives, reinvestment support, and liquidity mechanisms, drawing from models in Israel, Singapore, and South Korea.

IDG Capital’s Tran Viet Duc pointed out that targeted public capital is important in high-risk sectors for appealing to private investors. Bui Thanh Do of ThinkZone emphasized the need for reinvestment incentives and attractive policies to retain capital locally.

Business leaders from Viettel, FPT Software, and Google Vietnam praised the fund’s vision and encouraged focusing on urban challenges, digital infrastructure, smart mobility, and green cities to provide startups with a clear problem to solve and immediate market access.

The establishment of the venture capital fund represents a breakthrough in Hanoi’s efforts to drive science, technology, innovation, and digital transformation. At a February meeting on the implementation of Resolution No. 57, Tran Sy Thanh, Chairman of the Hanoi People's Committee, said the fund reflects the city’s ambition to become a leading regional hub for science and innovation.

Under the resolution, Hanoi aims to establish itself as the leading science and innovation hub in Southeast Asia by 2030 and as one of the top hubs in Asia by 2045, with a thriving knowledge-based economy that will raise the city’s global competitiveness.