Vietnam opens its doors to venture capital


VietNamNet Bridge – The Ministry of Planning and Investment (MPI) is drafting a legal document on allowing Vietnam to receive the venture capital flow, which is hoped to turn Vietnam into a country with startup movement.

The legal document will guide the establishment, organization and management of venture funds which facilitate startups in Vietnam.
Under the draft document, the procedures for the fund establishment would be simple: it would take three days to set up a fund in Vietnam.
Venture funds are formed from capital to be contributed by members which will pour capital into startups. The funds will not be covered by laws which regulate the operation of securities investment funds.
The legal document, once it comes out, is believed to put the capital flow into Vietnamese startups with simple procedures. A lot of startups have successfully called for foreign capital, but the majority of startups are still meeting big difficulties in capital arrangement.An analyst commented that startups in Vietnam mostly call for capital from angel investors, who inject capital into businesses when the businesses begin developing ideas and still cannot make profit. 
MPI has found from a survey that angel investors now can contribute capital to fund startups in accordance with the Securities Law. 
However, the requirements on investors to set up a fund under the law are too high, which cannot be met by small investors. 
The law, for example, stipulates that there must be at least 100 investors for a fund and the minimum value of a fund is VND50 billion.

Meanwhile, for startups, angel investors would only need to contribute $5,000-50,000 to develop a business idea into a product with high development growth.
Therefore, it would be better to lay down a specific legal framework for the establishment of the funds for startups.
The number of investment funds supporting startups in Vietnam remains very modest. CyberAgent, 500 Startups and Golden Gate Ventures only have representative offices in Vietnam. 
Some investment funds belonging to banks and large corporations, such as Vietcombank, BIDV, VPBank, VietA bank and PetroVietnam, also have injected money into businesses. 
But none of them poured capital into businesses at their early development stage. In general, they don’t make small investments, but only make deals worth hundreds of thousands of dollars, and buy shares and bonds which have high capitalization value.
FPT Venture is the only domestic fund that focuses on investments in startups.

It is estimated that about 10 Vietnamese startups can receive investment capital from the funds every year. Many Vietnamese startups have decided to register their business overseas to more easily seek capital.