The Vietnam Ministry of Science and Technology is exploring the possibility of establishing a national venture capital (VC) fund, to foster the growth of local startups and build a strong ecosystem, DEAL STREET ASIA has learnt.
The ministry has founded a number of supporting organisations, such as the National Foundation for Science and Technology Development (NAFOSTED), the National Technology Innovation Fund (NATIF), the National Agency for Technology Entrepreneurship and Commercialisation Development (NATEC) – which hosted the Techfest last month, Vietnam Startup Fund and the Vietnam Silicon Valley project. Ministry officials are of the view that it was now time the country to launch a ‘made in Vietnam’, national scaled VC fund.
Vietnam has not issued any detailed regulations and incentives for the establishment of such funds, the local Institute of Science and Technology Policies and Strategies (NISTPASS) said. The majority of private equity and venture capital funds headquartered in Vietnam are investment firms, such as Mekong Capital, VinaCapital, Dragon Capital etc, which target expanding and listed businesses. In addition, the verticals of investment of these units focus on consumer goods, real estate, retail and entertainment and media.
“There is a lack of local VC funds to support early stage tech startups. Thus, a national VC fund will be a prime solution for mobilising resources, helping them invest in and innovate new ideas,” the NISTPASS added.
It has studied overseas models from the US, Israel and China. Unlike the US, where venture capitalists are mostly private investors, the fund in Vietnam will have a feature of a catalyst to create a boost for startups. Some Chinese and Israeli funds are operated in the same pattern, in which the government plays an active role as the founder and provider of seed financing, in addition to forming a regulatory system.
However, the government will need to collaborate with private funds to minimise the risk of losing investment capital. The national fund can jointly offer seed funding with private units, or invest in startups that have been picked by other VC funds. This is the model that has been followed by Singapore.
The NISTPASS and the ministry will continue to seek expertise from foreign experts and also look at partnership with the private sector. The aim is to lunch the fund by the year-end.
DEALSTREETASIA has also learnt that eligible startups that this yet to be launched fund plans to support, will be those that have a track record of being established for at least six to 18 months, and have ideas in the fields of the nation’s priorities.