Measures proposed to improve startups’ access to capital

According to the National Agency for Technological Entrepreneurship and Commercialization Development of the Ministry of Science and Technology, there are currently about 3,800 start-ups in Vietnam, of which 11 are valued at more than USD 100 million and three are valued at more than USD 1 billion each.

Current financing for startups comes mainly from the state, investors, foreign and domestic venture capital funds, funds established by enterprises, incubation institutions, business support organizations, business angels and loans.

Data from BambuUP, a one-stop innovation platform, shows that there are currently around 210 venture capital funds investing in startups in Vietnam, including nearly 40 domestic funds. It is a fact that investors and venture capital funds play a crucial role in providing capital for startups.

The Vietnam Innovation and Tech Investment Report 2021, published by the National Innovation Centre (NIC), shows that USD 1.4 billion in venture capital was injected into Vietnamese startups in 2021.

About 90% of the amount came from foreign venture capital funds, estimated ThinkZone Ventures, a locally-resourced venture capital firm.

Meanwhile, a report by management consultancy Bain & Company said Vietnam is leading the way in attracting long-term investors in Southeast Asia. Investors believe investment activity in the country will increase by 83% between 2025 and 2030, compared to now.

However, experts point out that international investors also face many challenges when operating in the local startup investment market.

They pointed out that foreign venture capital funds invest directly in startups in Vietnam as ordinary foreign investors. Therefore, they still face certain difficulties in applying for investment permits, managing their investments, divesting capital, transferring profits to their home countries and dealing with tax-related issues.

Due to such issues, many foreign investors decided not to invest directly in Vietnamese startups, but requested them to restructure to set up parent companies in other countries to inject capital into those parent companies and benefit from foreign incentives. This has led to increased costs in terms of consulting, establishing and maintaining legal entities abroad, which has disadvantaged startups when operating in an unfamiliar legal environment.

ThinkZone Ventures stated that there are still many problems related to regulations, so it has encountered many difficulties in investing in Vietnamese startups. Therefore, it is necessary to improve the business environment and issue comprehensive regulations for startup investment.

Bui Thanh Do, founder and CEO of ThinkZone Ventures, said policies should be conducive to the activities of investment funds and create a transparent, equal and stable business environment in which funds can confidently invest in startups in Vietnam. Preferential policies should also be enacted, such as lowering taxes, providing financial aid, providing concessional credit and opening special economic zones with favorable infrastructure and services.

In addition to startups’ own efforts, Nguyen Huong Quynh, CEO of BambuUP, believed that to increase the attractiveness of the Vietnamese startup ecosystem to domestic and foreign investors, it is necessary to set up more startup support programs, conduct better communication to inform investors about the Vietnamese startup ecosystem, and create a favorable mechanism for foreign investment funds to invest in or divest from local companies.

She also stressed the need to promote cooperation opportunities for domestic companies and startups, as domestic companies’ investment strategies towards startups also help facilitate capital flows.

Pham Ngoc Huy, Managing Director of Lotte Ventures Vietnam, proposed developing a mechanism to encourage entrepreneurs to set up startup investment funds. He believed that this model would be more effective than corporate investment funds, as it is not focused on profit, but on creating value for society in the long term.

Investors are the most important part of a strong ecosystem, and when many investors are willing to provide support, more domestic and even foreign startups will emerge in Vietnam. To do that, the first condition is to create an optimal environment to attract foreign investors to build a capital market, Huy believed./.