On October 14, the Government issued Decree 264 on the National Venture Capital Fund and Local Venture Capital Funds, marking a turning point in forming the first legal corridor for venture capital activities in Vietnam.

At the regular October press conference held by MST on October 31, Pham Duc Nghiem, Deputy Director of the Startup and Technology Enterprise Department, said the decree aims to mobilize more private capital into high-risk projects, instead of relying solely on budget capital.

The two basic philosophies of the model include: “public investment, private management” and “use of public investment to lead private investment”.

For example, this approach can attract substantial investment resources in society into science, technology, and innovation, especially startups linked to the country’s strategic technology sectors.

Some localities, such as Hanoi, have already issued people’s council resolutions providing detailed guidance on local venture capital investments.

According to Pham Duc Nghiem, unlike previous co-financing models for scientific and technological tasks, decree 264 allows private entities, private investment funds, and angel investors to co-invest with the state in projects. 

“Funds can also hire professional fund management units with licenses under conditions and criteria set by the state to ensure transparency and operational efficiency,” he added.

Prior to that, at a workshop on October 22 discussing experiences in operating state-funded venture capital funds, Bui Thanh Do, founder and chair of ThinkZone Ventures, introduced South Korea’s Fund of Funds model. 

By 2022, KVIC had managed total assets of $6.8 billion, pouring capital into 1,125 sub-funds and generating $31.2 billion in capital for over 9,000 startups and SMEs. The figures demonstrate the effectiveness of using public funds as “seed capital.”

State investment funds of countries like South Korea, Japan and Singapore all set long-term cycles for 20-30 years, not expecting capital recovery in short periods of a few years or months.

Venture capital funds as enterprises

At the press conference, Luong Van Thuong, head of the Innovation and Startup Department, outlined the main contents of decree 264.

The National Venture Capital Fund and Local Venture Capital Funds are organized in enterprise form, which can be either limited liability companies with two or more members or joint stock companies. The state capital owner representative agency at the National Fund is MST, while at local funds it is the provincial People's Committee.

Funds’ capital comes from two parts: state budget and private capital. Specifically, the National Fund has an initial contribution VND500 billion, expected to reach VND2,000 billion in the first five years. Local funds are not bound by fixed capital levels, with decision making assigned to provincial authorities.

Decree 264 clearly stipulates risk limits and investment efficiency evaluation mechanisms. Total losses from investments using charter capital must not exceed 50 percent of charter capital, while there is no requirement on capital preservation for each individual project. Instead, efficiency is evaluated according to the overall investment portfolio in a maximum 10-year or 15-year cycle for technology projects linked to civil, defense and strategic fields.

Administrative and personnel liability exemption mechanisms apply to organizations and individuals operating funds if meeting three conditions: losses due to measurable factors (storms, natural disasters, epidemics or policy changes); full compliance with investment principles, fund internal regulations and transparency and honesty obligations in investment decision-making process; and full performance of appraisal, reporting, information transparency obligations and seeking investment opinions according to fund charter regulations.

Thuong said that in the coming period, MST will lead in selecting capable founding members to establish the National Venture Capital Fund, while working with provinces and cities in need like Hai Phong, HCMC, and Can Tho to guide establishment of local funds.

At the same time, the Ministry plans to build detailed operational documents such as charter and investment regulations, and organize seminars to disseminate the Decree and work with international investment funds to attract cooperation and foreign capital.

Thai Khang