On the afternoon of October 22, the Department of Startups and Technology Enterprises under the Ministry of Science and Technology (MOST) held a seminar titled “Models and operational mechanisms for venture capital funds using state budgets: International experiences and the potential for application in Vietnam.”

The event was organized to implement Decree No. 264, issued on October 14, which governs the National Venture Capital Fund and local-level venture capital funds.

According to Luong Van Thuong, Director General of the Department, MOST will represent the state’s capital ownership in the national fund, while provincial People’s Committees will do the same for local funds.

These funds will operate as legal entities with official seals and will be allowed to open accounts at the State Treasury, as well as domestic and foreign banks in accordance with relevant laws.

Vietnam lacks high-tech, deep-tech startups

Reviewing Vietnam’s venture capital market from 2013 to 2024, Pham Tuan Hiep, Director of Incubation at BK Holdings, predicted that 2025 would be “the bottom” of Vietnam’s VC landscape as investment volume and deal numbers continue to decline.

He cited figures from the 2022 Vietnam Innovation Ecosystem Report, noting that the country currently has around 4,000 startups - most of which focus on IT, with very few involved in deep-tech or high-tech areas such as advanced materials, cellular technology, nanotechnology, or renewable energy.

There is also a severe lack of incubators and investment funds targeting these deeper technology sectors.

Hiep pointed out a major mismatch between supply and demand in Vietnam’s innovation ecosystem: research institutions and universities (the supply side) focus mostly on IT, while large corporations (the demand side) tend to rely on imported technologies rather than domestic solutions.

With Vietnam recently announcing 11 strategic technology groups requiring focused innovation, Hiep expressed hope that the National Venture Capital Fund would play a guiding role in stimulating demand and driving development.

Lessons from Japan, South Korea, and Singapore

During the seminar, experts, investors, and fund representatives discussed international models and policies that could promote venture capital investment in Vietnamese startups.

Countries showcased included those with robust startup ecosystems. According to Bui Thanh Do, founder and chairman of ThinkZone Ventures, a common thread in models from South Korea and Singapore is that the state plays a foundational role in shaping the ecosystem without fully relying on public capital. The ultimate goal is to attract private capital.

In South Korea, the Fund of Funds (KFoF) model is managed by the Korea Venture Investment Corp (KVIC), which oversees the parent fund. Private fund management firms serve as general partners (GPs) of the subsidiary funds.

This model has created powerful capital leverage. As of the end of 2022, KVIC managed assets worth $6.8 billion, but generated a total investment impact of $31.2 billion, funding over 9,154 companies. Remarkably, according to Do, KVIC tends to invest more in high-risk ventures - a stark contrast to traditional risk-averse behavior.

KVIC operates under an annual investment plan. It receives proposals, evaluates them through a structured process, and secures approval from its investment committee. The parent fund typically has a long cycle of 20 to 30 years, while subsidiary funds can have shorter terms depending on investment focus. All profits are reinvested annually based on market demand and budget allocations.

“State-owned funds cannot pursue hot investments or expect results overnight. They must take a long-term view, looking 20 to 30 years ahead,” Do emphasized.

KVIC also allocates around 15% of its capital to international funds, with the condition that these foreign funds reinvest into South Korean startups at a defined ratio.

This tactic has brought in $779.5 million of foreign reverse-investment into 425 South Korean companies by the end of 2022, Do added.

In Singapore, the Startup SG/EDBI program - overseen by the Ministry of Trade and Industry - focuses on commerce, investment, and exports. The government’s co-investment approach emphasizes flexibility, deal-specific commitments, and maximizing private sector involvement.

Innovation: A golden opportunity or a vicious cycle?

For the first time, Vietnam hosted a national-level innovation event attended by the General Secretary, Prime Minister, and senior government leaders on October 1.

While South Korea focuses on tech startups and Singapore supports seed-stage ventures, both countries show high levels of state participation in early phases, which gradually taper off in later investment rounds.

Government capital is strategically deployed to overcome development barriers in sectors with long R&D cycles and high investment demands - such as biotech, healthcare, and quantum technology.

Beyond funding, the non-financial value of these programs is significant. They facilitate pilot projects between startups and government bodies or local customers, reinforcing Singapore’s regional innovation leadership.

From Japan, Ogata Ryosuke, CEO of MRIV International and Mitsubishi Research Institute Vietnam, presented the INCJ (Innovation Network Corporation of Japan) - the nation’s largest public-private partnership (PPP) fund, launched in 2009 and led by the government.

The Japanese government contributed 367 billion yen, while 25 enterprises added another 13.5 billion yen. INCJ invests across multiple sectors without limiting itself to startups or mature enterprises. Projects are evaluated based on their social impact, feasibility, and return on investment.

The fund’s role is to nurture emerging industries, such as aerospace, and to take on risks that private funds typically avoid.

Another key function of INCJ is ecosystem building, strengthening collaboration between government, academia, and business.

Experts at the event noted that while each country’s model has unique pros and cons, the consistent theme is the state’s leading, ecosystem-shaping role in fostering innovation.

“Vietnam should not copy any model outright,” said Bui Thanh Do. “Instead, we must identify our strengths, determine which sectors to prioritize, and choose strategic international partners for outward investment.”

Du Lam