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Economic Sector

Last updated: Wednesday, December 13, 2017

 

Capital Flows for Start-ups to Be Opened Up

Posted: Tuesday, November 28, 2017

In 2017, the legislative corridor for innovative start-up support has been significantly improved after the law-making National Assembly adopted the Law on Technology Transfer of 2017 and the Law on SME Support, with many contents wherein specifying supports for innovative start-ups. However, obstacles to start-ups have not been completely cleared.

In May 2016, the Prime Minister issued Decision 844/QD-TTg on the National Innovative Start-up Ecosystem Support Project to 2025 aimed to support 800 projects and 200 start-ups, of which 50 companies will successfully pool capital from venture capitalists and perform mergers and acquisitions with a combined value of VND1,000 billion. By 2025, the project will support developing 2,000 innovative start-ups and 600 innovative enterprises. As many as 100 enterprises benefited from the project will successfully pool capital from venture capitalists and perform mergers and acquisitions with a combined value of VND2 trillion

Forming Vietnamese start-up community

With effective cooperation, support and connectivity, the innovative start-up ecosystem of Vietnam has seen new development steps, with the formation and spreading effect of the start-up community.

Mr Chu Ngoc Anh, Minister of Science and Technology, said, in 2016 and 2017, innovations of Vietnamese companies were very vibrant. Just five most successfully pooled deals were worth over US$50 million in total (Momo with US$28 million, F88 with US$10 million, Got It! With over US$9 million, Vntrip.vn with US$3 million, Toong with US$1 million). Most recently, Foody, a social network for foods and drinks, was purchased over 82 per cent by SEA for more than US$64 million, which was considered the largest investment in 2017 to date. The big cash flow has been flowing into Vietnamese start-ups.

More than 900 incubated start-up projects with 300 products have been connected with the community and investment funds. More than 40 venture funds have been operational in Vietnam, like IDG Ventures, CyberAgent Ventures, Captii Ventures, Gobi Partners and 500 Start-ups, an increase of 30 per cent against 2016. At present, 24 business incubators (BIs) and 10 business accelerators (BA) are operating in Vietnam. Many start-up support networks have been formed, for example the SME Support Network and Vietnam Mentors Initiative (VMI) Programme for Start-ups.

Minister Anh said that these impressive figures have attested the robust development of the nation's innovative start-up ecosystem.

Policy shortages

The lack of appropriate policies is however hindering business start-ups. As an active and leading locality and with a resolute government that strongly supports the formation and development of a start-up ecosystem, Ho Chi Minh City only had 834 enterprises out of 1,800 start-ups engaged in the start-up ecosystem, accounting for 42 per cent of the total, after one year of executing Decision 844/QD-TTg on start-ups, while the remainder stood outside it.

Ms Dang My Chau, CEO of Topica, said, the lack of support policies on financing and divestment has led Vietnamese start-ups to leave the homeland to foreign countries to set up companies. “While start-ups in Singapore spend just a week completing the pooling and disbursing procedures, peers in Vietnam need eight months to one year. A start-up typically needs a six-month preparation to run and such a long time kills it when it has yet to attract investment capital. In addition, due to procedural obstacles, many investment funds willing to invest in start-ups in Vietnam have yet to use their money.

In a workshop opened to seek solutions to promote start-ups in Vietnam by the Ministry of Planning and Investment in October, Mr Meir Dardashti, a specialist in developing innovative ecosystems from Ideality Roads Incubator (Israel), advised Vietnam to build a culture of accepting start-up failures to restart a new business if they have good initiatives and integrity.

Pioneering government and public-private partnership

Mr Meir Dardashti recommended that a start-up ecosystem is not a windfall, but it needs pioneering leadership of the Government. At the same time, there is a strong need for the participation of all stakeholders from the private sector. And the ecosystem cannot last forever but it needs continued support.

Mr Mai Thanh Phong, Vice Rector of Ho Chi Minh City University of Technology, said, there should be a regulatory corridor for public-private partnership (PPP) for investment in start-ups in general and technical infrastructure for start-ups in particular. After many years of helping start-ups, Ms Truong Ly Hoang Phi, Director of the Business Start-up Support Centre (BSSC), said, Vietnam should soon have clear regulations on establishment of private start-up foundations.

Recently, the Ministry of Planning and Investment released a draft decree detailing investment in innovative start-ups. A representative from this ministry said the draft decree will regulate following issues: Identifying the legal status of innovative start-up companies and innovative start-up funds that Vietnam's legal system has not specified or clearly stated. Thus, in addition to current investment forms, the new rule will create more choices for investors to make investments into innovative start-up companies and innovative start-up investment funds.

The draft also aims to stimulate capital inflows for innovative start-ups by encouraging the establishment of innovative start-up companies and innovative start-up funds. Encouraging investment in innovative start-ups is encouraging investment for generating commercial value and nurturing a source of revenue for the State Budget.

Nguyen Thanh








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