VRDF 2019: more investment in startups via venture capital funds

VRDF 2019's session on the Vietnamese startup ecosystem

VRDF speakers expressed resounding agreement that startups are an apt tool to commercialise technology but they are currently facing difficulties as Vietnam’s venture capital market is not mature enough to support them with the resources they need. In addition, venture capital funds have strict rules on capital management as well as minimum investment levels for each company (usually a minimum $500,000) and most Vietnamese startups do not reach the required scale.

In addition, venture capital funds invest in startups based on their perceived market efficiency and prospects. This creates a vicious circle, as startups cannot get off the ground and attract customers (and hence generate revenue) without funds, and they will not be able to mobilise funds without being able to show revenue first.

In Vietnam, venture capital funds are not among the usual funding channels for startups and businesses. In addition, the funds' investment procedures are complex and do not go hand in hand with the business activities of startups because the funds’ motivation is not to generate profit but to preserve capital or fund community activities.

Le Thach Anh, founder of Vietnam Silicon Valley (VSV) and director of VSV R&D Center, said, “Angel investors and venture funds are quite popular in other countries but they are not really developed in Vietnam. In other words, the venture capital market for startups in Vietnam is still primitive and limited and has not helped Vietnamese startups to mobilise investment, or replicate and develop their business models.”

Anh added that in the countries with developed startup ecosystems, such as the US, Israel, South Korea, or Singapore, the government participates not only as a policymaker but also as an investor.

“Investment in startup via venture capital funds would deal with the problem of disbursement time because the government’s disbursement process is often complex and requires more time than the startup has,” said Thach Anh.

To prod the development of venture capital funds, experts at the forum proposed that if Vietnam wants to focus on developing startups, the government needs to make direct investments to stimulate growth in the quantity and quality of startups, especially in the early stage.