Kinhtedothi - Article 36 of the 2024 Capital Law allows Hanoi to pilot the establishment of a venture capital fund using the state budget, which has a positive impact and opens up many new opportunities for promoting innovation.
Support and promote innovation
Hanoi is currently leading the country in the local innovation index. Effective ideas and technological solutions originate not only from university research labs, but also from many young startups, including more than 1,000 innovative startups operating in Hanoi, accounting for over 26% of the country.
However, the number of domestic and foreign investment funds for creative startups in Vietnam is very small, most of them do not invest from the early stages and do not invest small. On average, each year, only about 10 Vietnamese startups receive investment from these investment funds. Meanwhile, the capital demand of startups is very large.
Therefore, in order to provide capital - a resource to successfully nurture innovative ideas, the Capital Law 2024 has allowed Hanoi to pilot the establishment of a Venture Capital Fund using the State budget. This will be an opportunity for the capital's innovative scientific and technological products and solutions to go from the laboratory to practice faster and more effectively.
According to the provisions of Article 36 of the Capital Law 2024 on venture investment using the State budget: Hanoi City is allowed to pilot the establishment of a Venture Investment Fund using the State budget to invest capital in high-tech enterprises, science and technology enterprises, and creative startups in key areas of science and technology of the Capital to support, promote innovation and commercialization of scientific and technological products.
The venture capital fund is allocated charter capital from the city budget, and is allowed to receive funding and mobilize other legal capital sources according to the provisions of law. The management and use of the venture capital fund's capital sources are carried out according to market principles, accepting the possibility of risks, ensuring publicity, transparency, efficiency, and preventing loss and waste of capital.
The City People's Committee develops a project to establish a Venture Investment Fund and submits it to the City People's Council for approval, clearly defining the Fund's organizational form of operation; the Fund's operating period; the level of charter capital support from the City budget; investment methods, cooperation objects, and recipients of investment capital; risk assessment and control mechanisms, and responsibilities of agencies, organizations, and individuals in the management and operation of the City's Venture Investment Fund.
The City People's Council approves the project, regulates the organization and operation mechanism of the Venture Capital Fund, responsibilities for inspection, supervision, and reporting of implementation results. The City People's Committee decides to establish the Fund, promulgates the charter and investment regulations of the Venture Capital Fund.
Building a clear and transparent legal framework
Master Thach Le Anh, founder of Vietnam Silicon Valley Investment Fund, an expert on innovative startups and venture capital, said that venture capital is a form of investment in innovative startups, technology companies or companies with the potential for breakthrough development, but at the same time also faces great risks. This is a popular method of raising capital for businesses and innovative projects, which can help promote rapid economic growth if successful. However, because of the high risk, venture capital often requires investment funds and investors with knowledge, thorough training in venture capital, and deep understanding and vision in this field.
"Technology-developed countries all have venture capital funds and Hanoi can refer to the experiences of some countries to have specific regulations on this issue in the process of developing documents guiding the implementation of the 2024 Capital Law" - Director of BK Fund Investment Fund, Hanoi University of Science and Technology Pham Tuan Hiep .
The characteristic of the venture capital model is investing in people, people who dare to do, dare to take responsibility, dare to change, accept to try new things, accept failure to achieve breakthrough success. Investing in people and the activities of that group of people is to survey and evaluate the market, test products and possibly new technology... In fact, this is an expense that may not bring in revenue or profit.
Vietnam, with the advantage of 100 million people and GDP growing rapidly every year, has become a large consumer market for businesses to target. The problem is that we need to have an effective method to retain tax revenues as well as retain large assets such as billion-dollar startups.
Sharing about some venture capital models such as the main State fund model, Master Thach Le Anh said that in this model, the Venture Capital Fund is mainly managed and funded by the State. The Government plays a major role in operating the fund, from selecting investment projects to monitoring implementation progress. However, this model requires high management capacity and must ensure transparency, avoiding scattered or ineffective investment.
With the public-private partnership fund model, this is a popular model, in which the government and private investors jointly contribute capital to establish a Venture Capital Fund. The government can use the budget to contribute part of the initial capital, creating confidence for private investors to participate. A typical example is Singapore, where the government has established technology investment funds with the participation of the State and the private sector, thereby promoting the strong development of the startup ecosystem.
According to Master Thach Le Anh, if Vietnam in general and the capital Hanoi in particular want to focus on developing Startups as an economic lever, they need to participate in investment to stimulate growth in the quantity and quality of Startups, especially in the early stages. At the same time, thereby attracting the private sector to invest in Startups. This will attract not only Startups and private investors in Vietnam but also in the region and the world.
Therefore, the most important requirement is to build a clear and transparent legal framework for the use of the State budget in venture capital. Legal regulations need to include contents such as investment processes, conditions for participation, project selection criteria, and monitoring mechanisms. This legal framework not only helps ensure that venture capital funds operate properly but also creates confidence for private investors to participate. The combination of state capital and private capital will help increase the financial strength of investment funds, while sharing risks among related parties.
Along with that, mobilizing capital from the private sector is an important factor to ensure the effectiveness of Venture Capital Funds. The Public-Private Partnership (PPP) model can be applied to combine capital from the State budget and private capital, thereby creating greater financial strength and minimizing risks for both parties.
In addition, venture capital fund management is a field that requires high professional skills and an understanding of the technology market. Therefore, developing fund management capacity is extremely important. Hanoi needs to create conditions for financial, technology and startup experts to participate in fund management, while ensuring that investment decisions are made based on scientific analysis and long-term strategies.
International cooperation is an important solution to learn from experience and attract investment capital from foreign venture capital funds. Hanoi can establish cooperation programs with international organizations to take advantage of financial resources and knowledge from international partners.
"The implementation of the venture capital mechanism using the State budget will bring many important benefits to Hanoi and the national economy, helping to promote startups and innovation; enhance national competitiveness; create jobs and improve labor quality; develop sustainably and improve the quality of life" - Master Thach Le Anh emphasized.
Opening a new direction for Hanoi
According to Associate Professor Dr. Nguyen Tuan Anh - Chairman of the Council of Hanoi Capital University, the venture capital fund using the budget is a special form of investment, in which a part of the fund's capital is contributed from the State budget. The venture capital fund using the budget plays an extremely important role in promoting innovation, creativity and economic development, especially for start-up enterprises. When combined with capital from the State budget, the effectiveness of these funds is multiplied.
Many developed countries have recognized the importance of Venture Capital Funds in promoting innovation, creativity and economic growth. Therefore, many countries have issued policies to actively support the development of Venture Capital Funds, especially those using the State budget.
Vietnam has recognized the important role of venture capital funds in promoting innovation, creativity and economic development. The Vietnamese government has made many efforts in issuing policies to support the development of venture capital funds, especially those using the State budget.
Accordingly, a number of documents of the Politburo and the Prime Minister have regulations on Venture Capital Funds and Creative Startups. Most recently, the Venture Capital Fund using the budget issued in the Capital Law 2024 has marked an important step forward in promoting innovation and socio-economic development in Hanoi in particular, and the whole country in general.
In recent years, Vietnam's ranking on global innovation rankings has been steadily increasing. The 2024 Global Innovation Index report shows that Vietnam is ranked 44/133 countries and economies, up 2 places compared to 2023. In 2024, Hanoi is also the leading locality in the country in terms of innovation index.
Associate Professor, Dr. Nguyen Tuan Anh said that the Venture Capital Fund using the State budget as stipulated in Article 36 of the Capital Law 2024 has opened a new direction for Hanoi in promoting innovation and economic development, which is allowing the city to pilot the establishment of a Venture Capital Fund using the State budget. In addition, the fund can cooperate with domestic and foreign investment funds to increase resources and expand the network; there needs to be a reserve fund to deal with possible risks, and an effective management information system needs to be built to monitor and manage investment projects.
The inclusion of regulations on venture capital using the State budget in the 2024 Capital Law is an important step forward, creating positive impacts and opening up many new opportunities for promoting innovation in Hanoi such as: creating stable capital sources; promoting innovation; building a startup ecosystem; strengthening Hanoi's position; developing industry; developing new products and services; creating jobs; attracting foreign investment; spreading successful models, encouraging other localities to learn and apply; contributing to the economy, enhancing Vietnam's competitiveness in the international arena.
Venture capital always comes with high risks. Therefore, effective risk management mechanisms are needed. Therefore, it is necessary to strengthen training and attract talent. State management agencies, startup support organizations, and investors need to coordinate closely to create a favorable environment for startups.
"Building a successful venture capital fund requires the efforts of many parties, including the city government, investors, experts and startups. With a suitable organizational structure and effective operations, the venture capital fund will play an important role in promoting the development of the startup ecosystem in Hanoi" - Associate Professor, Dr. Nguyen Tuan Anh emphasized.
"Venture capital funds are a very important entity that promotes development in any economy from the micro to the macro level, from individual investors, businesses, to cities and countries. It is necessary to socialize so that the fund's capital is abundant and can be mobilized from the people. It is also necessary to soon promulgate the Law on Venture Capital to disseminate it to all Vietnamese citizens to know and understand through training sessions for managers, investors and business owners. The State should create the best legal corridor to support domestic and international venture capital funds to develop in the capital in particular and each city in Vietnam in general" - Director of BestB Creative Startup Investment Fund Pham Anh Cuong .
Source: https://kinhtedothi.vn/luat-thu-do-2024-quy-dau-tu-mao-hiem-thuc-day-doi-moi-sang-tao.html
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