Vietnam, with its budding startup ecosystem, is said to be working on an official policy for venture capital. This policy is likely to be derived from the existing securities law in order to avoid any overlaps or confusion, according to the proposal put forward by the local technology ministry.
It is expected that these changes in legislation will include tax incentives, and a proper legal framework for the industry in order to attract the bigger international players into the country.
While a small number of homegrown VCs have sprung up alongside few international firms like Cyberagent Ventures,IDG Ventures,500 Startups, Golden Gate Ventures, a proper legal structure is likely to provide a further boost to venture money flowing into the domestic startups space.
DEALSTREETASIAreported last year that the government was considering a national venture capital fund. However, subsequently, the government told its ministries to“evaluate the creation of securities investment funds in the hi-tech and new technologies space“.
In response to a request by the local Ministry of Science and Technology in November last year to launch incentives for venture capital firms, the government has already started a series of reforms. “The Ministry of Planning and Investment will take lead to add new regulations that promote the development of technologies within small businesses, as a part of the coming law on supporting small and medium-sized companies,” said an earlier directive by the government.
After eight years of investing in Vietnam, Nguyen Manh Dzung, head of Cyberagent Ventures’ Vietnam and Thailand portfolios, sees an improvement in the country’s startup ecosystem with more active founders, investors and supportive agencies.
“I have never seen such an exciting community before in Vietnam,” he shared withLaunch, a local online event for startups.
While the startup space is getting more attention, lack of a proper legal framework has been deterring the big VC players from making an entry into the country. Other issues – like a smaller market size and tough exit environment – which are related to the legal issues, are also proving to be a stumbling block.
In a recent seminar on building VCs in the country, several experts pointed out that most of the funds – including the private equity funds or other investment funds – are domiciled in countries (such as Singapore and Cayman) which have a preferential taxation system.
Existing funds have proposed some measures of simplifying investment procedures for purchase of less than 50 per cent equity stake, distinguishing taxes for investments in listed companies and startup companies, and re-categorising verticals.
For example, while fintech is considered as technology business worldwide, it is categorised as banking in Vietnam, in which foreign ownership is limited at 30 per cent, legal experts shared at a conference on building VC framework last year.
According to a few investors, the state does not necessarily need to involve in the capital process. Private capital is still large compared to the market and has not been fully mobilized; what is needed from the government is supportive policies, says Le Huynh Kim Ngan, founder of SeedforAction, a small fund for startups from the idea stage.
Most of the investments into Vietnamese startups in the past few years have been angel to series A funding, while a lot of VCs have come to learn opportunities in Vietnam.
Source: http://www.dealstreetasia.com/
Key words: Vietnam, New VC policy, to be derived, from existing securities law
