Regulations on innovative startup investment funds
Innovative startup investment funds are specified in Decree No. 38/2018/ND-CP detailing investment for innovative startup small and medium enterprises, specifically:
“Innovative startup investment” refers to financing that investors provide to do business via contribution of capital to establishment of startups or purchase of shares or stakes of startups which are not public companies. Accordingly, investors are entitled to make investments in startups under the forms, including contribution of capital to establishment of startups, or purchase of shares or stakes of startups; or establishment or contribution of capital to establishment of venture capital funds to make investments.
“Innovative startup investment” means the fund which is established from investments made by private investors to invest in startups. “Paid-in capital” means the total amount of assets contributed by investors to the venture capital fund.
An innovative startup investment fund is not considered a juridical person and established by capital contributed by not more than 30 investors according to the fund’s Charter. An innovative startup investment fund is not entitled to make investments in other venture capital funds. Investors may make contributions to a venture capital fund by VND cash, gold, land-use rights and other assets which may be valued in VND. Investors are not entitled to contribute borrowed capital to a venture capital fund.
Portfolio and investments of an innovative startup investment fund include deposits at commercial banks; total investment made in a startup shall not exceed 50% of its charter capital after receiving investments. Total paid-in capital and assets of investors at an innovative startup investment fund must be recorded separately from those of the fund management company. Investors that contribute capital to an innovative startup investment fund shall themselves reach an agreement on the power to make decision on investment portfolio which must be specified in the fund’s Charter and the contract signed with the fund management company (If any).
An innovative startup investment fund shall be managed under at least one of the following models:
- General meeting of investors, the fund management company;
- General meeting of investors, the fund’s Board of representatives or Director, the fund management company;
- General meeting of investors, the fund’s Board of representatives and Director, the fund management company.
The fund’s investors may either establish or hire a company to take charge of managing the venture capital fund. The fund management company shall carry out procedures for establishment of the innovative startup investment fund and apply for registration of its additional business sector, which is management of innovative startup investment fund, in accordance with the law regulations on company registration when taking charge of managing such fund. The management of the innovative startup investment fund shall be done according to the fund’s Charter and agreements or contracts signed with the fund, and not be governed by regulations of the Law on securities.
Innovative startup investment funds in Vietnam
In recent years, the implementation of policies on entrepreneurship, innovation, and support for small and medium-sized enterprises has received attention and development from the State. According to Vietnam Innovation and Technology Investment Report by National Innovation Center, Ministry of Planning and Investment, Total venture capital investment in Vietnamese innovative start-ups will reach a record level in 2021 with $1.4 billion. The total number of investment funds participating in activities in Vietnam increased by 60%, evenly distributed among countries. Among them, the country with the most active investors is Singapore, followed by Vietnam and the United States. Investment from Japan into Vietnam is also gradually becoming more active after two years of slowing down due to the Covid-19 pandemic.
One of the prominent funds in Vietnam is the Ho Chi Minh City Innovation Startup Investment Fund. Ho Chi Minh City (HSIF) was founded by the Vietnam Youth Union Ho Chi Minh City, co-founded by the State Financial Investment Company of Ho Chi Minh City (HFIC) and Saigon – Hanoi Commercial Joint Stock Bank (SHB). HSIF was formed with the desire to help startups in Ho Chi Minh City in particular and Vietnam in general develop their innovative start-up projects, contributing to the development of Ho Chi Minh City. This is the City’s first investment fund that focuses on supporting, sponsoring and investing activities for start-ups towards innovative and creative products that contribute to changing lives. The Fund will consider and encourage technology-oriented enterprises: mobile applications, Internet applications, technology applications in agriculture, etc. have the potential to be applied on a large scale in Vietnam and other countries with favorable conditions for similar developments in the region and the world. The Fund also provides a priority mechanism for businesses in key economic sectors or supporting key economic sectors of the City, enterprises applying high technology in production, and practical inventions. and has high commercialization ability… by scientists, lecturers, students, alumni of universities in the city. Ho Chi Minh City initiated.
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