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Founders of start-up company TitKul |
Moreover, the government should support technology investment and production. Start-up founders said that they hardly access credit because they have not proven their operational efficiency in practice, as well as do not have collateral, and do not meet the conditions for issuing stocks and bonds. In addition, they found it difficult to call for investment capital from ordinary investment funds, because these funds are often interested in investing in successful businesses.
Many innovative start-up ideas have not been realized because they cannot raise capital, so venture capital funds are needed to fund them. A venture capital fund with the principle to invest in start-ups, even if they have not been successful; so the fund can accompany start-ups from the beginning.
If there are venture capital funds, there will be many creative and bold investment ideas for young investors. The more creative, the higher the risk, so when there is a venture capital fund, new creative ideas have the opportunity to try and fail to expect high profits in the future. A few successful ideas can earn enough profits that can make up for prior failed projects.
Mobilizing social capital
To promote the establishment of venture capital funds, it is necessary to pay attention to two factors including mission, operating mechanism and encouragement to form. The mission of venture capital funds is to help innovative start-up ideas have the capital to implement innovative investment ideas.
A venture capital fund is a professional investment organization, so the fund manager will have the knowledge and capacity to consult and plan business strategies for start-up ideas. Besides, thanks to the wide investment network, the fund is able to connect financial resources for new business ideas that are easier to succeed. It is not possible to form venture capital funds from the budget capital, because the budget capital cannot be used for risky purposes. Venture capital funds should be mobilized mainly from domestic and foreign private investors.
Venture capital funds can be formed in sectors in which Vietnam has advantages, such as venture capital funds in the fields of high-tech agriculture, information technology, and logistics. Last but not least, the government should encourage various types of venture capital fund activities such as limited partnerships; limited liability companies; joint stock companies; and ways of operating funds of enterprises.
Need a legal corridor
Currently, the legal framework for venture capital activities does not have clear regulations related to management, encouragement and development support mechanisms. In the laws on investment and credit, there have been no regulations on venture capital funds.
Laws on taxes and interest rates have not yet made a difference between venture capital activities and ordinary businesses. Because of high-risk venture capital activities and lower success rate, these venture capital funds should enjoy preferential policies. The lack of such supportive regulations will discourage domestic funds from operating, and Vietnam's capital market will not be attractive to international investment funds.
In addition, the ability to access venture capital funds of Vietnamese enterprises is not high because capital from venture capital funds is not yet popular. On the other hand, start-ups do not know how to present business ideas; so it is difficult to convince capital investment funds. At the same time, commercial banks have not been able to connect businesses with creative ideas with venture capital funds. Meanwhile, commercial banks can support venture capital funds in monitoring and evaluating the capital use of enterprises.
Therefore, to promote the formation and development of venture capital funds to finance innovation activities, it is necessary to build a completely legal basis and create conditions for enterprises to access finance from venture capital funds by promulgating centralized and unified guiding documents including the establishment conditions, operation charter, rights and obligations of related parties and operation management model of the fund.
On the other hand, the government should have specific regulations and implementation guidelines for the commercial banking system as financial intermediaries of venture capital funds and innovative ideas. Commercial banks have clear financial resources because these financial institutions know the market situation, predict development trends and are one of the most active parts in the application of this technology, digital transformation and encouraging innovation.
Plus, experiences in managing the operations of commercial banks as financial institutions will play an important role in promulgating regulations on the management of venture capital funds in Vietnam.
Finally, enterprises with innovative projects need to have good knowledge of financial management, capital attraction and capital management to be ready to receive capital from venture capital funds. Moreover, businesses need to know how to build a business strategy for a viable innovation idea to convince venture capital funds.
In addition, it is necessary to issue separate preferential policies for the operation of venture capital funds because venture capital activities are often risky and have a low success rate. Therefore, the Government needs to encourage the development of this form of investment through clear preferential policies on taxes or interest rates. Support and encouragement are considered indirect tools to promote the operation of the venture capital fund with innovation.
According to the Vietnam Chamber of Commerce and Industry (VCCI), 76 percent of Vietnamese want to start a business; However, only about 10 percent of them are able to be successful.
There are many reasons for the low success rate of start-ups, including limitations on capital and mechanisms and policies related to capital mobilization. Start-up projects are often started with limited self-capital of founding members, while the ability to borrow capital from banks or call for investment funds is very low.
