Dr Nguyễn Quân, former Minister of Science and Technology, speaks to the newspaper Hà Nội mới (New Hà Nội) about the role played by venture capital funds in start-up development.
The concept “start up ecology” has become rather popular in Việt Nam. In your opinion, what are the main factors in a sustainable start up ecology?
Start up ecology consists of five main components, two of which are the most important and classic: the start-ups themselves (the demand) and the research institutes/universities (the supply).
Generally speaking, the term “start up” refers to any new business. But for us the concept is applied to a new enterprise using high-tech. The other three components are support services; investors – particularly risk averse ones; and a legal system to protect investors and start-ups.
All the required components are available in our country, but their operation is not up to expectations. Do you know why?
There are various reasons. The first weakness I should mention is our incomplete legal system. Venture capital investment is not regulated in any official legal documents. The Government has submitted to the National Assembly the Law on Small and Medium Enterprises, which includes venture capital investment, but it only stops at the terminology, not going into its legal aspects.
In 2013, the Ministry of Science and Technology piloted a project it billed as support for start-ups based on the Silicon Valley model. I should say the project was a success. It has extended support to many start-ups in seeking financial support from investors inside and outside the country, particularly from venture capital funds.
However, most of our start-ups with investment funds have been lured to neighbouring countries in the region. That’s why it is imperative for us to have a legal system on start-ups to register their business and operate in Việt Nam. This means they will pay taxes to the State.
The start-up movement has nonetheless drawn the attention of many young Vietnamese entrepreneurs. Don’t you agree?
It is undeniable that the start-up movement presents a high level of risk and even failure. But when it becomes smooth sailing, it will bring high value added to the national economy. That’s why we should instil the spirit of creativity among young people and encourage them with the motto that “failure is the father of success”.
In my opinion, the Government should give start-ups close guidance, particularly in the areas of application and research. Ideally, we should encourage them to follow the successes of Intel, Uber or even Apple and Microsoft, and others.
Do you know why Việt Nam does not have any investment funds dedicated to start-ups which have potential for development?
The market economy in our country is relatively new, whereas in developed countries, it has operated for a century, providing a good foundation for start-ups to develop. However, we can learn from their trials and errors in terms of operations, investment, benefit sharing and risk acceptance, and even tax policy.
We presented quite a few proposals to establish a venture capital investment fund. During the preparation of the Law on High Tech, the National Assembly accepted the idea, in principle, but it remained on paper.
I earnestly hope the Government will soon give a green light to the establishment of a venture capital fund, just on a pilot basis. We can then integrate lessons learned from the pilot into an official legal document – a firm foundation for start-ups to operate and scale up. — VNS