Academic report actual state of and recommendation for the development of venture capital funds in vietnam

FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION …… o0o…… ACADEMIC REPORT ACTUAL STATE OF AND RECOMMENDATION FOR THE DEVELOPMENT OF VENTURE CAPITAL FUNDS IN VIETNAM Instructor : Dr Tang Thi Thanh Thuy Course : Financial Management Class : KETE307(GD1-HK2-2223).1 Group : 10 Group members : Nguyễn Thanh Hằng 2112250032 Trịnh Thị Tiểu Mai 2112250058 Trần Tố Quyên 2112250080 Dương Ngọc Diễm Thu 2112250090 Nguyễn Anh Thư 2113250046 Vũ Lê Ngọc Trâm 2112250099 Hanoi, March 2023 TABLE OF CONTENTS TABLE OF CONTENTS LIST OF FIGURES .3 LIST OF TABLES INTRODUCTION CHAPTER 1: THEORETICAL OVERVIEW 1.1 Definition of venture capital funds 1.2 Venture capital fund structure .5 1.2.1 General Partners (GPs) 1.2.2 Limited Partners (LPs) 1.2.3 Invested companies 1.3 Stages of venture capital financing 1.3.1 Stage 1: Seed Stage 1.3.2 Stage 2: Startup Stage .8 1.3.3 Stage 3: Early Stage 1.3.4 Stage 4: Expansion Stage .9 1.3.5 Stage 5: Mezzanine Stage .9 CHAPTER 2: ACTUAL STATE OF VENTURE CAPITAL FUNDS IN VIETNAM 10 2.1 Activities of venture capital funds in Vietnam 10 2.1.1 The development process 10 2.1.2 Some outstanding venture capital funds 14 2.2 Opportunities and challenges to develop in Vietnam 17 2.2.1 Opportunities 17 2.2.2 Challenges .19 CHAPTER 3: RECOMMENDATIONS 21 3.1 Governmental supports 21 3.2 Venture capital funds .21 3.3 International cooperations and partnerships 24 CONCLUSION 26 REFERENCES 27 APPENDICES 30 LIST OF FIGURES Figure 1: Venture Capital Fund Structure Figure 2: Vietnam Tech Investment Report H1 2019 11 Figure 3: Vietnam Tech Investment Report H1 2019 12 Figure 4: Vietnam Innovation & Tech Investment Report 2021 12 Figure 5: Vietnam Innovation & Tech Investment Report 2020 of DO Ventures 14 Figure 6: Investors Continued Flocking To Vietnam 19 Figure 7: Global Funding Monthly Averages By Half Year 20 LIST OF TABLES Table 1: The assessment of individual contribution .30 INTRODUCTION Venture capital industry have proven its necessity as an important source of funding for start-ups and emerging businesses, motivation for innovation and one of the key contributors to the sustainable economic growth, as they provide startups with the necessary capital to develop products, scale up and expand their businesses, offer expertise, resources, networks, and mentorship to help startups accumulate more experience and turn their ideas into reality In many countries, there is a close link between the growth of the venture capital industry and the development of a vibrant start-up ecosystem, which encourages entrepreneurship and innovation Vietnam, characterised by the rapidly growing economy, young, dynamic and techsavvy population and high internet accessibility, is providing a fertile ground for the development of new businesses and industries to thrive, especially the innovative startups in the technology sector In recent years, the Vietnamese startup ecosystem shows signs of promise and fast growth Simultaneously, the emphasis on promoting social entrepreneurship also requires the development of the venture capital industry as an irreversible trend In recent years Vietnam’s government has shown active support towards the development of venture capital funds, reflected in the improvement of legal framework, tax incentives and the openness to the international investors However, the venture capital industry in Vietnam is still relatively young, the amount of venture capital investment in Vietnam remains relatively low compared to other countries in the region and requires more support and investment to fully reach its potential The aforementioned factors are the reasons why we choose the topic “Actual state and solutions for the development of venture capital funds in Vietnam” This report aims to provide an overview about the current state of venture capital funds in Vietnam and elaborate the opportunities and challenges that the venture capital industry in Vietnam is facing before mentioning some suggestions for improvement We would like to express our gratitude to our lecturer for providing us with the opportunity to explore this practical topic The knowledge and insights gained from the Financial Management course that you provide us have been valuable throughout the preparation of this report CHAPTER 1: THEORETICAL OVERVIEW 1.1 Definition of venture capital funds Venture capital (VC) funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small - to medium sized enterprises with strong growth potential These investments are generally characterized as very high-risk/high-return opportunities In the past, venture capital investments were only accessible to professional venture capitalists, but now accredited investors have a greater ability to take part in venture capital investments Still, VC funds remain largely out of reach to ordinary investors Venture capital is a type of equity financing that gives entrepreneurial or other small companies the ability to raise funding before they have begun operations or started earning revenues or profits Venture capital funds are private equity investment vehicles that seek to invest in firms that have high-risk/high-return profiles, based on a company's size, assets, and stage of product development Venture capital funds differ fundamentally from mutual funds and hedge funds in that they focus on a very specific type of early-stage investment All firms that receive venture capital investments have high-growth potential, are risky, and have a long investment horizon Venture capital funds take a more active role in their investments by providing guidance and often holding a board seat VC funds therefore play an active and hands-on role in the management and operations of the companies in their portfolio 1.2 Venture capital fund structure 1.2.1 General Partners (GPs) Typically, the GP of a venture capital fund is a legal entity established and run by people employed by the VC firm In any limited partnership, the GP manages the partnership As a result, the GP has unlimited liability for the partnership’s business operations In other words, the GP assumes full responsibility for any business debts or legal liabilities 1.2.2 Limited Partners (LPs) With a venture capital fund, an LP is the investor who supplies the capital These LPs can be individuals or legal entities Often, LPs are institutional investors, such as pension funds, college endowments, trusts, insurance companies, health care systems, family offices, and sovereign wealth funds Sometimes, venture capital firms also make investments into outside venture funds as LPs Figure 1: Venture Capital Fund Structure LPs have limited liability in the partnership because they don’t take part in directing its business operations and remain passive investors When a limited partnership has debts or legal liabilities, the amount that LPs are responsible for is typically limited to their investment stakes in the partnership, and does not extend to their assets outside the partnership (The GP, on the other hand, would be on the hook for the full amount.) 1.2.3 Invested companies There are the actual startups and investments that a venture fund is making For a startup to be deemed venture - worthy they generally have to operate in a large market, have promising economics, and the ability to create a massive return for their investors (and their LPs) Venture capital investments are considered either seed capital, early-stage capital, or expansion-stage financing depending on the maturity of the business at the time of the investment However, regardless of the investment stage, all venture capital funds operate in much the same way Like all pooled investment funds, venture capital funds must raise money from outside investors prior to making any investments of their own A prospectus is given to potential investors of the fund who then commit money to that fund All potential investors who make a commitment are called by the fund's operators and individual investment amounts are finalized From there, the venture capital fund seeks private equity investments that have the potential of generating large positive returns for its investors This normally means the fund's manager or managers review hundreds of business plans in search of potentially high-growth companies The fund managers make investment decisions based on the prospectus' mandates and the expectations of the fund's investors After an investment is made, the fund charges an annual management fee, usually around 2% of assets under management (AUM), but some funds may not charge a fee except as a percentage of returns earned The management fees help pay for the salaries and expenses of the general partner Sometimes, fees for large funds may only be charged on invested capital or decline after a certain number of years 1.3 Stages of venture capital financing Venture capital is one source of financing for startups and is an important source of funding for startups that not have access to other capital or the ability to generate sufficient operating cash flows through revenue from launch Venture capital is offered with the expectation of generating a return on investment, typically through an exit event such as an initial public offering (IPO) or acquisition of the company Smaller ventures sometimes will first rely on family funding, loans from friends, personal bank loans, or crowd funding Larger projects or more experienced entrepreneurs may turn to “angel” investors or venture capital companies that specialize in financing new ventures There are five common stages of venture capital financing: 1.3.1 Stage 1: Seed Stage The seed stage is when a startup approaches an angel investor or a venture capital firm to seek funding for their idea or prototype At this stage, the startup may not have a commercially available product yet and is instead focused on convincing the potential investors why their ideas are worthy of venture capital support The entrepreneur must convince the investors why the ultimate product or service will be viable and successful in the market The potential investor will then investigate the technical aspects of the product or service, and the economic feasibility of the idea Seed-stage financing is usually modest in comparison to later stage financing An initial seed investment round made by a venture capital firm typically ranges from $250,000 to $1 million The financing may go towards product development, market research, and/or building a management team 1.3.2 Stage 2: Startup Stage If the idea or product appears to warrant further investigation or investment, the new company will advance to the startup stage Startups typically have a sample product available at this stage but will need funding for further product development Additionally, a management team will be formed, and a business plan prepared The startup will also use funding to conduct initial market research on the product The venture capital firm wants to see results of market research in order to determine whether the market size is big enough and if there are enough consumers to buy the product Investors also want to create a realistic forecast of the investment needed to push the venture into the next stage Venture capital funding at this stage might also include spending money on acquiring additional management personnel, fine-tuning the product, or conducting additional research 1.3.3 Stage 3: Early Stage This stage is also known as the first stage or second stage capital Though called “first stage,” this stage usually only comes after the seed and startup stages At this stage, the product or service has been developed and is being sold in the market This is the first opportunity the investors have to see how the product fairs with its competitors in the market Funding received at this stage will often go towards manufacturing, sales and additional marketing The amount invested here can be significantly higher than prior stages At this stage, the company could also be moving toward profitability, depending on its share of the marketplace If the startup and its product can hold their own against the competition, the venture capital firm will probably give a green light for the next stage 1.3.4 Stage 4: Expansion Stage The fourth stage also called second stage or third stage capital At this stage, the startup should be growing, the product selling, and the company taking in significant revenue The goal of funding at this stage is to scale the business and expand market share The venture capital funding could be used to invest in overseas manufacturing facilities, start a new marketing campaign, or take steps to reduce production and other costs The funding should help enable expansion into additional markets, such as other cities or countries, and also increase diversification and differentiation of product lines The venture capital firm will then evaluate if the management team has made the expected cost reductions and how the startup fares against the competitors 1.3.5 Stage 5: Mezzanine Stage Bridge or pre-IPO stage are also the other names for the fifth stage This is commonly the last stage of the venture capital financing process The primary goal of this stage is for the startup to go public so that investors can exit the venture and make a profit Funds received at this stage are generally used for activities such as merging with or acquiring other companies, taking measures to eliminate competitors or keep new competitors from the market, or financing the steps involved with an IPO CHAPTER 2: ACTUAL STATE OF VENTURE CAPITAL FUNDS IN VIETNAM 2.1 Activities of venture capital funds in Vietnam 2.1.1 The development process The late 1990s witnessed the seed stage of the venture capital industry in Vietnam in response to the demand for investment of startup companies, as the accessibility to bank loans posed numerous obstacles and many small enterprises having insufficient assets faced difficulties securing loans However, in this period, searching for sources of capital was a challenging task for startups due to the private investment sector being relatively new and not clearly regulated by laws The early stage started in the 2000s, when the market-based economy model began to be widely adopted and implemented in Vietnam, accelerating the development of venture capital industry to facilitate the increasing capital needs of startups Mekong Capital, IDG Ventures Vietnam, VIISA and other representative names took shape and invested in a diverse range of fields, namely real estate, consumer goods, technology, services and other areas It is also notable that the Vietnamese government began to consider promoting venture capital funds as an indicator of long-term economic growth and developed policies to encourage their establishment, regulate venture capital activities and created government-backed funds to boost entrepreneurship The government’s support was one of the prominent reasons why this period saw the substantial increases in the number of venture capital funds and the foreign funds entering the Vietnamese market, albeit with numerous limitations that investing in startups in Vietnam had to face due to lack of experience Starting from the mid-2000s, the Vietnamese venture capital market began to gain momentum, driven by a growing interest in technology startups and the increasing availability of funds However, this boom was followed by a slowdown in the late 2000s due to the global financial crisis, the lack of clear regulations for venture capital activities, the immaturity of the startup ecosystem, the lack of exits for investors and other factors The business environment also had disadvantageous factors such as 10 profitability In 2014, VNG Corporation became the first Vietnamese tech company to list on the NASDAQ stock exchange, with a valuation of over $1 billion 2.1.2.3 500 Startups Vietnam 500 Startups Vietnam (500 Global) is a venture capital firm and startup accelerator that prioritizes seed-stage investments in Vietnam's emerging startup ecosystem, especially the promising Vietnam-connected startups with an emphasis on technology companies Their investment philosophy targets companies characterised by a strong team with complementary skills, a clear and differentiated business model, and a large addressable market Since its launch in 2010, 500 Startups Vietnam has invested in more than 40 Vietnamese startups particularly in the areas of e-commerce, fintech, healthcare and edtech with some notable names, including Tiki, one of the leading e-commerce platforms in Vietnam, and Appota, a mobile content platform One of the outstanding investment cases of 500 Startups Vietnam is Tiki, one of Vietnam's largest e-commerce platforms offering a wide range of products and services, including books, electronics, fashion, beauty products, and others The company raised $54 million in its Series C funding round in 2017, which was led by JD.com and participated by VNG Corporation and CyberAgent Ventures With the help of this funding, Tiki expanded its operations and improved its services, logistics and delivery capabilities, continued to grow and expand its market share in Vietnam's highly competitive e-commerce space 2.1.2.4 VinaCapital Ventures: Founded in 2018, VinaCapital Ventures is a subsidiary of VinaCapital, one of the leading investment management and real estate development firms in Vietnam They show a strong focus on early-stage investments in Vietnam's technology sector, with a highlight on businesses with high growth potential to become market leaders in their respective fields They prioritize companies that have a strong team, a proven product or service and a scalable business model The fund has invested in a range of startups in sectors such as e-commerce, fintech, and software Their investment portfolio involves some outstanding names: Tiki (the 16 Vietnamese e-commerce platform), Smartly (the Singapore fintech startup) , and the Vietnamese software enterprise Base.vn One notable case that VinaCapital Ventures invested is Base.vn in 2019 as part of the company's Series A funding round Founded in 2016, Base.vn is a Vietnamese enterprise software company that offers cloud-based solutions for HR management, accounting, and customer relationship management and has become one of the leading enterprise software providers in Vietnam With VinaCapital Ventures' investment, Base.vn was able to expand its operations and product offerings The company has since launched new solutions, such as its BasePay platform, which provides online payment and transaction management services to businesses Base.vn has also expanded its customer base to include a diverse range of industries, including manufacturing, hospitality, and logistics Besides the aforementioned successful investment cases for venture capital funds in Vietnam, there have also been some notable failures Vatgia.com was an ecommerce platform that aimed to connect buyers and sellers in Vietnam and received a significant amount of funds from various investors, including CyberAgent Ventures, IDG Ventures Vietnam, and SoftBank Ventures Asia However, with the exponential growth of strong competitors (Shopee, Tiki, Lazada), Vatgia failed to gain traction in the competitive e-commerce market in Vietnam To conclude, the above-mentioned names have had significant achievements by pursuing different investment philosophies and targeting different models Their growth has contributed to the growth of the Vietnamese startup ecosystem, and helped to establish Vietnam as a hub for innovative entrepreneurship in Southeast Asia 2.2 Opportunities and challenges to develop in Vietnam 2.2.1 Opportunities It is undeniable that the form of investment through venture capital is becoming more and more popular in Vietnam these days In fact, the main sources of funding for startups in Vietnam mostly come from securities investment funds, 17 individual investors, non-governmental organizations, as well as venture capital funds According to Topica Founder Institute, from 2016 to 2018, the amount of venture capital and foreign capital invested in innovative start-up companies in Vietnam increased by more than three times, from $205 million to nearly $900 million The number of business affairs in this time period nearly doubled, from 50 deals in 2016 to 92 deals in 2018 Another source from the Journal of Echelon - Singapore, Vietnam now has approximately 3,000 innovative startups, nearly double the estimated figure of 1,800 businesses at the end of 2015 This also means a positive impact on the venture capital market in Vietnam Considering the global context, the development of science, technology, and innovation as well as the Fourth Industrial Revolution act as a motivator for the increasing number of startups in Vietnam Witnessing a rise in the number of startups, the government sees this trend as an opportunity to boost the country’s economy and starts to bring out policies, regulations, incentives, etc to support and encourage startups This course of action has been reflected in the Global Innovation Index (GII), from the 32nd rank out of 141 countries in 2015, Vietnam has made it to the 44th rank out of 132 countries in 2021, holding the 1st rank in the group of 29 countries with the same income level For foreign venture investors, Vietnam is a promising market as it is among the most populous countries in the world with a market of 100 million people considered as golden population The rate of purchasing power, the ability to absorb and welcome new products, especially technology, is higher than in other countries The Vietnam market, with the potential of the young market and the level of information receptivity, will meet the investors’ demand Moreover, globalization and international economic integration can also be counted as positive factors in the development of capital funding in Vietnam These trends help Vietnam approach global standards and make partnerships with other countries According to Vietnam Innovation & Tech Investment Report 2021 by DO Ventures, the number of foreign investors continued flocking to Vietnam for many years, with Singapore being the most active investor 18 As a result, there is no doubt that venture capital funding is growing day by day as startups need to raise capital for their business activities Figure 6: Investors Continued Flocking To Vietnam 2.2.2 Challenges The development of venture capital funding in Vietnam also faces some challenges in its growth These include the lack of legal corridors, the lack of angel investors, etc Legal corridors or policies in favor of venture capital funds need improving in the future The current procedures to establish member funds were rapid but the law still lacked specific regulations on definition, policy orientation, or preferential conditions for venture fund operation Another challenge, according to experts, is that the majority of domestic corporations have never invested in a venture capital fund model before For them, this type of investment model is quite risky compared to investing in stocks, bonds, or real estate Understandably, 97-98 startups out of 100 fail to continue their business activities To explain the number, domestic companies often face difficulties in accessing such venture capital due to the lack of innovative business ideas, and weak business and financial management skills 19 which fail to attract venture capital It is undoubtedly that most investors are still skeptical and won’t pour their capital into it Not only domestic venture capitalists but the number of foreign venture investors is also decreasing Due to language barriers, there are many startups that are actually doing well in their business but their founders not know how to persuade the foreign venture capitalists, leading these investors to question their potential and refuse to risk their money Consequently, there is a huge gap between the demand and supply for venture capital in Vietnam as the number of new enterprises continues to increase while the amount of capital raised is very limited The smaller the size of the Vietnam capital market is, the less attractive it appears to big investors, including domestic and foreign individuals Evidently, the number of foreign investors pulling out of Vietnam is decreasing; therefore, the amount of capital raised is also dropping Additionally, there has been a shift in the global capital flow According to Crunchbase News, in the first half of 2021, global venture capital funding broke its previous record as more than $288 billion was invested worldwide, which means approximately $50 billion was invested monthly But in a recent analysis also by Crunchbase News, total global venture capital in November 2022 was $22 billion, down by $70 billion compared to November 2021 This is the lowest funding month-on-month record since February 2020, which saw $18.3 billion invested Figure 7: Global Funding Monthly Averages By Half Year 20 CHAPTER 3: RECOMMENDATIONS 3.1 Governmental supports First, the overall regulatory framework for venture capital should be promulgated Due to the lack of a legal framework, the investors cannot have many incentives in investing in this new kind of market Thus, the Government needs to make a set of legal reforms not only in the venture capital market but also in a number of areas, such as Finance and Banking, Tax, Infrastructure, Intellectual Property and Dispute Resolution Furthermore, the Law had better distinguished the concept “venture capital” and “private equity” Based on that, the promotion policies for those markets can work effectively Most importantly, the definition of “Innovative SMEs” should be explained in detail, which is the critical point to make other incentives more effective Second, government should promote more Vietnamese Venture Capital funds instead of overseas venture capital investment in domestic companies To promote this establishment, local Venture Capital tax rates need to be competitive However, until now, there is no explicit guidance on specific tax incentives and separate accounting systems of a Venture Capital Fund Thus, on the investor tax incentive side, first, it needs to offer a discounted tax rate to Venture Capital funds domiciled in Vietnam of zero (tax exempt for years) to 10% (make Venture Capital a strategic industry) In addition, a tax deduction for Venture Capitalists is also recommended The overall risk of their investment in the early-stage would be lowered through their tax payment savings The tax deduction for Venture Capital investors could be piloted for five years Depending upon its ability to increase the amount of capital available to domestic Venture Capital funds it could then be discontinued or extended for another set period of time 3.2 Venture capital funds In addition to government support, venture capital funds also need several measures to attract capital, build strong ecosystems and have appropriate investment policies First, venture capital funds need to have measures to attract investment capital 21 Venture capital funds in Vietnam are often established in the form of joint stock companies or limited liability companies with a few shareholders, in order to unify goals and make decisions more easily The capital of these funds can come from many sources, such as the state budget, individuals, large corporations, brands, public investment funds or other financial institutions, etc Besides the state budget, in order to encourage stakeholders to increase their investment and funding for venture capital funds, funds need to enable and promote different mechanisms from which stakeholders can learn, exchange and share information with each other One of the most important measures is that funds need to actively open up information channels and be financially transparent Businesses are not open to funds in general and venture capital funds in particular if they not have broad access to information about these funds Up to now, most businesses are still operating in the absence of information in all areas They have to rely on commercial intermediaries to get market information and pay very high fees for information services To improve this situation and to respond to the requirements of the global information age, it is necessary to expand information channels so that businesses can get the necessary information This also means opening of information channels to all audiences equally, not just for one object at all Second, venture capital funds need to build a strong ecosystem With the current speed of scientific and technical development, there is no shortage of innovative, high-tech and potential products The important thing is how it is introduced and connected with investors Therefore, venture capital funds should create networks and opportunities for startups to connect with investors through organizing networking seminars, establishing groups to share information, organizing innovation and start-up competitions, etc Not only will this help funds to find potential projects, but also inspire and exchange experiences with young people who want to start a business, thereby promoting the growing startup community In addition, funds can also search for potential businesses or projects through cooperation with channels such as high-tech parks, business incubators, universities, research institutes, business associations, etc 22 Besides the financial support, funds can also provide non-financial support such as helping businesses to improve their management systems and business models, providing mentorships and consultants, building brand reputation, researching the market, giving professional training for startups and other investors, etc Since then, funds can both enhance their influence and bring more value to the society Third, venture capital funds need to evaluate and select projects carefully based on specific financial indicators and criteria The performance of venture capital funds depends on the success of their investment projects A good project will bring high returns to businesses, venture capitalists and fund managers Therefore, choosing a good project or a potential business plays a very important role Once a number of potential projects or businesses have been discovered, venture capital fund managers need to base on certain criteria to decide on the selection of suitable and effective investment projects Therefore, it is necessary to carefully consider the financial indicators of businesses and develop appropriate evaluation criteria such as: being reputable in the market, having a clear idea about the product, having a clear business plan and transparent financial statements, having an effective business management team, etc Fourth, venture capital funds should fund in stages and directly participate in the development of the business After the project evaluation process is completed and an investment decision is reached, venture capital funds should not sponsor a project or business once as the whole, but instead, divide it into several rounds In the first stage, funds should finance a part, then if the investment is found to bring the results as intended or committed, the funds will continue to invest in the next stage In order to limit risks, venture capital funds need to control the business receiving the funding by directly participating in the management of the business in the whole process and assisting in making business development decisions 23 Simultaneously, through the shares they own, venture capital funds can monitor the investments and cash flow of the business 3.3 International cooperations and partnerships With Vietnam’s current economy, the development of the venture capital market in general and the venture capital fund models in particular is necessary to realizing the cause of industrialization and modernization of the land Country in the context that the Vietnamese economy, especially the private sector, requires huge capital However, capital supply in Vietnam is still limited, the size of the capital market is small compared to the region There is a large gap between the supply and demand for venture capital in Vietnam, necessitating the formation and development of the venture capital market, as well as mechanisms and policies that contribute to the development of venture capital firms Therefore, attracting overseas venture capital funds to invest in Vietnam is critical According to Bain & Company’s recent survey, nearly 90 percent of investors said the hottest Southeast Asian market outside of Singapore in 2018-2019 is Vietnam and Indonesia With this advantageous situation, Vietnam needs more strategic policies to develop venture capital funds significantly In which, international cooperation and partnerships can play a crucial role in attracting foreign venture capital investment to the country Here are some potential initiatives that could be undertaken to promote such partnerships: First, strengthening relationships with foreign venture capital firms: Private sector players and government organizations in a country seeking foreign venture capital investment should pay attention to developing and strengthening the relationships with foreign venture capital firms This could involve attending industry conferences and meetups, and partnering with local organizations that work with venture capital firms, organizing meetings and events to connect with these firms and highlight the country's startup ecosystem Second, promoting the establishment of international venture capital funds: International venture capital funds could be established to invest in startups in the country seeking foreign venture capital investment Such funds, which could 24 be led by a mix of local and international players, could provide valuable funding and assistance to startups as they grow Third, creating startup exchange programs: Startup exchange programs could be established to encourage cross-border collaboration between startups and investors These programs could provide startups with opportunities to learn from international investors and gain exposure to new markets, while also enabling investors to gain access to promising startups in the country seeking foreign venture capital investment Fourth, increasing access to information to promote the country's image: Vietnam can provide more information about the startup ecosystem to foreign venture capital firms This can include information about the types of startups that are most successful in Vietnam, the regulatory landscape, and any cultural nuances that could impact doing business in the country Vietnam can also highlight its vibrant startup ecosystem, showcasing its talented entrepreneurs and the innovative ideas they're working on This can include hosting startup events and hackathons, and creating a network of incubators and accelerators Private sector players and government organizations in the country seeking foreign venture capital investment could collaborate to promote the country's strengths and opportunities to potential investors This could include emphasizing the country's favorable economic conditions, supportive regulatory environment, and skilled workforce Lastly, facilitating partnerships between startups and multinational corporations: Multinational corporations could be encouraged to partner with startups in Vietnam, which are seeking foreign venture capital investment Particularly, one of the major challenges facing the startup community in Vietnam is the lack of funding; therefore, partnerships could provide startups with access to valuable resources and expertise, while also enabling multinational corporations to gain access to new technologies and business models 25 CONCLUSION Through the report, it has clarified the characteristics and operation mechanism of the venture capital fund model, as well as the influence of the venture capital fund model in Vietnam The report synthesizes the experience of developing venture capital funds while also proposing some measures to encourage the creation of a venture capital development environment in Vietnam Overview of countries around the world, it is clear that the venture capital industry in general, and venture capital in particular, has affirmed its role and position in the development of the economy Investment recovery manifests itself differently in each country, depending on the characteristics of the political, economic, and legal environments, among other things Although the formation and development of venture capital funds in Vietnam is no exception to that general rule, we also cannot apply foreign experiences mechanically, but we must have considerations and choices to suit the specific and general situation of Vietnam In order for this type of investment to bring into full play the priority given to the financial market, to the process of scientific and technological innovation and above all to the national economy, our enterprises and the State need to have truthfully determined great effort First of all, is the formation of the initial legal framework for this type, then research and promulgate policies to encourage venture investment to develop Vietnamese businesses also need a change in management structure, company size to be suitable and especially to nurture business ideas to create attraction for venture capitalists Venture capitalists also oppose the requirement of taking a long time and making great efforts of the Government and businesses to match the development of the economy 26 REFERENCES [1] 500 Vietnam (2022, October 13) 500 Vietnam https://vietnam.500.co/ [2] Admin B (2012, March 11) Cơ hội “vàng” cho quỹ đầu tư mạo hiểm - Tạp chí Kinh tế 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Vietnam’s Leading Investment and Wealth Management Group VinaCapital Vinacap https://vinacapital.com/ [22] Vietnam Innovation and Tech Investment Report 2021 (2021) DO Ventures [23] VinaCapital Ventures (n.d.) https://ventures.vinacapital.com/ 29 APPENDICES Table 1: The assessment of individual contribution NO FULL NAME STUDENT ID CONTRIBUTION Nguyễn Thanh Hằng 2112250032 16.66% Trịnh Thị Tiểu Mai 2112250058 16.66% Trần Tố Quyên 2112250080 16.66% Dương Ngọc Diễm Thu 2112250090 16.66% Nguyễn Anh Thư 2113250046 16.66% Vũ Lê Ngọc Trâm 2112250099 16.66% 30 ... competitors from the market, or financing the steps involved with an IPO CHAPTER 2: ACTUAL STATE OF VENTURE CAPITAL FUNDS IN VIETNAM 2.1 Activities of venture capital funds in Vietnam 2.1.1 The development. .. mechanism of the venture capital fund model, as well as the influence of the venture capital fund model in Vietnam The report synthesizes the experience of developing venture capital funds while... supply and demand for venture capital in Vietnam, necessitating the formation and development of the venture capital market, as well as mechanisms and policies that contribute to the development of