Vietnam Establishes First Legal Framework for Venture Capital Funds
Table of Contents
- 1. Vietnam Establishes First Legal Framework for Venture Capital Funds
- 2. Addressing a Long-Standing Need
- 3. Key pillars of the New Framework
- 4. Investment Structures and Fund Management
- 5. Risk Management and Accountability
- 6. Fostering a Sustainable Innovation Ecosystem
- 7. The Global venture Capital Landscape
- 8. Frequently Asked Questions about Vietnam’s venture Capital decree
- 9. How will Decree 66/2024/ND-CP impact the level of foreign direct investment (FDI) in Vietnam’s startup ecosystem?
- 10. Vietnam Establishes Legal Framework for Venture Capital Funds for the First Time
- 11. The Landmark Decree 66/2024/ND-CP: A Game Changer for Vietnamese Investment
- 12. key provisions of the Decree
- 13. Implications for Investors: Domestic & International
- 14. Sector-Specific Opportunities: Where the Money Will Flow
- 15. navigating the New landscape: Practical Tips for Funds & Investors
- 16. Real-World Exmaple: The Rise of VNG corporation
- 17. Challenges and Future Outlook
Hanoi, Vietnam – A Landmark decree establishing a formal legal framework for venture capital funds in Vietnam was issued on October 14th, 2025. Decree 264/2025/ND-CP, promulgated by the government, marks a pivotal moment for the country’s burgeoning startup scene and signals a significant shift in its approach to attracting investment.
Addressing a Long-Standing Need
Prior to this decree, investment in Vietnamese startups occurred in a fragmented manner, relying on pilot programs and smaller, regionally focused funds. The absence of clear regulations created hurdles for both domestic and international investors, hindering the growth of the venture capital market. Foreign funds historically dominated early-stage funding, while domestic entities struggled wiht capital acquisition and legal uncertainties.
Pham Duc Nghiem, Deputy Director of the Department of Startups and Technology Enterprises at the Ministry of science and Technology, emphasized that this decree establishes a dedicated legal pathway for venture capital operations within Vietnam. This represents a concerted effort to foster a more stable and attractive environment for investment.
Key pillars of the New Framework
The new legislation is built on two core principles: “public investment, private governance” and “leveraging public investment to drive private investment.” According to sources, this allows for a more dynamic interplay between state support and private sector expertise.
The decree allows for flexible investment models, enabling private institutions, funds, and individual investors to collaborate with the state on science, technology, and innovation projects. Previously, such collaborations largely relied on co-financing arrangements without a solid legal underpinning.
Investment Structures and Fund Management
Funds can now be structured as either limited liability companies or joint-stock corporations. Critically, the decree permits the hiring of private fund management companies with appropriate licensing to oversee investments, ensuring professional management and risk mitigation. According to Luong Van Thuong,Deputy Director of the Department of Innovative Startups,this framework clearly defines capital contribution ratios,risk assessment,and profit sharing mechanisms to encourage private investment.
| Fund Type | Initial State Capital | Target Total Capital (5 Years) |
|---|---|---|
| National Venture Fund | VND 500 Billion | VND 2 Trillion+ |
| Local Venture Funds | varies by Province/City | Resolute by Budget & needs |
Did You Know? The decree allows funds to establish or invest in other funds,both domestically and internationally,utilizing a “Fund of Funds” model,a common strategy in developed venture capital ecosystems.
Risk Management and Accountability
The decree addresses risk management by stipulating that total investment losses should not exceed 50% of charter capital. It also introduces an innovative approach to evaluating fund performance, assessing the entire investment portfolio’s success over its lifecycle, rather than individual investment outcomes. Managers and operators are protected from liability if losses result from objective circumstances and are managed transparently and in compliance with established investment principles.
Pro Tip: This liability protection is designed to encourage bolder and more proactive fund management, fostering a more dynamic investment environment.
Fostering a Sustainable Innovation Ecosystem
The National Venture Capital Fund can reinvest up to 5% of after-tax profits back into the national innovation ecosystem, creating a self-sustaining cycle of investment and growth. The Ministry of Science and Technology is presently focused on selecting founding members for the national fund and establishing a comprehensive operating system.
Collaboration is key,with plans underway for seminars and partnerships with regions boasting strong technological capabilities,including Bac Ninh Province,Hai Phong Province,Da Nang City,Ho Chi Minh City,and can tho Province. The Ministry is also actively seeking cooperation with international organizations and investment funds to attract foreign expertise and resources.
Experts view the issuance of Decree 264/2025/ND-CP as a transformative step for Vietnam’s science,technology,and innovation policies. This new legal framework is expected to unlock significant investment, enabling the convergence of public and private resources to support groundbreaking ideas and businesses.
Will this new decree effectively attract the necessary capital to truly elevate Vietnam’s startup ecosystem? And how will the government ensure transparency and accountability in the management of these funds?
The Global venture Capital Landscape
Globally,venture capital investment experienced significant fluctuations in recent years. According to PitchBook data,global VC funding totaled $368.7 billion in the first three quarters of 2023, down substantially from the record high of $424.9 billion in 2022. Though, certain sectors like Artificial Intelligence continue to attract substantial investment. Countries like the United States, China, and India remain the leading destinations for venture capital, but Southeast Asia, including Vietnam, is rapidly gaining prominence.
Frequently Asked Questions about Vietnam’s venture Capital decree
- What is venture capital? venture capital is a type of private equity financing provided by firms or funds to small, early-stage, emerging companies that are deemed to have high growth potential.
- What does Decree 264/2025/ND-CP aim to achieve? The decree aims to establish a legal framework to attract investment into Vietnamese startups, fostering innovation and economic growth.
- How does the decree encourage private sector participation? It allows for collaboration between state and private entities in investment and permits private companies to manage venture capital funds.
- What is the “Fund of Funds” model? This model allows funds to invest in other funds, diversifying risk and expanding investment reach.
- What are the risk management provisions of the decree? The decree limits potential losses and protects fund managers who act transparently and responsibly.
- What role does the Ministry of Science and Technology play? The Ministry represents state-owned capital owners in the national venture fund.
- How will this impact foreign investors? The decree provides a clearer and more stable legal environment for foreign investors looking to participate in the Vietnamese startup ecosystem.
Share your thoughts on this exciting development in the comments below!
How will Decree 66/2024/ND-CP impact the level of foreign direct investment (FDI) in Vietnam’s startup ecosystem?
Vietnam Establishes Legal Framework for Venture Capital Funds for the First Time
The Landmark Decree 66/2024/ND-CP: A Game Changer for Vietnamese Investment
For the first time, vietnam has a dedicated legal framework governing venture capital (VC) funds, officially enacted through Decree 66/2024/ND-CP, effective September 1st, 2024. This represents a meaningful leap forward for the country’s burgeoning startup ecosystem and opens doors for increased foreign direct investment (FDI). Previously, VC funds operated in a gray area, lacking specific regulations, which hindered growth and deterred some investors. This new legislation aims to clarify the rules, attract more capital, and foster innovation. The decree covers both domestic and foreign investment funds operating within Vietnam.
key provisions of the Decree
The decree outlines crucial aspects of VC fund operation, including:
* fund structure: Defines permissible fund structures, including limited partnerships and closed-end funds. this clarity is vital for investors understanding the legal implications of their investments.
* investment scope: Specifies the types of companies VC funds can invest in – primarily startups and small to medium-sized enterprises (SMEs) with high growth potential. Focus areas include technology, renewable energy, and innovative business models.
* Capital Contribution & Withdrawal: Details the rules surrounding capital contributions from investors and the procedures for withdrawing funds.This includes stipulations on reporting requirements and potential restrictions.
* Fund Management: Establishes requirements for fund managers, including qualifications, licensing, and fiduciary duties. This aims to ensure professional and responsible fund management.
* Tax Incentives: Offers potential tax benefits for both VC funds and their investors, designed to encourage investment in the Vietnamese startup scene. These incentives are still being finalized but are expected to be competitive.
* Reporting & Compliance: Sets out clear reporting requirements to the State Securities Commission (SSC) and other relevant authorities, ensuring clarity and accountability.
Implications for Investors: Domestic & International
This new framework has profound implications for both domestic and international investors interested in the Vietnamese market.
* Reduced Risk: The legal clarity substantially reduces the risk associated with venture capital investment in Vietnam. A defined regulatory habitat provides a level of protection and predictability previously absent.
* Increased Transparency: Enhanced reporting requirements and oversight by the SSC will increase transparency in fund operations,building investor confidence.
* Attracting FDI: The decree is expected to attract significant foreign investment into Vietnamese startups, fueling growth and innovation.
* Opportunities for Local Funds: Domestic VC funds will benefit from a more level playing field and increased access to capital.
* Simplified Procedures: Streamlined procedures for fund establishment and operation will reduce administrative burdens and costs.
Sector-Specific Opportunities: Where the Money Will Flow
Several sectors are poised to benefit significantly from the influx of venture funding:
* Fintech: Vietnam’s rapidly growing digital economy and increasing smartphone penetration make fintech a prime target for investment. Areas like mobile payments, lending platforms, and insurtech are particularly attractive.
* E-commerce: Despite the presence of established players, the e-commerce market still offers significant growth potential, especially in tier-2 and tier-3 cities.
* Renewable Energy: Vietnam’s commitment to sustainable progress and increasing energy demand create opportunities for investment in solar,wind,and other renewable energy projects.
* Logistics & Supply Chain: Improving infrastructure and a growing manufacturing sector are driving demand for efficient logistics and supply chain solutions.
* Edtech: A young and ambitious population coupled with a growing demand for quality education makes edtech a promising sector.
Successfully navigating the new regulatory landscape requires careful planning and execution:
- Legal Counsel: Engage experienced legal counsel specializing in Vietnamese investment law to ensure full compliance with Decree 66.
- Due Diligence: Conduct thorough due diligence on potential investee companies, focusing on their business model, financial performance, and legal standing.
- SSC Registration: Ensure timely registration with the State Securities Commission (SSC) and adhere to all reporting requirements.
- Tax Planning: Optimize tax strategies to take advantage of available incentives and minimize tax liabilities.
- local Partnerships: Consider partnering with local investors or advisors who have a deep understanding of the Vietnamese market.
- Stay Updated: continuously monitor regulatory updates and changes to ensure ongoing compliance.
Real-World Exmaple: The Rise of VNG corporation
While operating before the formal framework, the success of VNG Corporation, a leading Vietnamese tech company, demonstrates the potential of the Vietnamese startup ecosystem. VNG received early-stage investment from IDG Ventures Vietnam and other investors, showcasing the appetite for Vietnamese innovation. The new decree aims to facilitate more such success stories by providing a stable and predictable investment environment.
Challenges and Future Outlook
Despite the positive developments, challenges remain. The implementation of the decree will be crucial, and further clarification on certain provisions might potentially be needed. Building a robust ecosystem requires not only capital but also skilled talent, supportive infrastructure, and a conducive regulatory environment. However, the establishment