HÀ NỘI — A newly-issued decree on investment in innovative start-ups is expected to strongly promote the wave of domestic venture capital, attract more private capital flows and help the start-up ecosystem develop more sustainably and transparently.

Under Decree No. 210/2025/NĐ-CP, which will take effect from September 15 this year, for the first time, the law recognises convertible investment instruments, allowing investment funds to invest in start-ups through specific financial instruments and then convert them into shares or capital contributions.

This is a significant step forward compared to before, when non-traditional investment models were not officially recognised by Vietnamese law.

In addition, the decree clearly stipulates the right to purchase shares. Accordingly, investment funds are allowed to pre-negotiate the right to purchase new shares in the next rounds of capital calls of start-ups. This not only creates flexibility in the investment structure, but also helps funds maintain their position and benefits in the next stages of business development.

The decree also states specific regulations to standardise the organisational and operational model of innovative start-up investment funds.

First, in terms of scale, each innovative start-up investment fund can include from two to a maximum of 30 investors contributing capital, and has no legal entity. This is a flexible model, suitable for the small scale and experimental nature of many venture capital funds in the early stages.

Second, in terms of the investment ratio cap, the total capital a fund is allowed to invest in a start-up must not exceed 50 per cent of the start-up's charter capital after receiving investment. This regulation aims to restrict the fully dominance of investors and encourage start-ups to seek more diverse sources of capital.

Third, cross-investment is prohibited. The decree strictly prohibits innovative start-up investment funds from contributing capital to another innovative start-up investment fund. This is a measure to avoid financial risks, avoid capital spirals and increase transparency in investment activities.

As for operation, creative start-up investment funds are allowed to invest in innovative start-up SMEs; use convertible investment instruments; own the right to purchase shares in start-ups; and use idle capital to make term deposits or buy deposit certificates at banks approved by competent authorities.

However, the funds are not allowed to lend commercially or guarantee loans; invest in listed securities, bonds, fund certificates on the stock market; or make profit commitments when raising capital from investors. These limits are put in place to protect the nature of venture capital as supporting innovation, rather than operating for financial profit or speculation. — BIZHUB/VNS