Vietnam is preparing to test a more interventionist model for building technology companies, with the Ministry of Science and Technology proposing a National Venture Capital Fund with initial capital of US$100 million for the 2026-2028 period.
The proposal, discussed at a meeting of the government’s science, technology, and innovation committee on Tuesday, is designed to accelerate the commercialisation of strategic technologies and support the creation of competitive technology enterprises.
Also Read: Vietnam isn’t just inviting private capital in. It is structurally dependent on it
While US$100 million is modest by global venture capital standards, the plan is significant for Vietnam and the wider Southeast Asian startup ecosystem. It signals Hanoi’s intent to move beyond policy support and infrastructure building and towards direct participation in venture financing, particularly in sectors where private investors remain cautious because of long development cycles, uncertain exits, and high technical risk.
The fund is being modelled on Israel’s Yozma programme, one of the most cited examples of state-backed venture capital catalysing a private VC industry. Under the Vietnamese proposal, the state would lead the fund’s initial capital structure. From 2028 to 2035, the fund would gradually mobilise more private capital, with private investors expected to account for 30 to 40 per cent of total capital. The ministry has also proposed the development of separate funds for different technology sectors.
Vietnam’s deeptech funding gap
The timing is notable. Vietnam has emerged as one of Southeast Asia’s more dynamic startup markets, supported by a young digital population, a growing engineering workforce, and increasing interest from regional and global investors. However, much of the country’s startup funding has flowed into consumer internet, fintech, e-commerce enablement, and software businesses rather than harder technology categories.
That is not unique to Vietnam. Across Southeast Asia, deeptech, advanced manufacturing, semiconductors, climate technologies, biotech, and other research-heavy sectors often struggle to secure early-stage risk capital. These companies typically require longer gestation periods, specialised evaluation, patient funding, and stronger links between universities, laboratories, corporates, and investors.
Vietnam is trying to position itself more aggressively in strategic technologies as global supply chains shift and as multinational technology companies expand their presence in the country. The country has already attracted attention as a manufacturing base for electronics and is attempting to move up the value chain into higher-value technology development.
A national venture capital fund could help bridge the gap between research and commercialisation, especially if it can back companies emerging from universities, research institutes, and incubators. But the challenge will be turning a state-funded vehicle into a credible venture investor rather than another public-sector grant mechanism.
The Yozma inspiration and its limits
Israel’s Yozma programme, launched in the 1990s, helped seed the country’s venture capital industry by using government capital to attract foreign and domestic private investors. Its structure gave private investors strong incentives and helped create a commercially disciplined investment culture.
Also Read: Vietnam’s biggest PE bet of 2025 was not on tech. It was on what 100M people eat every day
Vietnam’s proposal borrows from that logic: state capital comes first, private capital follows, and specialised funds are created around priority sectors. In theory, this allows the government to absorb some early risk while encouraging private investors to participate once the model matures.
But transplanting Yozma-style models is rarely straightforward. Israel already had strong research universities, defence-linked technology capabilities, global diaspora networks, and deep connections to US capital markets. Vietnam has different institutional realities, including a younger VC ecosystem, fewer proven deeptech exits, and a capital market still developing mechanisms for valuing high-growth technology businesses.
The ministry appears aware of these constraints. It has identified the tension between venture capital’s risk-tolerant nature and the public-sector principle of preserving state capital as a major challenge. That tension is central to whether the fund can function effectively.
Risk cannot be managed deal by deal
Venture capital works because a small number of outsized winners compensate for many failures. Public capital management, by contrast, often penalises losses on individual investments, even when the overall portfolio performs well. If officials managing the fund are exposed to personal or legal liability for failed startup investments, the vehicle could become too conservative to achieve its purpose.
To address this, the ministry has proposed that fund performance be evaluated across the entire portfolio rather than on individual deals. It has also called for protection mechanisms for decision-makers who follow proper procedures.
This is a crucial point. Without such protections, fund managers may avoid genuinely risky strategic technologies and instead back safer, later-stage, or politically favoured companies. That would undermine the rationale for creating a venture fund in the first place.
The ministry has recommended that the government report to the National Assembly to issue a resolution creating a specific mechanism for the fund. This would include liability exemptions for officials managing state-funded venture capital, provided they comply with regulations. The goal is to enable controlled risk-taking in investments involving strategic technologies.
Governance will decide credibility
The proposed governance structure also points to lessons from past state-backed investment efforts in the region. The ministry has recommended market-based recruitment and compensation, autonomy for the fund’s investment council, and stronger ties with research institutes, universities, and technology incubators.
These details are important. A venture fund needs experienced investors, sector specialists, and the ability to make decisions quickly. If compensation is not competitive, the fund may struggle to attract talent from the private market. If investment decisions are too bureaucratic, promising startups may look elsewhere for capital.
Autonomy will also be closely watched by private investors. For the fund to crowd in capital rather than crowd it out, it must be seen as commercially disciplined, transparent, and free from excessive administrative intervention.
Southeast Asia has no shortage of government-backed funding initiatives, from Singapore’s deep pool of state-linked capital to Malaysia’s startup financing schemes and Indonesia’s efforts to mobilise domestic capital for technology and innovation. The strongest models tend to combine public-sector strategic direction with professional investment management and clear accountability frameworks.
Also Read: Why Vietnam is the next big thing for startups and corporate partnerships
Vietnam now appears to be moving in that direction, but execution will be decisive.
The exit problem
Perhaps the most difficult issue is not capital deployment but capital recovery. The ministry highlighted Vietnam’s underdeveloped exit ecosystem, including limited mechanisms for valuing technology companies and insufficient channels for investors to recover capital.
This is a broader Southeast Asian problem. IPO markets remain uneven for technology companies, M&A activity is still limited compared with the US or China, and many regional startups depend on later-stage funding rounds rather than clear exit pathways. For deeptech companies, the problem is even more acute because buyers are specialised and commercialisation timelines can be long.
If Vietnam wants private investors to account for 30 to 40 per cent of the fund’s capital in later phases, it will need to improve exit visibility. That could involve strengthening domestic capital markets, encouraging corporate acquisitions, creating clearer valuation standards, and deepening cross-border links with regional and global investors.
The proposed US$100 million fund is therefore not just a financing instrument. It is a test of whether Vietnam can build the institutional architecture required for a more sophisticated innovation economy.
If designed well, the fund could help turn public research into commercially viable companies and give Vietnam a stronger position in Southeast Asia’s emerging deeptech landscape. If designed poorly, it risks becoming another state capital vehicle constrained by caution, weak incentives, and limited exits.
For now, Hanoi has identified the right problems. The harder task will be building a fund that is allowed to take the risks venture capital requires.
The post Vietnam looks to Israel’s Yozma model for US$100M national venture fund appeared first on e27.