Proposal for startups that are not yet profitable to still be listed

In commenting on the project file for the Law amending and supplementing a number of articles of the Securities Law, the Ministry of Science and Technology proposed adjusting the regulation that businesses must be profitable for 2 consecutive years before offering shares for the initial public offering (IPO) using appropriate criteria.

According to the Ministry of Science and Technology, startups and innovation companies often spend the first 3-5 years “burning money” on research, development, and testing of new technology and business models to attract users. If current regulations are applied, technology startups or unicorns in their strongest growth phase will find it difficult to qualify for IPO and listing. This leads to the risk of “draining” potential businesses and capital flows when they move to another country to IPO.

The Ministry of Science and Technology believes that there are more appropriate criteria to evaluate the financial health and growth potential of startups. For example, revenue growth rate, ratio of investment and development costs to total revenue, valuation and participation of venture capital funds…

According to the Securities Law, businesses must meet 9 criteria to IPO. In addition to being profitable for two consecutive years before the initial share offering, the enterprise must not have accumulated losses, the actual contributed charter capital is at least 30 billion VND or more, 15% of the shares must be sold to at least 100 minority investors to ensure public status…

The Ministry of Finance, the agency drafting the revised Law, believes that the IPO conditions are designed to ensure that businesses have certain business stability and financial capacity before mobilizing capital widely from the public. This is also to maintain the quality of goods on the market and protect investors, especially individual investors.

According to the drafting agency, the criteria proposed by the Ministry of Science and Technology do not sufficiently reflect the ability to generate cash flow and the level of sustainability of the business model. That is also not a highly standardized accounting and financial indicator to apply uniformly when licensing an IPO.

“Applying these criteria may create risks of subjective assessment, making it difficult to ensure transparency and the ability to monitor implementation,” the Ministry of Finance responded. According to this agency, the capital market development orientation for startups and innovations has been researched according to a separate mechanism, synchronized with the specialized trading market.

As of the end of last year, the country had about 4,000 startups, including two technology unicorns valued at over a billion USD, MoMo and Sky Mavis. The startup support infrastructure is gradually improving with 208 investment funds, 84 incubators, 40 business promotion organizations and more than 20 startup support centers.

In early April, the Government issued the National Strategy on creative startups, which set a goal of having 5 million business entities and at least 10,000 creative startups by 2030. Vision to 2045, in addition to the goal of 10% of the population participating in startups, Vietnam strives to have one business for every 35 people, and one creative startup for every 5,000 people.

According to the strategy, a creative startup nation is a place where all citizens can start a business based on science, technology, innovation and digital transformation. The spirit of entrepreneurship, daring to think, daring to do, accepting risks and being tolerant of failure is encouraged and spread throughout society.