Korea plans $751m venture capital fund-of-funds
The Korean government has sought to counter a steep drop-off in venture capital investment by pledging significant policy support for the industry, including a KRW 1trn (USD 751m) fund-of-funds.
The Ministry of SMEs and Startups (MSS) said the fund-of-funds was intended to support KRW 2trn in fundraising activity by third-party managers in 2023. This will “encourage venture capital firms to promptly execute an investment surplus of around KRW 11trn,” as of year-end 2022, it added.
In addition, MSS plans to provide more R&D support through initiatives such as its Super Startup 1000+ project, which was launched in late 2022 with a view to investing KRW 2trn in deep-tech start-ups over a five-year period. Funding will come through a public-private partnership structure.
MSS also raised the prospect of introducing global special innovation zones that would provide incentives to start-ups and it promised to review all laws, systems, and infrastructure that may help Korean companies expand overseas.
These proposed measures come on top of a KRW 80trn funding programme for small and medium-sized enterprises (SMEs) that is already being implemented, according to a statement.
Young Lee, the minister for SMEs and Startups, noted that commitments to venture capital funds in Korea fell 78.6% year-on-year in the first quarter of 2023, while venture capital investment was down 60.3%. This compared to declines of 84.1% and 55.1% in the US. Lee blamed global economic uncertainty driven by high interest rates and high prices.
“As this crisis is a global phenomenon and overcoming the crisis in a short time period is the key to enhancing economic competitiveness, the government and the private sector need to take this as an opportunity to strengthen the venture/start-up ecosystem and collaborate in making an all-out effort to invigorate the ecosystem,” Lee added.
“The government will carefully examine the various opinions voiced by the industry at the forum and thoroughly consider them when developing and implementing venture/start-up policies.”
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