Korea's Kakao, government to launch start-up fund

While the Korean government has a track record for providing support to the country's venture capital industry, particularly in the technology space, this is first time that it has paired up with a successful tech firm for such an initiative.

Kakao, which has developed several mobile applications, is known predominately for its Kakao Talk mobile chat service, used by nearly 100 million smartphone owners worldwide. The company recorded revenues of $42 million last year.

The fund is intended to support the rapidly increasing number of young companies that work with mobile technology, apps and, more broadly, ICT industry.

Kakao and SMBA are to focus on investing in businesses that create jobs for a younger generation of Koreans, specifically targeting founders aged under 40 with less than three years of experience and companies where more than half of the workforce is aged under 30.

The SMBA has plans to take on other successful venture companies and increase the size of the fund to KRW40-100 billion. The fund's long-term plans extend to 2017, by which time it is hoped that it will have invested some KRW260 billion in local start-ups.

"Unlike the existing funds that just make investments, this fund, through the participation of a successful company as an investor, will be able to transfer successful startup experience and management know-how as well," Lee Suk-woo, CEO of Kakao, said in a statement.

SMBA added that the Korean venture ecosystem is likely to follow a similar development path to the Silicon Valley, with founders of successful internet companies backing the next generation of start-ups.

"In the US, there is a vibrant venture ecosystem with a virtuous cycle where big corporations like Google, Apple, and Cisco foster start-up companies, and, after their growth, make an exit from the companies through M&A," said Han Jung-wha, SMBA Administrator. "But in our country, because companies raise capital mainly through loans and M&A or KOSDAQ markets are insufficient for the recovery of investment, the realization of revenue from a startup is blocked, or it takes a long time, cutting the link to a restart or a reinvestment in another startup."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Venture
• Technology
• Fundraising
• SME
• Technology
• South Korea
• Venture
• Fundraising
• TMT