Startup Industry: "COVID-19 Government Measures Must Address Startup Blind Spots"

Kospo "Startup frozen investments block loan paths... New industry faces extinction crisis"

[Asia Economy Reporter Kim Cheol-hyun] The Korea Startup Forum announced on the 25th that it has submitted a report to the government proposing policy tasks after identifying the current status of startups related to the novel coronavirus infection (COVID-19). The Korea Startup Forum (hereinafter Kospo) conducted an urgent survey on member companies over five days from the 19th to the 23rd to investigate the types of damages startups related to COVID-19 have experienced. The results showed that the difficulties were in the order of ▲decreased sales (41.5%) ▲investment setbacks (33.0%) ▲challenges in overseas business (16.0%).

Kospo, based on the urgent survey results, proposed eight policy tasks to the government in the first phase, including ▲resolving blind spots in financial and policy funds ▲restoring venture investment sentiment ▲urgent public procurement of services in crisis industries ▲activating fintech-based fund liquidity such as P2P. Kospo first pointed out that the government's support measures have wide blind spots for startups. Since startup investment has virtually stopped, many startups are not included in either small business or SME categories, leaving them in a blind spot for government support.

Startups grow through investment based on growth potential, so sales and operating profit are not the company's top priorities. However, Kospo explained that current corporate support measures are judged based on sales and operating profit, which excludes startups from SME support measures. Additionally, startups find it difficult to qualify for small business policy funds in terms of the number of employees and working capital size. Startups are excluded from both SME and small business support measures, and with the investment market also tightening, there is no alternative for them to endure the COVID-19 situation.

A representative of a Kospo member company said, "Due to the surge in inquiries at loan fund operating institutions' counters, it was not easy to even conduct initial consultations. During the consultation, we were told that only loans around 3 million won were possible considering our company's sales from the previous year. We had built services through R&D last year and were about to sign contracts with key customers, but these factors were not considered in the loan screening process."

Accordingly, Kospo argued that a comprehensive review and improvement of various projects are necessary to ensure that startups are not exposed to blind spots in government COVID-19 countermeasures. For startups, it is necessary to adjust loan eligibility criteria such as sales scale, establishment year, CEO age, number of employees, and past closures to enable urgent capital injections, and to explore ways to activate fintech-based fund liquidity such as P2P to prevent startups facing financial difficulties from falling into high-interest loan markets. Furthermore, Kospo emphasized the need to ensure that startups are not excluded from employment retention support projects and tax reduction measures, and to prepare incentives for restoring the severely contracted venture investment sentiment through early execution of the Venture Fund, tax benefits for VC investments, and improvement of related regulations.

Choi Sung-jin, CEO of Kospo, said, "The damage and pain caused by COVID-19 are the same for all citizens, but many startups are in a situation where survival is difficult," adding, "We will continue efforts to overcome the crisis while communicating with the government to prevent the collapse of startups, which are future growth engines."

This content was produced with the assistance of AI translation services.