Ministry of SMEs and Startups Reorganizes R&D Support System to Investment-Based and Postpaid Models

Source: Ministry of SMEs and Startups

[Asia Economy Reporter Moon Hyewon] The Ministry of SMEs and Startups announced on the 23rd that it will introduce a new concept of ‘investment-type and post-payment R&D projects’ to support R&D for SMEs and startups, moving away from the previous sole grant-based approach.

First, an ‘investment-type R&D’ will be introduced, where the government provides matching support to companies pre-selected and invested in by venture capitalists. This approach combines the market’s advantages such as company selection, nurturing capabilities, and capital strength with the flexibility of investment methods to support R&D, starting with a scale of 16.5 billion KRW this year.

Targeting SMEs and startups in the materials, parts, equipment, and non-face-to-face sectors, the government plans to provide matching investments up to 1x the amount invested by venture capitalists, capped at 2 billion KRW, supporting about 10 companies by the end of September.

To prevent conservative investments by private investors and encourage bold innovation, the government will allow up to 10% of the government investment as a priority loss provision in case of losses during challenging R&D processes. For SMEs and startups with excellent performance, an incentive of a call option to purchase up to 60% of the government’s investment shares will be granted.

The government mandates that more than 50% of the support funds be used for R&D and expands the allowable expenditure scope to include prototype production, granting autonomy. The remaining funds can be used for mass production capital, supporting a consistent approach from technology development to commercialization.

With the introduction of the post-payment R&D project, companies can first conduct R&D using their own resources and receive government grants after successful evaluation. This targets SMEs and startups in the 4th Industrial Revolution fields, materials, parts, equipment, and the BIG3 sectors (system semiconductors, future cars, bio-health). Since companies invest their own resources first, the selection process is simplified to basic requirement checks and document evaluations only (previously, selection evaluation took 3 months → within 1 month), enabling a one-stop evaluation.

About 25 companies to be selected by the end of September will receive 25% of the government support funds upfront, with the remainder provided after successful R&D evaluation. Outstanding post-payment R&D companies will also receive exceptional incentives such as technology fee exemptions, linkage to commercialization fund guarantees (through the Korea Technology Finance Corporation), and follow-up R&D support if necessary.

Won Young-jun, Director of Technology Innovation Policy at the Ministry of SMEs and Startups, said, “The previous grant-based approach had difficulties reflecting the rapidly changing market demands for R&D and fostering proactive innovation by SMEs and startups due to strict selection procedures and rigid execution structures. Through the introduction of new support methods?investment-type and post-payment R&D?we plan to encourage bold R&D participation by companies and investors, especially in the materials, parts, and equipment sectors that have been neglected by the investment market.”

The investment-type R&D will begin with a public announcement on the 27th of this month, and detailed information and applications can be submitted through Korea Venture Investment at least twice every two months.

Post-payment R&D applications and detailed information will be available from the 24th of this month to the 24th of next month via the Technology Development Project Integrated Management System. Inquiries can be made to the Ministry of SMEs and Startups, the Small and Medium Business Technology Information Promotion Agency, or the SME Integrated Call Center.

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