Discussion on Establishing the Public-Private Joint Venture 'Jeju Venture Capital'

Regional Forum Advocates Establishment of Jeju Venture Capital Firm
Led by JDC and Jeju Province?

[Asia Economy Reporter Kwangho Lee] Discussions on establishing a public-private joint venture capital (VC) in Jeju Province are gaining momentum. This is interpreted as an effort to transform the investment ecosystem, which is concentrated in the metropolitan area, through a regionally specialized investment firm. Attention is focused on how the investors will be composed in the future.

According to the investment banking (IB) industry on the 29th, as the need to establish a venture capital in Jeju Province has been raised, related discussions are ongoing. The tentative names Jeju Venture Capital or Jeju Venture Investment are being mentioned. The form is likely to be a startup investment company.

Recently, the Jeju Financial Forum and Tamna Financial Forum jointly held an 'Invitational Briefing on Spatial Investment Strategies Using Innovative Financial Services.' At this event, they argued that a public-private joint investment firm headquartered in Jeju Province should be established to invest in local companies for the economic development of Jeju.

Need for Establishing a Startup Investment Company Based in Jeju Province Raised

Regarding investment funds, it was proposed to raise them through the Korea Fund of Funds, local government funds, financial institutions within Jeju, and mid-sized excellent companies in the Jeju region, and also to establish a Jeju-type Fund of Funds. Ultimately, it is expected that the invested companies will be listed on KOSPI, KOSDAQ, KONEX, etc., transforming the economic structure of Jeju.

Earlier, the Jeju Free International City Development Center (JDC), an organization under the Ministry of Land, Infrastructure and Transport, reportedly agreed on the necessity of establishing a venture capital in Jeju Province. It is anticipated that JDC and Jeju Province will lead the establishment of the venture capital, with local companies lending their support.

Jeju Province is known to be modeling itself after Gyeongsangnam-do. Gyeongnam has Gyeongnam Venture Investment, the first public-private joint venture capital in Korea. It holds the title of the first startup investment company established through the cooperation of private, government, and financial sectors. Major shareholders include Daehan Steel (59.6%), Nonghyup Bank (10.6%), Gyeongnam Bank (10.6%), and Gyeongnam Creative Economy Innovation Center (8.5%).

It contributes to channeling venture capital funds, which are concentrated in the metropolitan area, into the Gyeongnam region. Since its launch in 2019, it has continued active regional investments. It is also evaluated as creating a virtuous cycle where money circulates locally by securing local companies as private investors (LPs).

Gyeongnam Venture Investment, Korea’s First Public-Private Joint VC, as a Role Model

Due to the success of Gyeongnam Venture Investment, it is reported that local governments including Jeju Province are showing interest in establishing regional venture capitals. There is a possibility that other local governments, like Jeju, will begin related discussions.

Many domestic venture capitals are located on Teheran-ro in Gangnam-gu, Seoul. Korea’s Teheran-ro is equivalent to the United States’ Silicon Valley. Since many startups are in Seoul and the metropolitan area, venture capitals nest nearby and conduct investment activities.

Because of this, there are limits to venture capital funds flowing down to local areas. According to the Ministry of SMEs and Startups, the concentration of venture investment in the metropolitan area was 81.8% last year, up from 78.2% in 2020. This is the highest since 82.3% in 2017. While 62.1% of startups are concentrated in the metropolitan area, investment amounts are even more heavily concentrated there.

In response, the Ministry of SMEs and Startups announced a ‘Regional Venture Investment Activation Plan’ to create more than 470 billion KRW in local-only funds to revitalize regional economies through expanded venture investment. However, voices criticizing the effectiveness of local funds are growing.

A venture capital industry official said, “Although policies to induce local investments have been steadily introduced, venture capitals have only met the mandatory local investment ratios and bet the remaining funds in the metropolitan area. On the other hand, regional venture capitals, having a clear purpose, will be more sincere in local investments.”

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