[Exclusive] 10 Billion Invested in Chungcheong and Honam Region Angel Investment Fund... Only One Investment Destination

'Hub Fund' to Alleviate Angel Investment Concentration in the Seoul Metropolitan Area
Formed with 10 Billion KRW in Public-Private Contributions Including 6 Billion KRW from the Korea Fund of Funds
Over 8 Months Passed, Only One Investee Company...Criticism of "Show Administration"

The non-capital region angel investment fund, totaling 10 billion KRW and established by the previous government, has yet to find suitable investment targets nearly a year after its formation. Although government funds were injected to alleviate the concentration of early startup investments in the capital area, questions about its effectiveness are being raised.

According to the Ministry of SMEs and Startups and the Korea Angel Investment Association on the 8th, the 'Regional Angel Investment Hub Dedicated Fund' (hereafter Hub Fund), formed in January this year for early-stage startups in the Chungcheong and Honam regions, currently has only one investment target. The Hub Fund was established with a total of 10 billion KRW, receiving 6 billion KRW from the Korea Fund of Funds and 4 billion KRW from local governments and private investors, but it is struggling to find investment opportunities.

Angel investment plays a role as seed money for technology development and commercialization funds for early startups and venture companies. During the venture boom in the 2000s, angel investment exceeded 500 billion KRW and grew to nearly 700 billion KRW by 2020. However, as of 2018, out of the total angel investment amount of 632.8 billion KRW, 81.6% was concentrated in the capital area, while only 18.4% was in non-capital regions, showing that most investments are focused on the capital area.

In response, in May last year, the Ministry of SMEs and Startups opened regional angel investment hubs in the Chungcheong and Honam areas to expand regional angel investments. The purpose was to establish specialized institutions in non-capital regions to activate angel investments and create startup and investment ecosystem environments tailored to regional characteristics. The Hub Fund was formed with funds from the government’s Korea Fund of Funds, local governments, the Creative Economy Innovation Centers, and private investors.

The process of discovering promising startups in non-capital regions and making investments has not been easy. Although more than eight months have passed since the fund was formed, only one company, a manufacturing firm based in Daejeon, has actually received investment funds so far. A Ministry of SMEs and Startups official explained, "The Hub Fund, jointly established by the public and private sectors, has more members who review and decide on investments compared to other investment associations," adding, "All members must agree to invest, and coordinating opinions took time." The investment conditions are also stringent. The investment amount is up to 500 million KRW per company, and only companies that meet the criteria of being within three years of establishment or having annual sales below 2 billion KRW, and having headquarters, branches, or planned factories in the Chungcheong or Honam regions, can receive investments.

Despite these circumstances, the government plans to focus on expanding regional angel investments to ease the concentration of investments in the capital area. Establishing angel investment hubs in the Gyeongnam and Gyeongbuk regions is also under consideration. Since angel investments carry relatively high risks of not recovering invested funds, the government believes that without intervention, the marginalization of non-capital regions will worsen. A Ministry of SMEs and Startups official said, "It is true that finding investment targets is more difficult than in the capital area," but added, "If funding support for early startups is insufficient, promising companies will lose growth opportunities, and the concentration in the capital area will intensify."

Experts have different opinions. Yoo Hyo-sang, a professor at Soongsil University and director of the Unicorn Management and Economics Research Institute, said, "It is natural for excellent companies to concentrate in large cities like Seoul," and questioned, "How economically meaningful is it to use government money to invest in regional companies to reduce capital area concentration?" He suggested, "Rather than showy spending, it would be more effective to create infrastructure that attracts talented personnel or to strengthen corporate incentives at the local government level."

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