Ministry of SMEs aims to increase venture investment with private and foreign capital... "Annual 8 trillion KRW venture fund target"

Ministry of SMEs and Startups Announces at Emergency Economic Ministers' Meeting on 4th
Plans to Attract Private Venture Mother Funds and Global Funds
Global Networking... Diversification into Europe, Middle East, etc.

[Asia Economy Reporter Kim Bo-kyung] The government announced plans to attract private and overseas capital to revitalize the stagnant venture investment market. Through this, it aims to grow the ecosystem to form venture funds totaling 8 trillion won annually.

The Ministry of SMEs and Startups announced the "Plan to Create a Dynamic Venture Investment Ecosystem" at the emergency economic ministers' meeting held on the 4th.

Recently, due to worsening domestic and international economic conditions such as high exchange rates, high inflation, and high interest rates, venture investment sentiment has weakened, with venture investment performance in the third quarter of this year decreasing by about 840 billion won compared to the same period last year. Small and medium-sized venture capital (VC) firms are struggling to form funds, and due to the stock market decline, companies are delaying their initial public offerings (IPOs), making the virtuous cycle of 'venture investment - recovery - reinvestment' difficult.

In response, the Ministry of SMEs and Startups announced plans to foster the venture investment ecosystem by establishing private venture mother funds and attracting global funds.

First, they plan to open a new era of private venture mother funds. Venture and startup growth capital will be supplied through two main pillars: the existing government mother fund and private venture mother funds. A private venture mother fund refers to a private fund-of-funds established with private capital without government money, which invests in venture funds (sub-funds). As of November last year, seven global venture-leading countries including the United States, the United Kingdom, and Germany are already operating 22 private venture mother funds.

Private venture mother funds will focus on sectors with high investment profitability, while the government mother fund will support sectors requiring policy support such as youth, women, and early-stage startups. Additionally, the government will prepare various tax incentives to activate the formation of private venture mother funds.

The global fund, jointly established by the government mother fund and overseas venture capital, is planned to be expanded to a cumulative 8 trillion won or more by the end of next year. As of the end of last year, the global fund had reached a cumulative 4.9 trillion won. The scope of formation will be expanded from the U.S. to the Middle East and Europe to broaden opportunities for domestic startups to enter the global market. Furthermore, to strengthen the global network among VCs, one additional "Korea Venture Startup Investment Center" will be opened in Europe next year.

Minister Lee Young of the Ministry of SMEs and Startups (center), Financial Services Commission Chairman Kim Joo-hyun (left), and Minister Lee Jung-sik of the Ministry of Employment and Labor are greeting each other at the Emergency Economic Ministers' Meeting. Photo by Kim Hyun-min kimhyun81@

A new "Overseas VC Project Fund" will be established to make large-scale follow-up investments in domestic startups with high potential to become unicorns (unlisted companies valued at over 1 trillion won). The government mother fund will also participate as an investor alongside global contributors.

The secondary market will also be activated. By 2027, a private equity fund of 1 trillion won will be created to invest in secondary venture funds through mother fund contributions. Secondary venture funds refer to funds that purchase existing shares of startups and venture companies held by other venture funds or trade shares of existing investors in the fund.

Next year, a "Private Proposal Rookie League" will be newly established, and the scope of the government mother fund's Rookie League investments will be expanded. The Rookie League refers to a mother fund investment area where only VCs that meet both specific operating years (within 3 years of registration) and asset management scale (total assets under management less than 50 billion won) can participate. Currently, the Rookie League investment area is limited to early-stage startups, but youth and specialized industry sectors are expected to be added. With the establishment of the Private Proposal Rookie League, small and medium-sized VCs will be able to propose investments focused on specific industry sectors where they have expertise.

The Ministry of SMEs and Startups aims to expand the scale of venture fund formation from the current 6 trillion won level to 8 trillion won annually through these plans.

Minister Lee Young of the Ministry of SMEs and Startups said, "We expect that this measure will increase the market's venture fund formation capacity by about 2 trillion won," adding, "We will spare no support to create a dynamic venture investment ecosystem where private capital flows in autonomously and global capital actively invests in our ventures and startups."

Meanwhile, a policy briefing session on this plan was held at Seoul Tipstown for policy stakeholders including the VC industry and startup sector. Minister Lee is scheduled to explain the government's detailed support measures and future plans at this event.

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