Government to Provide 10.5 Trillion Won Support to Cash-Strapped Venture and Startup Companies

"Innovation Venture and Startup Funding Support and Competitiveness Enhancement Plan"
Venture Startup Investment Plummets Due to High Interest Rates and Economic Slowdown
Policy Financing and Other Support Focused on Early and Mid-Stage Startups

Lee Young, Minister of SMEs and Startups, is speaking at the private-party-government council meeting on venture and startup support measures to expand new growth engines held at the National Assembly on the 19th. Photo by Kim Hyun-min kimhyun81@

A total of 10.5 trillion KRW in funding will be supplied to ventures and startups facing a dry-up of capital due to high interest rates and economic slowdown. This is expected to be a much-needed relief for ventures and startups on the brink of collapse.

On the 20th, the Ministry of SMEs and Startups and the Financial Services Commission announced the "Innovative Venture and Startup Funding Support and Competitiveness Enhancement Plan," stating that they will inject 6.1 trillion KRW into early-stage growth companies less than three years old, 1.9 trillion KRW into mid-stage growth companies aged between three and seven years, and 400 billion KRW into late-stage growth companies over seven years old.

The government explained the support background by saying, "Venture investments are declining worldwide, and in South Korea, the downward trend in investments has continued since the second half of last year." The year-on-year venture investment growth rates were -38.6% in Q3 last year, -43.9% in Q4, and -60.3% in Q1 this year.

6.1 trillion KRW supplied initially through special guarantees

For stage 1 early companies with weak financial structures, the biggest problem was the inability to secure funding due to rising interest burdens and difficulty obtaining bank loans amid the economic slowdown. Accordingly, a total of 6.1 trillion KRW will be supplied to ease their cash flow.

The government stated, "We will expand guarantees from the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation focusing on technology sectors such as bio, medical, gaming, electricity, and machinery." The Korea Credit Guarantee Fund established a new special guarantee worth 600 billion KRW for venture companies. The Korea Technology Finance Corporation also decided to provide 550 billion KRW in special guarantees targeting ventures, startups, and export SMEs in industries experiencing sharp investment declines. Both institutions will reduce guarantee fees by up to 0.5 percentage points.

Additionally, the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation will jointly invest an additional 60 billion KRW in angel investments and regional innovative companies. The Industrial Bank of Korea plans to establish a startup-related subsidiary with support worth 100 billion KRW.

Furthermore, the Ministry of Science and ICT will support 4.7 trillion KRW worth of R&D expenses in advanced industry sectors this year alone.

19 trillion KRW support for mid-stage growth and working capital

1.9 trillion KRW will be invested in mid-stage companies. A Financial Services Commission official explained, "Companies aged between three and seven years need to grow once again and require follow-up investments, but they lack funds." Accordingly, the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation introduced 'growth fund policy guarantees' (200 billion KRW) and 'working capital policy guarantees' (100 billion KRW).

The supply of 'low-interest venture loans' will also be expanded. Loans will be provided at low interest rates to companies that have attracted investments, with a system allowing the acquisition of rights to subscribe to new shares in the future. Previously, only the Industrial Bank of Korea could provide up to 100 billion KRW. Going forward, the Small and Medium Business Corporation will also be able to handle up to 50 billion KRW.

Measures to prevent technology innovation companies from going bankrupt have also been strengthened. The scale of 'factoring,' where the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation purchase sales receivables without recourse, has been increased by 70 billion KRW (from 100 billion KRW to 170 billion KRW). The Korea Credit Guarantee Fund will also supply an additional 500 billion KRW in sales receivables insurance.

For reinvestment in matured funds, the 'secondary fund' to promote follow-up investments in mid-stage companies will be increased by 1 trillion KRW jointly by the Korea Development Bank and the Industrial Bank of Korea.

400 billion KRW invested in late-stage companies for global expansion and M&A support

Financial Services Commission Chairman Kim Ju-hyun and People Power Party lawmaker Kim Hee-gon are talking at the private-party-government consultation meeting on venture and startup support measures to expand new growth engines held at the National Assembly on the 19th. Photo by Kim Hyun-min kimhyun81@

400 billion KRW will be allocated to late-stage companies over seven years old. These companies are in situations where they want to pursue mergers and acquisitions or recover funds through new listings. Accordingly, the Korea Development Bank will establish a 300 billion KRW 'Global Expansion Support Fund' to support overseas expansion. To support M&A efforts, the Korea Development Bank and the Industrial Bank of Korea will provide 100 billion KRW for consulting and acquisition financing.

In addition to support by growth stage, policy financial institutions will create a 2.1 trillion KRW fund to invest in the overall venture and startup ecosystem. The Industrial Bank of Korea will invest more than 2 trillion KRW over three years in investment-purpose funds for ventures and startups. The Korea Exchange, Korea Securities Finance Corporation, and the Korea Financial Investment Association will invest to increase the 'KONEX Scale-up Fund' by 100 billion KRW, which supports listings on KONEX (KONEX: Korea New Exchange, a stock market for early-stage SMEs) or investments in listed companies.

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