Ministry of SMEs and Startups Revamps Mothae Fund Rookie League... Creating VC Investment Atmosphere (Comprehensive)

On the 5th, VC Meeting Held Hosted by Minister of SMEs and Startups
Compensation Standards for Management Companies Also Revised

The government has decided to allocate at least 10% of the annual contribution amount from the Korea Fund of Funds to the Rookie League to create an environment where venture capitalists (VCs) can invest boldly. This is intended to support the market entry and stabilization of new VCs. Alongside this, the operation of the Korea Fund of Funds will be restructured to be more market-friendly.

Lee Young, Minister of SMEs and Startups, is giving a greeting at the announcement of measures to revitalize venture investment and a meeting with venture capitalists held on the 5th at the Korea Technology Finance Corporation Seoul Headquarters in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@

On the 5th, Lee Young, Minister of SMEs and Startups, held a VC meeting and announced the "Measures to Revitalize Venture Investment," which included these details. The meeting was attended by 12 VC representatives, including Yoon Geon-su, Chairman of the Korea VC Association.

First, the Rookie League will be restructured. In principle, at least 10% of the Korea Fund of Funds' annual contribution will be allocated each year. However, if demand is low or there are no suitable VCs, contributions below 10% are allowed. The eligibility criteria for VCs applying to the Rookie League will be changed from within 3 years of establishment to within 5 years, and the asset under management scale from less than 50 billion KRW to less than 100 billion KRW. While these requirements have been adjusted to reflect recent realities, measures such as introducing a graduation system and allowing biennial participation will prevent concentration.

Lee Eun-cheong, Venture Policy Officer at the Ministry of SMEs and Startups, explained, "At the meeting, the expansion of the Rookie League received the most positive response from VCs," adding, "There were even opinions suggesting that it should be expanded further in the future."

Separate from the investment promotion incentives applied to newly established Korea Fund of Funds this year, funds established in 2021-2022 will receive preferential treatment in next year's contribution project selection if they execute early investments this year. The contribution ratio (an increase of 10 percentage points) and management fee rate (an increase of 0.2 percentage points) will be raised.

The management fee standards will be improved to ensure aggressive investments receive reasonable treatment. If a simple change in accounting standards during the listing process causes recognition of capital erosion, or if significant follow-up investments are attracted after capital erosion, management fees will not be reduced.

The investment direction of the Korea Fund of Funds will be discussed jointly by the public and private sectors. A new "Korea Fund of Funds Contribution Strategy Committee," centered on private experts, will be established. Sanctions for major violations of obligations by Korea Fund of Funds will also be decided through deliberations by the "Korea Fund of Funds Post-Management Committee," which includes private experts.

On the 5th, at the Korea Technology Finance Corporation Seoul Headquarters in Yeongdeungpo-gu, Seoul, participants including Lee Young, Minister of SMEs and Startups (center), and Yoon Geon-su, Chairman of the Korea Venture Capital Association (third from the right in the front row), are cheering during the announcement of measures to revitalize venture investment and the venture capital meeting. Photo by Jo Yong-jun jun21@

Korea Venture Investment will introduce a "Responsibility Structure Chart," the first among financial public institutions, and reorganize its compensation system to focus on responsible management and performance creation as a public institution. This method clearly allocates internal control responsibilities related to each executive’s duties in advance to ensure executives have a sense of responsibility.

The VC management and supervision system will also be advanced. Specific standards for sanctions imposed on VCs violating venture investment laws will be established to ensure consistent penalties for future violations.

The government plans to encourage the VC industry to establish internal control guidelines independently. VCs that faithfully comply with these guidelines will receive benefits such as preferential selection in Korea Fund of Funds contribution projects and mitigation of sanctions under the Venture Investment Act.

Additionally, for Korea Fund of Funds sub-funds, it is recommended in principle to sign Non-Disclosure Agreements (NDAs), and a "Comprehensive Confidentiality Pledge," which obligates maintaining corporate secrets learned during the investment review process, will be mandatory. The Ministry of SMEs and Startups will establish a dedicated venture investment supervision team within the Investment Management and Supervision Division and increase experts in venture investment-related law and accounting.

Minister Lee said, "In the early stages of forming the venture investment market, the government's initial funding was important, but recently, considering that the private sector's share has grown to several times that of policy finance contributions to venture funds, it is time for the government to reconsider its role in line with the changed market conditions." He added, "A private-led venture investment ecosystem is the cornerstone of 'Startup Korea' and a country where ventures and startups drive economic growth. We will continue to communicate closely with the industry and do our best to provide policy support that the market needs."

He continued, "We tried to reflect the voices of the VC industry as much as possible, but if they speak frankly, we will supplement any areas that need improvement," emphasizing, "It is said that by looking at the flow of money, one can see the direction of the country's economy. This is a very important time."

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