'5.7 Trillion Won Unicorn Fund' Faces Formation Hurdles... Year-End Capital Supply Uncertain

Only Three Funds Established Despite 300 Billion Won Supplementary Budget
Government’s Goal of Investment Within the Year Now Unlikely

The sub-funds of the Fund of Funds investment project, which was launched to quickly provide capital to promising deep tech companies, are failing to be established on time. Contrary to the government's plan to inject an additional 300 billion won in the supplementary budget and continue investments within the year, a significant number of fund managers have not completed their funds even as the deadline for formation approaches. Even if the funds are established, it is unlikely that any companies will receive investments within this year.

According to the Ministry of SMEs and Startups on December 10, only three out of the eleven fund managers for the 'Next Unicorn Project' have completed fund formation so far. The eleven companies, selected as fund managers in September, are required to establish their funds by December 11, but more than half have still not secured all their limited partners (LPs).

The Next Unicorn Project is a new initiative that was launched through the second supplementary budget in July. The Ministry of SMEs and Startups planned to contribute 300 billion won from the Fund of Funds, combine it with 270.6 billion won in private capital, and create a total fund of 570.6 billion won to support promising companies in the artificial intelligence (AI) and deep tech sectors at various stages of growth.

Specifically, the 'Startup Fund,' which provides about 2 billion won to each AI and deep tech specialized technology startup, consists of nine funds totaling 260 billion won. The 'Scale-up Fund,' which invests an average of more than 10 billion won per company, consists of two funds totaling 310 billion won. When selecting fund managers, the government set a goal of early formation within three months and investment initiation within the year. It is reported that the possibility of early formation was an important criterion during the selection process.

Concerns about delays in fund formation had already been raised. Song Somi, a policy advisor for the National Assembly’s Trade, Industry, Energy, SMEs, and Startups Committee, stated in a related review report, "On average, it takes about nine months from the selection of the Fund of Funds investment project to the completion of all fund formations, and even in 2024, when the shortest period was recorded, it still took five months." She projected that the likelihood of completing fund formation within the year for this project was low.

The Ministry of SMEs and Startups is considering granting a one-month grace period for fund formation, but only for those funds that have raised a certain percentage of their capital. A ministry official explained, "Among the funds that have not yet been formed, there are cases where LP recruitment is complete and only final discussions among investors remain," adding, "We plan to encourage these funds to complete formation within this year."

Industry insiders believe that even if all funds are formed within the deadline, supplying capital before the end of the year will be virtually impossible. This is because, after fund formation, several procedures such as deal sourcing, due diligence, investment committee meetings, negotiating terms, and capital calls must still be completed, making it physically impossible to execute investments within a three-week period.

However, the government plans to begin full-scale project implementation starting next year. The Ministry of SMEs and Startups’ budget for the Fund of Funds in 2026 has been set at 820 billion won, an increase of 300 billion won compared to this year. The ministry intends to expand support for AI and deep tech startups and venture companies, focusing on the Next Unicorn Project and similar initiatives.

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