Korea Development Bank Launches 880 Billion Won Mega Fund... Why Small VCs Are Sighing

Concerns Over Large VCs Dominating Due to Fund Scaling Up

Unprecedented Launch of Super-Long-Term Funds Favors Major Firms

Concentration on Large VCs Could Dampen Early-Stage Startup Investment

Korea Development Bank is currently promoting a super long-term technology investment fund project worth 880 billion won. This is welcome news for startups and venture companies, but some concerns are being raised within the venture capital (VC) industry. This is because the gap between large-scale VCs and small- to mid-sized VCs could potentially widen further.

Super Long-Term Technology Investment Fund Worth 880 Billion Won Launched

According to the investment banking (IB) industry on April 13, Korea Development Bank is currently preparing a draft with the goal of selecting sub-fund managers for the super long-term technology investment fund by August. Unlike the typical VC fund maturity period of 8 years, this fund aims for a long-term investment period of 10 to 20 years. The intention is to foster an environment in which deep tech companies, which require a long time from technology development to commercialization, can focus on research and development (R&D) without pressure from investors to exit.

Earlier, in February, Woori Asset Management was selected as the delegated manager of the fiscal parent fund, marking the beginning of Korea Development Bank’s technology investment fund. Of the total 880 billion won, 500 billion won has been allocated to a dedicated scaling-up fund, with the plan to increase the size of each investment. Fund managers are required to invest at least 75% of the target fund amount in advanced strategic industry companies, and investment instruments are limited to common shares or non-redeemable preferred shares to minimize the financial burden on the companies.

"In the End, Only Large-Scale VCs Will Be Selected as GPs"—Concerns Emerge

Among small- and mid-sized VCs, there are concerns that the super long-term technology investment fund could intensify the concentration of resources among large-scale VCs. As the sub-funds grow larger, there is a risk that small- and mid-sized VCs will be marginalized while only large VCs further increase their funds, exacerbating polarization.

The possibility that large VCs will be selected as general partners (GPs) due to the scaling up of the sub-funds is gaining traction. Although there are no specific guidelines yet, the industry speculates that each sub-fund could be structured at around 100 billion won, making them large-scale funds.

A CEO of a small- to mid-sized VC commented, "While it is said that small- to mid-sized VCs could be selected since they mainly focus on early-round investments, in reality, it sounds like an intention to select GPs among large VCs with capital strength and manpower. Unlike the typical VC fund size of 20 billion won, if the scale increases to 100 billion won or more per fund, the management capabilities required will naturally increase, so ultimately, bank-affiliated large VCs or large houses with private equity funds (PEF) will have the advantage," he said.

The fact that there is little precedent for establishing super long-term funds also acts as a barrier to entry for small- and mid-sized VCs. Currently, most domestic VC funds have a maturity period of 7 to 8 years. While there have been cases where the maturity period is extended if investment recovery is delayed, it is extremely rare to set an initial operation period of up to 20 years. From the perspective of Korea Development Bank, when selecting a partner to manage a long-term project, it is likely that the continuity of the VC, rather than deep tech discovery expertise, will be the primary criterion.

The CEO of a newly established VC stated, "Not only are there few cases of long-term funds being formed, but also very few managers with experience operating them, so it will be difficult to give opportunities to small- and mid-sized VCs. In a structure where only large VCs that can stably manage funds despite changes in the business environment can participate, the opportunities for small- and mid-sized VCs are bound to decline, and polarization within the industry will intensify," he said.

Concentration on Large-Scale VCs Threatens the Ecosystem

In this situation, there are even concerns that the VC ecosystem may collapse. The VC industry operates in a structure where accelerators (ACs) or small- to mid-sized VCs discover and invest in early-stage startups, and large-scale VCs provide follow-up investments to validated companies. However, if funds become concentrated among large VCs, the proportion of early-round investments could decrease as a result.

Even if large VCs invest in early-stage companies through the super long-term technology investment fund, polarization in the startup ecosystem will be difficult to avoid. Given the nature of large GPs managing multi-hundred-billion-won funds, they inevitably have to make much larger investments per case, from tens of billions to hundreds of billions won, for efficiency. In this case, capital is concentrated on a few companies, causing their valuations to become abnormally inflated, while countless early-stage companies may be neglected as a side effect.

Early-round investment is already sluggish. According to the Korea Venture Capital Association, as of February 2024, the proportion of new investments in early rounds fell to 15.2% in 2026, compared to 22.3% in 2024 and 16.5% last year. In contrast, the share of late-stage investments increased to 52.0% in 2026, compared to 41.7% in 2024 and 51.6% last year.

An industry insider commented, "When allocating policy funds, a separate league dedicated to early-stage investments by small- and mid-sized VCs should be established to enable competition in specialized fields and support the discovery of early-stage companies. Small- and mid-sized VCs also need to differentiate themselves by creating specialized funds that large VCs do not offer," he advised.

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