"Huh? Returns Higher in Provinces Than Seoul... Why VCs Are Focusing on Regional Funds"

Jeonbuk Added as Regional Growth Fund Site
Total of Five Regions Including Daegu-Gyeongbuk, Gwangju-Jeonnam, Jeonbuk, and Ulsan
KB Investment: "Provincial IRR 17% Higher Than Seoul"

The government and the Korea Venture Investment Corp. (KVIC) are moving forward with the establishment of regional growth funds in a total of five regions, following the additional selection of Jeonbuk. Interest in regional investment is also growing in the venture capital (VC) sector, with data showing that the internal rate of return (IRR) for local investment companies is 17.7% higher.

According to the Ministry of SMEs and Startups (MSS) and other sources on April 15, the previous day, the MSS and Korea Venture Investment Corp. additionally selected Jeonbuk as a region for the creation of a regional growth fund. The planned amount for the Jeonbuk regional parent fund is 100 billion won. The regional growth fund is a local parent fund jointly established and managed by the local community, local governments, and the Korea Venture Investment Corp. Starting this year, the goal is to create at least one parent fund in each non-metropolitan region and to supply more than 3.5 trillion won in sub-funds over five years.

On March 30, the Daegu-Gyeongbuk region, Gwangju-Jeonnam region, Daejeon, and Ulsan were selected as regional growth fund areas with a combined planned fund size of over 350 billion won, and are currently submitting relevant documents. From April 30, the local finance investment review will begin. Jeonbuk, which was newly selected, has been designated as a secondary priority region along with Gyeongnam, Jeju, and Chungbuk. Secondary priority regions can establish funds without an additional public offering process once financial resources are secured. An MSS official explained, "With an additional 60 billion won allocated through the supplementary budget this time, Jeonbuk was selected as an additional region."

The government is strengthening related programs such as regional parent funds to foster local venture investment. The number of regional parent funds established by Korea Venture Investment Corp. increased from two in 2021–2022, to one in 2023, three in 2024, and four last year. This year, as of the beginning of the year, five regional parent funds are set to be established based on regional criteria.

Interest in regional investment remains high among VCs. Recently, Yoon Beomryeol, CEO of KB Investment, presented an analysis based on the company's own data at the "2026 1st Parent Fund Policy Forum," revealing the results of a 10-year performance analysis by region. According to KB Investment, the IRR for investments in the non-Seoul metropolitan area and the provinces was 1.8% and 17.7% higher, respectively, than in Seoul itself. Portfolio companies based in the provinces showed particularly high returns. The industry responded that these results were surprising and "contrary to common sense."

CEO Yoon attributed the difference in returns between the provinces and the metropolitan area to a higher proportion of investments in high-performing sectors in the provinces. Provincial portfolios had a greater share of investments in high-performing sectors such as bio-healthcare, energy, and IT (both software and hardware), whereas lower-yielding sectors like gaming and media centers accounted for a larger share in Seoul and the metropolitan area. A VC executive based in a regional area commented, "Each local government has its own key technologies, and many early-stage companies in high value-added industries such as deep tech are emerging based on this infrastructure."

However, some point out that under the current funding structure, venture companies are often forced to relocate to the metropolitan area once they reach a growth phase. Another regional VC executive stated, "If you look at it in proportion to the population, the available investment resources in the regions are extremely limited. Startups need capital, but due to insufficient funds, they tend to receive small-scale initial investments locally and then, as they require larger subsequent investments, often move their headquarters to the metropolitan area." According to the MSS's regional startup statistics, as of 2023, 54.79% of startups were based in Seoul and the metropolitan area.

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