Jungjingong Expands Seed Investment for Early-Stage Startups

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[Asia Economy Reporter Kim Cheol-hyun] The Small and Medium Business Corporation (Chairman Kim Hak-do, hereinafter referred to as SBC) announced on the 18th that it will expand seed investments in early-stage startups. This is to support promising companies located in investment-neglected areas due to high loss rates and long recovery periods.

SBC is expanding seed investments targeting startups less than three years old with technological capabilities, business feasibility, and high growth potential. The support ratio last year was 25.7%, more than double the 11.8% in 2020, and this year it aims to support over 30%.

Seed investments in early-stage startups are conducted by acquiring convertible bonds or redeemable convertible preferred stocks of the companies. Convertible bonds reduce liabilities upon conversion to stocks, improving financial soundness, while redeemable convertible preferred stocks can be included as capital under international accounting standards, serving as a catalyst to attract private investments.

In particular, SBC applies a future value-linked investment method considering the characteristics of early-stage startups. This method allows skipping the valuation of the company at the time of acquiring convertible bonds if necessary, and links it to the evaluation value of follow-up investments by institutional investors later, enabling rapid support. The future value-linked method is used to activate startup investments in places like Silicon Valley, and SBC adapts it with modifications suitable for the domestic environment.

Chairman Kim Hak-do said, "SBC will build an investment ecosystem that provides tailored support for each growth stage from seed investment in early-stage startups to scale-up," adding, "We will continue efforts to support attracting private follow-up investments to back the birth and growth of innovative companies."

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