Korean economy loses venture creation momentum

[Photo by MK DB]

There are growing concerns that the loss of momentum in venture and startup creation, alongside a sharp decline in investment funds, could undermine the South Korean economy’s growth engine. Calls for a revival of the venture startup boom that characterized the early 2000s are growing louder as the number of ventures that become mid-sized and large companies dwindles and potentially drives stagnation.

The Korea Venture Business Association and Mirae Asset Securities said on Monday that the growth momentum of domestically certified venture companies is waning, with the number of venture companies certified by the government totaling 40,081 in 2023. The modest average annual growth rate of venture companies from 2021 to 2023, which was just 2.2 percent, is particularly concerning and the real gross domestic product (GDP) growth rate averaged only 1.9 percent during the same period.

In contrast, the average annual growth rate of venture companies was 51.9 percent when the Kim Dae-jung administration actively promoted venture cultivation from 1999 to 2001, with the real GDP growth rate averaging 6.9 percent during this period.

Venture capital investment has also seen a significant decline, totaling15.93 trillion won ($11.6 billion) in 2021 but dropping sharply to 12.47 trillion won in 2022 and 10.91 trillion won in 2023 according to the Ministry of SMEs and Startups.