SME ministry proposes fund of funds for venture capital

The Ministry of SMEs and Startups announced plans to create a more diverse investment environment for venture capital (VC) Friday, with an aim to increase funds invested by 8 trillion won ($5.6 billion) per year and establish a public-backed...

Minister of SMEs and Startups Lee Young gives a presentation on "Measures to Create a Dynamic Venture Investment Ecosystem" at TIPS Town in Gangnam District, western Seoul on Friday. [MINISTRY OF SMES AND STARTUPS]

The Ministry of SMEs and Startups announced plans to create a more diverse investment environment for venture capital (VC) Friday, with an aim to increase funds invested by 8 trillion won ($5.6 billion) per year and establish a public-backed, private-led fund of funds.

The “Measures to Create a Dynamic Venture Investment Ecosystem” plan was proposed at an emergency cabinet meeting on the economy on Friday. The purpose of the plan is to ensure that investments in start-ups continue steadily and to attract more private capital into VCs.

To increase the flow of private capital and raise the annual average of funds raised from the 6 trillion won a year for the past five years to 8 trillion won a year by 2026, the SMEs ministry proposed a set of support measures including stronger incentives for VCs that meet performance targets, expanding the “rookie league” category dedicated to small-to-mid-sized VCs and easing regulations on M&A venture fund investments in listed companies.

A fund of funds backed by the government and led by the private sector will be established with the goal of attracting more global funds, according to the SMEs ministry. Capital from the Middle East and Europe will be included in the global fund, expanding the focus from the United States.

Events for domestic VCs to present their portfolios to foreign investors will be sponsored by the ministry, and the ministry promised further measures to facilitate active networking between Korean and foreign VCs.

“The vitality of the venture investment market is directly linked to the growth of venture businesses and start-ups that will lead the future of the national economy,” said SME Minister Lee Young at a briefing held at TIPS Town in Gangnam District, western Seoul on Friday.

BY LIM JEONG-WON [lim.jeongwon@joongang.co.kr]