Korean financial authority to introduce measures to support startups

[Image source: gettyimagesbank]

South Korea’s Financial Services Commission (FSC) is coming up with supportive measures for local startups amid weakened investment sentiment in the venture capital market, according to its chairman Monday.

FSC Chairman Kim Joo-hyun in a meeting reviewed support initiatives by the state-run financial institutions, such as the Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK), and called for broader support to address the difficulties that startups face.

“Innovative growth powered by fostering startups is part of the government’s policy,” Kim said. “To achieve the goal, the government has provided support for the startup industry after pledging to build up a startup ecosystem, ranging from seed startups to global unicorns.”

He added that the FSC will offer a policy finance program worth 205 trillion won ($155.3 billion) to the industry this year and provide 9 trillion won in funds to unicorns and small and mid-size enterprises that will be designated as one of the five key strategic areas.

FSC Chairman Kim Joo-hyun announces on April 10. [Photo by Yonhap]

“Venture capital investment has been on the decline since last year,” Kim said. “The FSC’s efforts, in collaboration with the Ministry of SMEs and Startups, are underway to develop supportive measures for venture capital firms.”

Park Yong-rin, a senior researcher at the Korea Capital Market Institute, said during the meeting that both venture capital firms and investments have declined since the fourth quarter of last year but investment sentiment will recover if the government’s measures take effect.

Park called on policy financing institutions to provide more operating funds to protect startups from cash crunches. He also noted that secondary funds are necessary for venture capital firms whose debt maturity is imminent.

Leaders of startups and venture capital firms called for broader policy finance programs, citing the ongoing financial difficulties in the venture market.

The KDB is expected to create the so-called innovation growth fund worth 15 trillion won, offering startups 3 trillion won per year from 2023 to 2027. The bank plans to build a policy finance program with its funds to support vulnerable areas in the venture market.

The Industrial Bank of Korea (IBK) plans to raise its venture capital investments to 2.5 trillion won between 2023 and 2025, mainly in small and medium-sized innovative startups with high potential for growth.

The Korea Credit Guarantee Fund (KODIT) will implement various support measures, such as a credit program based on each stage of startups and an investment bridge credit program.