FSC Chairman Kim Joo-hyun visited Mapo Front1, the largest startup support center in Korea, on November 24, where he held talks with venture businesses, venture capitalists and financial institutions. Chairman Kim listened to difficulties and complaints from startups and venture businesses and also asked financial institutions to increase investment and support for startups and venture businesses.
Summary of FSC Chairman’s Remarks
Startups and venture businesses are essential for increasing our economy’s growth potential and creating jobs. Thus, it is important to establish an ecosystem where they can thrive. Meanwhile, to improve our economy’s competitiveness, more startups and small businesses with technological prowess and innovativeness need to be fostered even in times of investment drought.
Therefore, the FSC and policy financial institutions will strengthen their support for innovative and promising venture businesses by providing more funding opportunities and acting as a priming pump to attract more private sector investments. For this, the innovative growth fund worth KRW15 trillion will be created over the next five years to support SMEs and startups in new industries such as semiconductor and artificial intelligence (AI) and to supply venture businesses the funds in need to grow up into unicorn companies.
Second, policy financial institutions—Korea Development Bank (KDB), Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT)—will introduce a lending program worth KRW6.3 trillion, which will provide funds to startups and venture businesses based on loan examinations focused on their growth potential rather than their financial statements and the value of collaterals. In particular, the IBK will introduce a new lending program for venture businesses, modeled after those observed in Silicon Valley, which will offer loans with zero-interest rate bonds with warrants (BWs) attached. This program will enable early-stage venture businesses to continue financing their projects by providing loans with an interest rate lower than market rates during the period of insufficient funding between early-stage and next-stage investment.
Third, authorities will introduce business development companies (BDCs), which are a new type of venture capital entities, and make reasonable improvements to the current regulations on publicly offered funds. These measures will facilitate fund supply from private sectors through capital markets.
Fourth, to support the listing of innovative firms, authorities will substantialize the specialized assessment of technology, etc. for a technology growth company which applies for listing. Standard assessment models reflecting different aspects of different business types will be used.
Financial institutions are also encouraged to supply funds more actively to startups and venture businesses and to contribute to develop infrastructures to foster and cultivate them.
Summary of Remarks by Participants
(Venture Businesses) With the rapid drying out of liquidity in the venture market, venture businesses face difficulties in securing sufficient funding needed for growth. To ensure sufficient inflow of the private sector funds, venture businesses asked financial institutions to make investments in a variety of areas. Venture businesses also requested the government to endeavor to supply funds to innovative sectors and promote growth of venture capital funds.
(Financial Institutions) Financial sectors said that they spare no effort in making investments and providing support for the ecosystem of the startups and venture businesses. First, policy financial institutions will increase the size of venture investments next year and gradually extend their credit supply based mainly on the assessment of innovativeness and technological prowess. They will also strengthen their venture startup incubating function, such as investment connection, education, consulting, business spaces, investor relations, etc., through their venture business fostering platforms already in operation (KDB NextRound, IBK Startup Factory). Second, the banking sector will make active and continuous efforts to boost investments in not only fintech firms but also in other various sectors. In particular, Busan Bank pledged to bolster its program designed to foster startups and venture businesses, located outside the Seoul metropolitan area, which face the problem of inadequate infrastructures. Third, the financial investment business sector emphasized the important role of capital markets in a private sector-driven market environment, and said that, based on their corporate finance know-how that they have exploited from capital markets, BDCs (business development companies) will be utilized to provide customized support for startups and venture businesses at each growth stage of business lifecycle such as corporate discovery, accelerating, funding, listing and M&A, and they will create a business model that benefits both financial management companies and venture businesses.
Further Plan
The FSC, policy financial institutions and financial industry groups will continuously extend support for startups and venture businesses to ensure that our economy’s innovation continues.
* Please refer to the attached PDF for details.