South Korea’s Financial Services Commission (FSC) is taking action to support local startups amidst a weakened investment sentiment in the venture capital market. FSC Chairman Kim Joo-hyun has reviewed support initiatives by state-run financial institutions, such as Korea Development Bank (KDB) and Industrial Bank of Korea (IBK), and called for broader support to address the challenges faced by startups in the country.
In a recent meeting, Chairman Kim emphasized the importance of innovative growth powered by fostering startups, stating that it is a part of the government’s policy. He noted that the government has pledged to build up a startup ecosystem, ranging from seed-stage startups to global unicorns, and has provided support to the startup industry accordingly. As part of these efforts, the FSC has announced a policy finance program worth 205 trillion won ($155.3 billion) to be allocated to the industry this year. Additionally, 9 trillion won in funds will be provided to unicorns and small and medium-sized enterprises (SMEs) designated as key strategic areas.
The decline in venture capital investment in South Korea has been a cause for concern, and the FSC is working in collaboration with the Ministry of SMEs and Startups to develop supportive measures for venture capital firms. Park Yong-rin, a senior researcher at the Korea Capital Market Institute, highlighted during the meeting that both venture capital firms and investments have declined since the fourth quarter of the previous year. However, he expressed optimism that investment sentiment will recover if the government’s measures take effect.
To further support startups, policy financing institutions in South Korea are also stepping up their efforts. The KDB is expected to create an innovation growth fund worth 15 trillion won, which will offer startups 3 trillion won per year from 2023 to 2027. The bank also plans to build a policy finance program with its funds to support vulnerable areas in the venture market.
Similarly, the IBK is planning to raise its venture capital investments to 2.5 trillion won between 2023 and 2025, with a focus on small and medium-sized innovative startups with high growth potential. The Korea Credit Guarantee Fund (KODIT) will implement various support measures, including a credit program based on each stage of startups and an investment bridge credit program.
Leaders of startups and venture capital firms have welcomed these measures but have also called for broader policy finance programs to address the ongoing financial difficulties faced by the venture market in South Korea. They have emphasized the need for more operating funds to protect startups from cash crunches and have highlighted the importance of secondary funds for venture capital firms whose debt maturity is imminent.
The FSC’s initiatives have been met with positive responses from the startup community in South Korea. Many startups and venture capital firms are hopeful that these measures will provide much-needed support to overcome the challenges posed by the weakened investment sentiment in the venture capital market. They view the government’s commitment to fostering an innovative startup ecosystem as a positive step towards driving growth and innovation in the country.
The startup ecosystem in South Korea has been gaining momentum in recent years, with several successful startups emerging in areas such as technology, e-commerce, and entertainment. However, the COVID-19 pandemic and other economic challenges have posed difficulties for startups, including reduced access to funding and investment.
The introduction of supportive measures by the FSC and other policy financing institutions is expected to provide a boost to the startup ecosystem, helping startups to weather the current challenges and continue to drive innovation and economic growth in the country.
In conclusion, South Korea’s Financial Services Commission is taking proactive steps to support the local startup ecosystem by introducing measures to address the weakened investment sentiment in the venture capital market. The FSC’s initiatives, along with efforts by other policy financing institutions such as Korea Development Bank (KDB), Industrial Bank of Korea (IBK), and Korea Credit Guarantee Fund (KODIT), are aimed at providing much-needed support to startups and venture capital firms in South Korea.
These measures, including the policy finance program, creation of innovation growth funds, increased venture capital investments, and credit programs, are expected to contribute towards fostering a favorable environment for startups to thrive and continue driving innovation and economic growth in the country. With the support of the government and financial institutions, the startup ecosystem in South Korea is poised for further growth and success in the coming years.
