The government plans to allocate 910 billion won (US$679.87 million) to a seed fund, intending to establish a 1.7 trillion won venture capital. Notably, the government’s investment is scheduled to be executed entirely within the first quarter, providing a ray of hope for the cash-strapped venture investment sector.
The Ministry of SMEs and Startups (MSS) announced its plan for the first round of scheduled investments in the seed fund in 2024 on Feb. 4. The ministry aims to invest a total of 910 billion won to create a venture fund with a scale of 1.7 trillion won. It will invest in a fund of funds (FoF), known as the seed fund, and select venture capital firms (VCs) to manage it. The chosen VCs will attract private investments based on the invested amount, ultimately forming and executing the venture fund. Through this approach, the government is engaging in “indirect investment” via the seed fund.
Venture funds that have received government investments have a high level of credibility, resulting in a “multiplier effect” that attracts private investments better than other funds. Therefore, the MSS sets a goal to create venture funds with a target amount, reaching nearly ten times the investment made in the seed funds at the most. The ministry plans to make investments in nine different sectors, allocating the highest budget of 150 billion won to the “Global Fund,” which supports attracting overseas investments for domestic startups, with a target fund creation amount of 1 trillion won.
In addition, the MSS will invest in various other funds, including regional venture funds, Rookie League, and early-stage startup funds. For regional venture funds, the ministry plans to invest 100 billion won, aiming to create a fund of 130 billion won. It anticipates an investment exceeding 100 billion won for Rookie League, a fund dedicated to emerging and small-scale venture capital firms, resulting in a fund larger than 166.7 billion won. The ministry also plans an 80 billion won investment in early-stage startup funds with a goal of creating a fund worth 133.3 billion won.
The MSS plans to utilize the entire budget of 910 billion won in the first quarter of this year with the intention of revitalizing the stagnant venture investment industry. To encourage swift investment by venture funds that receive investments from the seed fund, the ministry has limited the fund creation deadline to three months. Any unfulfilled investment budgets within the first deadline will be collected and immediately executed through the second round of investment projects. Furthermore, there are plans to favor venture capital firms that actively executed investments the previous year. Similarly, those actively investing this year will receive preferential treatment in terms of fund manager selection and other aspects next year.
Minister of MSS, Oh Young-ju, stated, “This year, the seed fund investment project focuses on quickly bolstering the recovery momentum of the venture investment market. We have substantially revamped the overall investment process to swiftly select fund managers and establish funds within the first half, enabling the full-fledged investment execution from the second half.”
