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Korean Gov’t Unveils Comprehensive Plan to Support Startups
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Korean Gov’t Unveils Comprehensive Plan to Support Startups
  • By Cho Jin-young
  • April 6, 2017, 01:45
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Deputy Prime Minister for Economy Yoo Il-ho presides over a ministerial meeting to discuss measures to nurture startups, which was at the Seoul government complex in Seoul on April 5.
Deputy Prime Minister for Economy Yoo Il-ho presides over a ministerial meeting to discuss measures to nurture startups, which was at the Seoul government complex in Seoul on April 5.

 

The Korean government on April 5 unveiled a series of measures to nurture local startups and venture firms.

During a ministerial economic meeting on April 5 presided over by Deputy Prime Minister for Economy Yoo Il-ho, the government decided to remove hurdles and boost fast-track processing systems for local startups to attract more investments and gain access to the global market.

The comprehensive plan drawn by the Ministry of Science, ICT and Future Planning, is expected to ease regulations on the investment in startups and new investment instruments.

In the meeting, the Ministry introduced the convertible notes and simple agreements for future equity (SAFE), which will be instrumented as new investment methods for startups through revision of the relevant laws. Previously, the ways of investment in startups were limited to new equities, bonds with warrant, convertible bonds and exchangeable bonds. 

Convertible notes are common in Silicon Valley as they are simpler and easier to handle than convertible bonds. A major advantage of convertible notes is that the issuer or investor does not need to determine the value of his or her company that is in the early stages without much data to evaluate. The investor gets equity in the company later when it has come to gain some achievements that can be evaluated. 

Along with that, the government will raise a 3 trillion won (US$2.7 billion) fund to help youth launch 50,000 new startups. The fund, in particular, will be used for helping youth launch new biotech startups. The duration of supports for the startups in bio sector will be expanded from three to seven years.

The government has also decided to create a 300 billion-won (US$267 million) fund with foreign venture capitalists, providing them with a package of legal, foreign exchange, taxation and visa services to simplify procedures for investing in Korean startups. 

The current 40 percent cap ceiling on local venture capitalists’ overseas investments will also be relaxed or removed after further discussion. 

The fund worth 20 billion-won also will be newly raised to support Korean startups that hire foreign talents. The existing rule on the employment of foreign workers, which limits the proportion of foreign workers to less than 20 percent of the total number of Korean workers, will be revised, too, allowing small startups to hire the global workforce. 

In addition, the government will encourage international entrepreneurs across the world to pitch their business ideas in the country. Last year, the government launched the accelerator program K-Startup Grand Challenge, the first of its kind, to help foreign startups launch their businesses here.

The government will also extended a variety of tax incentives as part of its efforts to help small but innovative companies.