Local venture companies are paying attention to the government’s plan to create an 8 trillion won (US$7.12billion) fund to invest in promising startups. In particular, the success of the fund is in fund managers’ hands as they will autonomously decide on which startups are to receive funding.
According to investment banking (IB) industry sources on Sept. 6, the Financial Services Commission (FSC) named 18 private firms to manage the fund and the 18 fund managers will select venture companies based on their own standards of selection to provide funds. The period of fund investment was initially designed to be between four and 10 years but the period will be flexibly extended to between eight and 10 years according to the need of startups.
The FSC has required companies which are more than three years old in the Fourth Industrial Revolution sectors to be selected. This is to offer a wide range of support opportunities to startups which is in the growing stage in new areas, such as blockchain, artificial intelligence (AI), big data and biotechnology, regardless of the size of the firms. Based on this, 18 fund managers will come up with their own standards of selection. Accordingly, venture companies are eyeing on what methods fund managers will apply to choose firms to invest in.
Venture firms have considerable interest in the growth support fund because it is large in size compared to other existing funds for venture companies.
The IMM growth support fund created by IMM Investment Corp., one of the fund managers, will be expanded to 500 billion won (US$445.04 million) so the amount of support fund is expected to be reach up to 50 billion won (US$44.5 million) per company. There is a growing interest in the fund as it is investing in companies which is in the growing stage in the specific sector unlike fund of funds that supports startups in the early stage and growth ladder fund that supports growing companies regardless of the industrial sector.
An official from a fund manager said, “We will make an investment to create a business synergy through marketing and overseas expansion support as well as mutual investment with partners that seek to launch new business and related business. We will help small and mid-size companies carry out initial public offering (IPO) and merger and acquisition (M&A) at home and abroad.”