Wednesday, December 19, 2018
S. Korea's Venture Support Policy Bearing Fruit
Korea's Startup Ecosystem Changing
S. Korea's Venture Support Policy Bearing Fruit
  • By Yoon Young-sil
  • November 14, 2018, 10:12
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South Korea’s startup ecosystem is changing.

This year, fresh investment in venture companies is expected to surpass 3 trillion won (US$2.65 billion) while the number of certified venture companies are about to exceed 100,000. These figures suggest that the Korean government’s venture support policy is paying off.

The government presented “innovative start-up ecosystem creation plans” based on the private sector in November last year. The plans aim to encourage talent to set up a business and realize an innovative startup country with venture investment. To this end, the government set up three key promotion directions, including the creation of innovative startup-friendly environment, the promotion of dramatic increase in venture investment funds and the establishment of a virtuous circle from startup to investment.

Now, a year after the announcement of the plans, the startup ecosystem is changing. The private sector is participating in growing the whole venture market unlike the past when it was led by the public sector. Fresh venture investments are highly likely to exceed 3 trillion won (US$2.65 billion) and the total number of venture companies is expected to surpass 100,000.

The government selected 22 in-house venture operating companies and 41 in-house venture teams in August in order to create an innovative startup-friendly environment. It is currently carrying out the second round of recruitment by introducing the TIPS method into in-house venture and challenge programs.

The government has also removed startup barriers, such as levies and taxes. It has extended the period of levy exemption on startups by five years to 2022 and exempted technical innovation firms from acquisition taxes and heavy taxes in the metropolitan area. It has also selected 65 leading companies to create a maker space in where everyone with an idea can start a business across the nation.

The biggest difference between the situation now and the one before is that a large amount of money has flooded into the venture market. The government has allocated 400 billion won (US$352.73 million) to dramatically increase venture investment funds through this year’s budget and supplementary budget. Based on this, it is raising the Innovation Venture Funds worth 560 billion won (US$493.83 million) in total and will carry out the fund-linked security programs as soon as the fund is raised. Policy financing institutions, such as the Korea Credit Guarantee Fund and the Korea Technology Finance Corp., will work together with private funds to supply security for innovation venture funds investing companies as well as give out loans with no guarantee.

The government has eased the limit of crowdfunding investments and regulations on advertisements in the first half of this year and extended the range of excellent technologies which are subject to income tax exemption when investing in crowdfunding. Its decision is expected to help the venture market attract investment.

In addition, the government is making an effort to build the virtuous cycle system from startup to investment. It revised the income tax law early this year and has decided to exempt from taxes on capital gains in the process of trading small and mid-size business shares on the Korea Over-the-Counter (K-OTC) market. It also abolished the company representative’s joint surety system in getting public institutions’ loans and guarantee in April.