Measures to Boost Ventures

 

 

The government unveiled its measures to boost ventures on March 6, 2019, which covers plans to promote high-tech startups and venture capital, as well as plans to support scaleups and develop secondary markets.  The following is a summary of the measures:

 

1. Promote high-tech startups

 

     - Promote startups in bio-health, fintech, AI and ICT

 

1) Bio-health: Promote the sharing of medical laboratories and research data with startups, help commercialize their products and services, and provide financial support worth 600 billion won

2) Fintech:  Run testbeds for 20 new services in April, improve P2P related regulations, revise rules regulating financial institutions’ investment in fintech firms, and launch 15 billion won worth of fintech funds

3) AI and ICT:  Introduce a ‘Future Unicorn 50’ program, in which 50 promising ICT startups are selected every year to be provided with across the board support, including financial support and professional consultation services, provide AI startups with 38.8 billion won worth of support over 2019

 

     - Promote tech professional startups

 

1) Financial support:  Invest 600 billion won by 2022 in funds raised to help commercialize new technologies, provide tech startups with 190 billion won worth of guarantees, and launch 23 billion won worth of new funds to support high tech companies in Daeduck Valley

2) Further develop TIPS[1]:  Break down TIPS into three (Pre-TIPS, TIPS and Post-TIPS) and expand the program (500 startups with TIPS and 50 startups with Post-TIPS by 2022)

3) Promote professor startups, as well as student startups:  Reform evaluation systems in universities in a way to encourage professors and students to try commercializing their research outcomes

 

2. Promote venture capital

 

     - Work to increase private investment in ventures

 

1) Introduce Business Development Company (BDC)[2] to venture capital:  Work on tax support for BDC venture capital investing more than 40 percent of the fund in startups

2) Introduce Simple Agreement for Future Equity (SAFE)[3]

3) Attract small investors:  Allow a pool of small investors to invest in private equity fund of funds

 

     - Promote angel investment and crowdfunding

 

1) Angel investment:  Provide angel investors with an up to 200 percent guarantee for the amount they invested as Korea Technology Finance Corporation will launch a special guarantee program worth 10 billion won

2) Crowdfunding:  Raise the fundraising ceiling from 0.7 billion won to 1.5 billion won, expand companies eligible for crowdfunding campaigns from companies with up to seven years of business operation to all SMEs, and give capital gains tax exemptions for investment in tech SMEs with up to three years of operation

 

3. Support transition from startups to scaleups, and promote their going into overseas markets

 

     - Support transition from startups to scaleups

 

1) Strengthen the Industrial Bank of Korea’s (IBK’s) scaleup support program:  Introduce a Silicon Valley Bank model[4] to the IBK, with which the bank will work with major venture capital firms to more actively participate in scaleup support

2) Launch scaleup funds:  Raise scaleup funds worth 12 trillion won over the four years from now, and work for new investment worth five trillion won a year to flow into ventures in 2022

3) Provide guarantees through pilot programs designed to help brilliant ventures faced with deficits, such as 10 billion won of guarantees per company through Korea Technology Finance Corporation, as well as increase intellectual property (IP)-based financing by doubling the size of IP funds to 220 billion won

 

     - Promote going into overseas markets

 

1) Attract foreign venture capital:  Increase the size of the foreign venture capital funds (2.1 trillion won) by 300 billion won, and promote Korean ventures’ cooperating with global companies for overseas market entry

2) Open venture support centers in Seattle and New Deli in June and August, respectively, and transform 70 overseas spaces owned by the public sector into offices for Korean ventures

3) Help Korean ventures go into the ASEAN countries and Taiwan, of which the market Korean ventures want to enter, and support exchanges between Korean startups and startups in those countries

 

4. Develop secondary markets

 

     - Promote corporate investment, as well as venture capital investment

 

1) Ease corporate shareholding regulations and give tax incentives:  Work to raise the subsidiary shareholding ceiling for large conglomerates and allow their holding of non-affiliate stocks, and give capital gains tax exemptions to venture holding companies for the return on their venture capital investment

2) Encourage large enterprises and financial institutions to launch a joint fund of funds:  The joint fund will invest in ventures and the corporate investors will be given the first priority if there are M&A deals for the ventures

3) Promote M&As:  Raise one trillion won worth of new M&A funds by 2021, as well as increase the size of the current M&A funds worth 1.3 trillion won as of now

 

     - Develop secondary markets for angel investment

 

1) Raise 200 billion won worth of funds over the four years from now to purchase shares held by angel investors

2) Give capital gains tax exemptions for angel investment

 

5. Create a startup-friendly environment

 

     - Promote the use of regulatory sandboxes:  Work for startups to produce more than 100 cases of successfully applying regulatory sandboxes

     - Work to attract high quality human resources to ventures, as well as grow high tech professionals:   Increase capital gains tax exemptions for stock options from 20 million won to 30 million won, and grow as many as 10,000 AI and data analytics professionals by 2023

     - Build a startup complex, and strengthen the startup centers in the Pangyo valley