Start-up fund seeks more money

The government raised the investment target for a fund that will invest in Korean start-ups by 30 percent on Monday, from an initial target of 2.35 trillion won ($2.11 billion) to 3.07 trillion won, citing growing interest in the fund.

The announcement was made at a ceremony at the Korea Development Bank, where 18 companies were appointed to manage the fund.

“A financial ecosystem is where investment is appropriately supplied, recovered and reinvested in the life cycle of a business,” Choi Jong-ku, chairman of the Financial Services Commission, said at the ceremony. “A financial ecosystem led by the private sector, where the creativity and autonomy of the private sector is actively demonstrated, should be created.”

Choi said the government decided to raise the investment target because of positive response from the private sector. IMM Investment, one of the 18 fund management companies, said it has already raised 355 billion won and plans to raise its target to 500 billion won by the end of this year.

The fund includes investment from both the government and private sector, but the latter’s contribution is much higher. It was started in March to address growing need for Korean investment in start-ups. While there have been domestic venture capital funds and angel investors pumping money into local start-ups, the size of investment is relatively small compared with those of foreign investors, especially those from China.

While investment in start-ups and small businesses has been increasing - venture capital fund investment reached an all-time high of 2.4 trillion won last year - many of it has come from the government and state-owned financial institutions. As of 2015, government investment accounted for 46 percent of start-up investment, double Europe’s 21 percent and nearly quadruple that in the United States, leading to calls for more active participation from the private sector.

So far, the government and Korea Development Bank have each invested 170 billion won and 770 billion won in the fund. Roughly 2.1 trillion won has been collected from the private sector.

“We request the fund management companies play a pivotal role in smoothly supplying the investment to innovative companies with a responsibility of great importance,” Choi said.

“Innovative growth is a historical project that cannot be postponed anymore,” said Rep. Min Byung-doo of the Democratic Party, who leads the National Policy Committee. “The National Assembly will provide support so that the necessary legislation and budget is made in creating an innovative growth financial ecosystem.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]