Overhauling venture policiesThe government announced measures to support venture and start-up enterprises in a meaningful step toward its goal of cultivating a “creative economy.” Large exporters and manufacturers have grown substantially in size, but their contributions to hiring have lessened.
To foster a creativity-oriented economy and creation of jobs, stimulating the venture start-up sector is a must. The government came up with a comprehensive package to reinvent the venture industry and corporate habitat from birth, breeding and regeneration. It first of all removed red tape in a move long demanded by the venture industry to ease the bottleneck in the field.
The government has promised incentives in corporate and inheritance taxes on mergers and acquisitions in technology and innovation-related ventures while raising tax deduction limits for angel investment to help start-ups and venture enterprises raise funds through investment rather than loans. It will introduce a new over-the-counter equity market, dubbed Korea New Exchange (Konex), to help start-up and venture enterprises raise more capital. The government will separately create a 500 billion won ($447 million) fund to finance innovation and ventures as well as a 2.5 trillion won funding network for business start-ups.
But despite all the fanfare, government-led venture policies have rarely been successful in the past. There are over 30,000 so-called venture companies in Korea as of today, but 98 percent of them survive on public funding or loans. Only a handful remain successful through their own efforts to hone competitiveness. Venture companies flourish in Israel and the United States because the government stays out as much as possible and instead allows the market and industry to determine winners and losers.
To make the policies work, the social mind-set also needs to change.
As in other industries, people are the most important asset in determining the success of any venture. If excellent brains all seek solid jobs in large companies, none of the policies will be of any use. Young talents with brilliant minds, ideas and passion must be inspired to take risks. The exit routes must also widen.
The venture industry remains moribund not because of a lack of government interest and policies, but because of a misapplication of policies. The government should be done with its role by injecting funds at the initial stage and letting businesses flourish or die according to the market.
President Park Geun-hye may be tempted to create a venture and start-up boom to fuel her vision of a creative economy. But excessive government involvement may encourage speculation and undermine the sector. What it should focus on is motivating changes in the social perspective about risky ventures and readjusting policies related to venture firms and large companies.