Small businesses to get a large boost

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Small businesses to get a large boost

The state-run Small and Medium Business Administration (SMBA) is set to launch a 600 billion won ($535 million) fund next month that will support start-ups and small companies deemed to have promising futures.

The so-called “future creativity fund,” obviously reflecting the Park Geun-hye administration’s key agenda of achieving “creative economy,” will combine 200 billion won from the government and 400 billion won from large companies such as Doosan and Kolon and first-generation start-up operators. It will designate a fund operator over the coming three weeks with the aim of launching in mid-September, according to the agency.

The 200 billion won from the government will be earmarked for start-ups three years old or less that have a hard time attracting private investment. The fields of industries that will receive the financial and mentoring assistance range from IT to mobile, health care, medical equipment and convergence of two cutting-edge tech sectors.

Of that, 100 billion won in particular will be collected from leading domestic and foreign start-ups that have developed into either medium or large tech firms such as Neowiz, Daou Technology, NHN and CyberAgent from Japan. It will be spent on those companies sharing information with budding start-ups.

Those private investors will receive 3 percent of the fund’s profits.

“The fund has created an opportunity for large companies participating in the fund to acquire quality start-ups,” said a spokesman with the SMBA, “now that the government is set to implement the policy of giving corporate tax exemptions to large corporations acquiring start-ups.”

Whereas established companies such as Google, Apple and Cisco in the United States support and foster start-ups and retrieve invested capital later by acquiring them to create a virtuous circle, according to the agency, the link that connects start-ups and large companies is nearly severed because the local M&A market is frozen and bigger corporations refrain from investing in smaller counterparts.

The fund is expected to bolster creation of a start-up ecosystem in Korea, said Han Jung-wha, administrator of the agency.

Statistics from the SMBA show that larger companies’ share of funds investing in start-ups edged up from 6.4 percent in 2010 to 7.5 percent in 2011, but nose-dived to 0.9 percent in 2012.

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