Foreign venture capital fund set up

Foreign venture capital firms are eyeing Korean start-ups.

The Small and Medium Business Administration (SMBA) said that it signed a memorandum of understanding in San Francisco yesterday with venture capital firms DFJ and Walden International to form a fund that is tentatively called the Korea Fund worth $150 million.

DFJ, founded in 1986, has invested in such successful companies as Skype, Hotmail, Baidu and Tesla. It has $7 billion in assets.

Walden International, which was started in 1987, has invested in Korean corporations in the past such as Com2us, SundayToz and MNtech. It has $2.2 billion in operating assets.

DFJ and Walden International will invest $75 million each in the fund.

They will manage the Korea Fund by themselves and will be obliged to use at least 51 percent of the fund to invest in Korean start-ups and small and medium enterprises, according to the deal.

The Korea Fund will be promoted alongside the Korean Yozma Fund, which is included in the government’s three-year economic innovation plan, which aims to raise a total of 200 billion won ($193.2 million) by 2017.

The Yozma Fund is the most well-known venture capital firm for start-ups in Israel, which was a driving force in the Israel economy. The Yozma Fund is also planning to invest 1 trillion won in Korean start-ups over the next three years.

According to the SMBA, Timothy Draper, chairman and founder of DFJ, plans to manage the Korea Fund.

“Some Korean start-ups have the potential to grow as successful companies in the global market if they have financial support from investors,” said Draper, during the MoU signing event yesterday in San Francisco.

“We have high expectations as we can cooperate with Korean entrepreneurs through this fund,” he added.

SMBA also shared its hopes for the incoming venture capital.

“We plan to finalize the follow-up procedures in establishing the fund as soon as possible,” said a spokesman for the SMBA in a press release.

“We will make sure to raise the original goal of 200 billion won of funds early next year through aggressive marketing promotions and by persuading foreign venture capital firms in person.”

Besides DFJ, Walden International and the Yozma Fund, Altos Ventures and Japanese venture companies such as CyberAgent Ventures, Global Brain, SoftBank Capital and Rakuten Ventures are expanding investments into Korean IT start-ups.

The amount of foreign assets attracted by domestic start-up companies has also increased from 123.6 billion won in 2003 to 428.3 billion won in 2013. This year, it is estimated to reach 700 billion won, according to the SMBA.

BY KIM JUNG-YOON[kjy@joongang.co.kr]