Start-ups receive record investment

Korean investment in local start-ups reached a record high of 2.54 trillion won ($2.3 billion) last year, shooting up 61.9 percent over 2013, largely thanks to contributions from the private sector.

According to data disclosed on Tuesday by the Small and Medium Business Administration (SMBA), more than half of the new investments came from the private sector, including commercial banks, pension funds, conglomerates and successful start-ups that have grown into large businesses.

The private sector’s contribution of 1.5 trillion won to local start-ups in 2014 showed a drastic increase over the previous two years, due to the Park Geun-hye administration’s efforts to boost start-ups.

National policy funds - central and regional governments, the state-run Korea Development Bank and their joint funds - put about 1 trillion won into start-ups last year.

The SMBA added that there were 481 start-up funds operating at the end of last year, holding a total of 12.2 trillion won.

The SMBA said that the bigger boost from the private sector is a sign that the nation’s start-up ecosystem has improved and became more attractive to investors.

“Investment in start-ups has continuously grown over the past decade,” said Kang Ki-sam, an official at the SMBA’s start-up investment department. “After a slight slowdown in 2012, a new investment streak picked up in 2013 along with the Park administration’s creative economy campaign.”

The largest portion of last year’s new start-up investment, 448 billion won, was put into cultural content, an industry that is growing at a rate of about 6.1 percent annually. IT and biotechnology received the second and third most funding.

Last year, investment in cultural content and biotechnology rose, but IT and manufacturing received less money. Despite declining investment in some IT areas, investment in software and e-commerce increased.

The business group estimated that total investment in start-ups this year will fall to 1.8 trillion won, and will gradually build up to 2.2 trillion won in 2017. Kang noted that the drop in funding after a record-high year was part of a common pattern.

The SMBA official said lawmakers will work on legalizing new funding mechanisms this year.

“The SMBA and Financial Services Commission are waiting for the National Assembly to pass the crowdfunding bill, which is stuck in a preliminary committee,” Kang said.

BY KIM JI-YOON [jiyoon.kim@joongang.co.kr]