The Ministry of SMEs and Startups (hereafter MSS) plans to create a $1.27 billion (KRW 1.7 trillion) venture fund by pooling $681 million (KRW 910 billion) through the “2024 Fund of Funds (FOF) 1st Investment Announcement”.
The $112.3 million (KRW 150 billion) investment is the largest ever in the Global Funds, which supports domestic start-ups to attract foreign investment, bringing the total to more than $749 million (KRW 1 trillion).
A record $74.9 million (KRW 100 billion) will be invested in the Regional Venture Fund, which focuses on ventures and start-ups in non-metropolitan areas.
The regional venture funds will consist of the Regional Innovation Venture Fund ($41.2 million (KRW 55 billion)), which will establish a FOF with local governments and public institutions; the Regional Startup Fund ($15 million (KRW 2 billion)), which will be open to local entrepreneurs and technology holding companies; and the LICON Fund ($11.2 million (KRW 15 billion)), which will focus on investing in entrepreneurial small and medium-sized enterprises in the region.
More than $74.9 million (KRW 100 billion) will be invested in the Rookie League, a programme dedicated to emerging and small venture capital firms, which will be completely revamped to allow rookie VCs to directly propose challenging investment areas.
MSS will invest $74.9 million (KRW 100 billion) in the Rookie League, about 10% of its total investment budget, but will consider allocating additional budget if the VCs make a number of breakthrough proposals.
The Ministry of SMEs and Startups will also continue to support investment blind spots through the creation of funds such as Women ($12.5 million, (KRW16.7 billion)), Youth Entrepreneurship ($50 million (KRW66.7 billion)), Rebound ($37.5 million (KRW5 billion)) and Impact ($25 million (KRW33.3 billion)).
Meanwhile, the Startup Korea Fund, which will be co-funded by the Fund of Funds (FOF) in partnership with large corporations, financial institutions and successful venture firms, is currently exploring the willingness of private investors to participate, and an investment announcement will be made in March 2024.
In addition, MMS is also reorganising the operational structure of its fund of funds (FOF) investment business in order to provide investment funds quickly.
To ensure that the baby fund of the fund of funds (FOF) can start investing quickly, the selection of venture capital firms is based on their ability to establish funds quickly.
In principle, the first investment project will be completed within the fund establishment period (3 months), and the unsuccessful investment budget will be recovered and a new manager selected immediately through the second investment project (scheduled for July 2024).
However, in order to ease the burden on venture capitalists in this process, the “Fund Formation Failure Penalty” will be waived for a limited time this year.
In addition, MMS will actively operate the incentive system to promote venture investment in 2024, and venture capital firms that have actively made venture investments in 2023 will be given preferential treatment in the selection of investment projects in 2025 and various government investment projects.
A ‘Fund of Funds (FOF) Post-Management Committee’ will be established to manage the venture capital firms that have made investments and to ensure that they are given sufficient opportunity to be heard on key post-management issues, such as reducing management fees and limiting participation in investment projects..
Oh Young-ju, Minister of SMEs and Start-ups, said: “This year’s Fund of Funds (FOF) investment project focused on rapidly expanding the recovery momentum of the venture investment market. We quickly completed the selection of managers and fund formation in the first half of the year, and drastically reorganised the entire investment project so that full-scale investment can be carried out from the second half of the year.” “We will take this year as the year of realising ‘Startup Korea’ and focus on creating tangible results by rapidly advancing core policies including the parent fund.”
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