[Startup Struggle ④-2] Scale-up, Opening the Way with the Benchok Act

Scale-up Fund Plans to Raise 3 Trillion Won This Year
Fund Needs to Move Beyond 'Splitting' to 'Sizing Up'

[Asia Economy Reporter Han Jinju] The year 2020 marks the inaugural year focusing on the 'scale-up' of domestic startups. Scale-up funds will be launched this year to help companies with growth potential develop into unicorn companies. The Venture Investment Promotion Act, which alleviates regulations related to venture investment, was also passed on the 9th.

The government announced plans to establish scale-up funds worth 12 trillion won over three years. Private investment firms, which receive about 40% of their capital from government-established mother funds, will secure 60% by recruiting investors, making the participation of private venture capital (VC) crucial. The government plans to announce detailed fund establishment plans by the end of this month.

Kim Ju-sik, head of the Venture Investment Division at the Ministry of SMEs and Startups, explained, "Together with the Financial Services Commission, we will invest a budget of 3 trillion won this year to create scale-up funds and invest in private venture funds. We will not impose any restrictions on business age and will increase the fund size so that companies can be properly evaluated at the growth stage and raise large-scale capital."

Jung Sung-in, chairman of the Korea Venture Capital Association, said, "The government's introduction of scale-up funds is evidence of its intention to nurture startups that will replace existing industries and become the main drivers of innovative growth. It is not easy for domestic VCs to voluntarily increase fund sizes, but if the government creates a fund worth up to 1 trillion won, domestic VCs can participate, build track records, and gradually increase the proportion of private investment."

With the passage of the Venture Investment Promotion Act in the National Assembly, a turning point has been established to improve the quality of venture investments. The regulation that required venture capital companies to prioritize domestic investments and only allow up to 40% for overseas investments has been removed. Investments in financial services, real estate, lodging, and food services, which were prohibited under the Startup Support Act and the Special Act on Venture Businesses, are now permitted. The mandatory investment threshold of at least 40% per individual fund has been changed to a cumulative basis across held funds, allowing more flexible investments.

A startup industry insider said, "Instead of splitting the same mother fund, the government should play a role in properly supporting a single company and increasing the fund size to several hundred billion won. Private investors should make bold bets once the government creates the physical conditions. Although large-scale bets have been rare so far, they are expected to gradually appear starting this year."