They Said They Would Raise Unicorns, but Support Programs Are Shrinking... Must Break Through the 'Needle's Eye'

Special Guarantee Program Starts Next Month
Supporting Companies Reduced by 10 Compared to Last Year
Contrary to Corporate Development Policy Direction

[Asia Economy Reporter Kim Bo-kyung] A government support project aimed at nurturing innovative ventures and promising startups into unicorn companies valued at over 1 trillion won will be fully launched starting next month. However, the number of prospective unicorn companies eligible for support has been reduced from 30 last year to 20 this year, leading to expected fierce competition to pass through this 'needle's eye.'

According to the Ministry of SMEs and Startups on the 26th, next month the ministry will announce the 'Prospective Unicorn Special Guarantee' project to help prospective unicorns grow into K-unicorns.

The Prospective Unicorn Special Guarantee is a program that provides up to 10 billion won in guarantees through the Korea Technology Finance Corporation when companies take out loans from financial institutions to raise large-scale investment funds. Since the government agency guarantees the loan, companies can receive favorable conditions such as low-interest loans and maturity extensions without worrying about default.

The issue is that the number of companies selected for the Prospective Unicorn Special Guarantee has been reduced from 30 last year to 20 this year. Considering that 109 companies applied for the selection process for 30 companies last year, competition for government support is expected to be even more intense this year. The Prospective Unicorn Special Guarantee project was first implemented as a pilot program in 2019 to support promising companies with high potential to grow into unicorns. This means the project scale has been reduced just two years after becoming a regular program.

Job seekers visiting the 'Startup Job Fair' are looking at the recruitment bulletin board. Photo by Jinhyung Kang aymsdream@

This runs counter to the government's policy direction. Last year, the Ministry of SMEs and Startups announced plans to increase the number of prospective unicorns to 500 by 2022 to help South Korea leap forward as one of the 'four major venture powerhouses.' Newly appointed Minister Kwon Chil-seung also pledged in this year's work report to 'ignite a second venture boom.' Despite the COVID-19 crisis last year, venture companies created 53,000 jobs and attracted a record investment of 4.3 trillion won, leading the innovative growth of the Korean economy.

In this situation, reducing the special guarantee program designed to temporarily cover companies' funding shortages is tantamount to pouring cold water on the growth momentum of the venture and startup sector, which is just gaining traction.

To be selected for the Prospective Unicorn Special Guarantee, a company must have a valuation of at least 100 billion won and a technology business evaluation rating of B or higher. Alternatively, it must meet requirements such as ▲raising over 5 billion won from venture investment institutions ▲an average annual sales growth rate of 20% or more over three years ▲a technology business evaluation rating of BB or higher.

An official from the Ministry of SMEs and Startups said, "The number of companies growing into prospective unicorns valued at over 100 billion won does not increase steadily every year. Forcing companies that do not meet the standards could lower the quality of the project," but added, "We may increase the number of supported companies in the future based on industry demand."

A venture industry insider said, "Companies that need special guarantee support will naturally feel disappointed if the project is scaled down," and added, "Strategic allocation of government support is necessary, such as focusing on nurturing the recently highlighted untact (contactless) sector."