[K Startup Great Transformation] Trillions in Grants Released... "Challenge to Secure Review Expertise"

<Part 1> Asking 30 CEOs
Criticism of Lack of Expertise... "Cannot Identify 'Zombie Companies'"
Support Target Categories Limited... Must Match Keywords Like Region, Women
Startups Unattracted to Government Projects... 78% "Have Never Applied"

[Asia Economy Reporter Junhyung Lee] "There are so-called ‘zombie startups’ that survive solely on government subsidies due to a lack of judgment ability by the business operators, yet even these cannot be properly identified."

A CEO of a startup in its fifth year cited the lack of expertise in policy enforcement agencies and the problem of ‘zombie startups’ that focus solely on government subsidies without competitiveness as one of the challenges to be addressed. As the proportion of startups in the national economy grows, the budget for startup support has increased significantly, but there are many issues that need to be resolved accordingly.

Lack of Expertise in Policy Enforcement Bodies

The level of evaluation personnel is one of the problems pointed out by the industry regarding the current system. It is often criticized that those who evaluate startups to select support targets lack expertise and understanding of the industry. CEO A of a daily necessities startup using a subscription economy model said, "The lack of expertise among those participating in the support program evaluations is at a serious level." CEO B of an IT solution startup pointed out, "The structure is such that you can receive support funds by deceiving just 10 minutes of face-to-face presentation time."

There were also criticisms that too many stakeholders are involved in government projects, limiting the scope of support recipients. Professor Dohyun Kim of the Department of Business Administration at Kookmin University explained, "Too many entities intervene in the business process, so you have to meet all the (keywords they demand) to receive support," adding, "For example, by segmenting support targets by ‘region’ or ‘women,’ companies with high growth potential are sometimes excluded." CEO C of an augmented reality (AR) startup said, "It is also problematic that the threshold for government support is lowered simply because someone is young," adding, "There is a possibility of moral hazard among young entrepreneurs."

Need to Strengthen Private Sector Linkages

In fact, many startups do not find government projects very attractive. According to the ‘2020 ICT Small and Medium Enterprise Survey’ by the Korea Information Society Development Institute (KISDI), among 20,749 ICT SMEs, 78% responded that they had never even applied for government or local government startup support policies. They cited ‘strict basic eligibility requirements such as credit rating restrictions’ (36.6%) and ‘complex administrative procedures and required documents for startup support projects’ (32.8%) as the main reasons. Only 14.8% of companies that applied actually received support. In other words, startups and venture companies growing from the government’s ‘mother fund’ fall short of even 2 out of 10.

The industry emphasized the need to significantly strengthen linkages with private investors. The TIPS program, a technology startup support program by the Ministry of SMEs and Startups, was cited as a representative example. TIPS operates by providing additional support such as technology and R&D to companies that have been pre-invested in by verified private investors. The private sector acts as the main investor, maintaining continuous interest in the companies and supporting systematic nurturing. CEO D of a platform startup with four years of experience said, "There is a need to create a policy environment that aligns with market logic through private investment," adding, "One option could be to reduce government-led projects and delegate more to the private sector."