[Reading Science] Everyone Rushes to Start 'Research Institute Companies' with Tax, Finance, and Marketing Support

On the 13th, Minister Lim Hye-sook of the Ministry of Science and ICT held a meeting with young representatives of research institute startups at the Daedeok Research and Development Special Zone.

[Asia Economy Reporter Kim Bong-su] The government is supporting various types of ‘research institute companies’ to foster youth and technology startups. As of the end of August this year, a total of 1,220 research institute companies have been established, of which 254 have closed, leaving 966 in operation. They are classified according to the business entity and promotion method into joint investment type (414 companies, 34.1%), existing company conversion type (391 companies, 32.2%), and new startup type (408 companies, 33.7%).

These companies are established in five national research and development special zones, with Daedeok Special Zone having the most at 391 companies. Daegu has 204, Gwangju 174, Busan 171, and Jeonbuk 166. In particular, startups utilizing research outcomes from public research institutions have surged recently. Before 2013, fewer than 10 were established annually, but the number rapidly increased to 179 in 2016, 181 in 2017, 187 in 2019, and surpassed 200 with 217 last year. This year, as of the end of August, 112 have been recorded.

The growth of research institute companies is also remarkable. From 2017 to 2019, their average annual sales increased by 21%, and employment rose by 36%. Total sales of all research institute companies grew more than fivefold from 120.858 billion KRW in 2012 to 739.447 billion KRW in 2019, while employment increased nearly eightfold from 524 to 3,910 during the same period.

A representative success case is Kolmar BNH, which was founded as the first research institute company in 2006 with investment from the Korea Atomic Energy Research Institute. In February 2015, it achieved the milestone of being the first to list on KOSDAQ. At that time, it recorded a market capitalization of 1.0276 trillion KRW, and as of June this year, its market capitalization has increased by more than 50% to approximately 1.5155 trillion KRW. During this period, sales grew by 86% and employment by 39%. Syntekabio, founded in 2014 with investment from the Electronics and Telecommunications Research Institute (ETRI), was listed on KOSDAQ in December 2019 and has grown into a mid-sized company with a market capitalization of 188.9 billion KRW as of the end of June.

These research institute companies receive tax benefits such as corporate tax exemption (100% for 3 years, then 50% for 2 years), acquisition and registration tax exemption, and property tax exemption (100% for up to 7 years, then 50% for 3 years). They also receive substantial financial support from the government. Companies established within 3 years receive 50 million KRW to lay the foundation for initial growth, and an additional 250 million KRW within 2 to 5 years to support scale-up growth and leap. Even after 5 years of establishment, they can receive support of around 500 million KRW. Furthermore, they are provided with investment opportunities such as investment mentoring, joint IR, priority linkage and application with venture capital and special zone funds (123.4 billion KRW), and customized consulting for overseas market entry strategies and initial public offerings (IPO). Marketing and sales channel support is also provided, including entry into online platforms like Amazon, Alibaba, eBay, as well as department stores and home shopping.

An official from the Ministry of Science and ICT stated, "More researchers are leaving their labs and starting companies by attracting external investors together with research institutions," adding, "Startup companies have a structure where income is earned according to shares, so government-funded research institutes receive profits only proportional to their shares upon listing, and the rest goes to the founders or other shareholders."