Venture Industry Urges "CVC Regulation Easing... Calls for Fair Trade Act Passage in National Assembly"

"External Funding Investment Ratio Increased from 40% to 50%"

The venture business sector has urged the swift passage of the "Amendment to the Monopoly Regulation and Fair Trade Act," which includes the deregulation of CVC (Corporate Venture Capital).

On October 4th, Baek Hyeryun, the chairperson of the National Assembly's Political Affairs Committee, is conducting a plenary session.
[Photo by Yonhap News]

On the 4th, the Korea Venture Business Association stated in a position paper, "The difficulties faced by ventures and startups are intensifying due to the contraction of venture investment, and the investment shrinkage could lead to a stagnation in overall innovation activities such as technology development, new business exploration, and market expansion. Therefore, incentives to attract private industrial capital into venture investment are absolutely necessary at this time."

They continued, "Compared to advanced venture investment countries like the United States, Korea's industrial capital investment through CVC is low, accounting for about 22% of the venture investment market, which is significantly lower than in countries like the U.S. The biggest challenge for CVC under the Fair Trade Act is the restriction on external capital contributions. Operating a fund of a certain scale is essential for investment activities as a VC (Venture Capital), but currently, the proportion of external capital contributions for fund formation is limited to within 40% per individual fund, causing difficulties. Therefore, a legal amendment is needed to relax the external capital contribution ratio from the current 40% to 50%," they emphasized.

The Korea Venture Business Association also said, "While we agree with the current 20% limit on overseas investment by CVCs to promote domestic investment, overseas investments tend to involve large amounts per transaction. For most newly established CVCs, the current standard effectively makes overseas investment impossible. Therefore, there is sufficient need to ease the overseas investment limit from 20% to 30%."

Furthermore, the association explained, "Korea's venture investment market has been highly dependent on policy finance, and there have been limitations in attracting private capital and market liquidity into the venture investment market. This amendment, which can promote the inflow of innovative venture capital, benefits not only CVCs but also ventures and startups by enabling them to form cooperative relationships with CVC parent companies, expanding business opportunities and potentially leading to mergers and acquisitions (M&A), thereby contributing to the activation of the exit market."

The Korea Venture Business Association stated, "The amendment is essential not only for CVCs and ventures/startups but also for the advancement of the venture ecosystem. We earnestly urge the National Assembly's Political Affairs Committee to promptly pass this amendment so that it can serve as a catalyst for the innovative activities of ventures and startups."