Busan City Anticipates Formation of Korea's First Region-Led 100 Billion KRW Scale Mother Fund

Creation of the Largest Regional Fund 'Busan Future Growth Venture Fund'

Focused on Busan's Regional and Strategic Industries, Innovative Ventures, and SMEs

The largest-ever regional mother fund creation project in Sasang, aimed at expanding the investment ecosystem infrastructure for the growth of innovative companies in Busan, is expected to soon bear fruit under local leadership.

Busan City Hall.

On the 29th, Busan City announced that it had secured an additional 36 billion KRW (25 billion KRW from the government’s mother fund and 11 billion KRW from others) to the initially secured 50 billion KRW from the Industrial Bank of Korea, 5 billion KRW from Busan City’s investment, and 10 billion KRW from BNK Financial Group, finalizing the fund manager as Korea Venture Investment Corp for the largest-ever 100 billion KRW scale ‘Busan Future Growth Venture Fund’.

In February, Busan’s proposal and application for the Ministry of SMEs and Startups’ investment project were finally selected, securing 25 billion KRW of mother fund capital, and the remaining 11 billion KRW will be finalized through financial sector investment reviews.

With the formation of the ‘Busan Future Growth Venture Fund’ in the first half of the year, the creation of sub-funds exceeding 250 billion KRW is expected to follow in the second half, somewhat alleviating recent concerns in the investment ecosystem.

While regional funds have so far played a passive role mainly involving local governments’ participation in government-led fund creation, the ‘Busan Future Growth Venture Fund’ is the first case led by the region itself.

Moreover, the future growth fund is unusually large in scale and innovative in sub-fund management. The city, together with the Industrial Bank of Korea, carefully devised a fund management strategy to bring about changes for the future growth of the regional investment ecosystem.

Considering the characteristics and capabilities of the region, a league system was introduced for fund operation: ▲Regional (40% of the mother fund) ▲Capital area (50% of the mother fund) ▲Global (10% of the mother fund), aiming to efficiently allocate funds and improve weaknesses in the regional investment ecosystem through the roles of each league.

In the regional league, only local accelerators (AC) and venture capitalists (VC), including branches, can participate as fund managers. Up to 70% of the mother fund will be invested to focus on regional companies from early startup to growth stages, fostering native regional accelerators (AC) and venture capitalists (VC) and supporting the growth of promising local startups.

An Accelerator (AC) refers to a startup planner that discovers promising early-stage startups and provides comprehensive incubation services such as angel investment, business space, and mentoring.

Venture Capital (VC) refers to financial capital that invests in potential venture companies and provides comprehensive support including management and technology guidance to pursue high capital gains.

In the capital area and global leagues, excellent fund managers with nationwide networks and overseas networks, respectively, participate, with up to 30% matching investment from the mother fund to form sub-funds.

This supports the scale-up of regional innovative companies that require nationwide or overseas expansion (including attracting overseas startups).

To secure the public nature and profitability of this large fund combining policy and private capital, the accumulated fund management strategies and network capabilities of the Industrial Bank of Korea play a key role in fund operation design, with specific details to be finalized through future consultations among investment institutions.

Through this, native regional investment firms will face fewer difficulties in fund formation (up to 70% support), regional startups receiving large-scale investments from excellent capital area investors will gain momentum for follow-up investments, and the experience of excellent investors attracting regional investments is expected to lead to increased interest from other investors in the region, expanding the attraction of investors and promising domestic and international startups to the region.

Regarding regional investment scale, it has typically been 2 to 3 times the city’s investment, but the ‘Future Growth Fund’ is expected to achieve regional investments exceeding 12 times the city’s investment (5 billion KRW city investment, over 60 billion KRW regional investment).

Mayor Park Hyung-jun said, “The soon-to-be-formed mother fund will serve as the seed money necessary for supplying funds for the growth of regional innovative companies and act as a catalyst to attract follow-up investments for sub-fund investee companies, enabling many excellent innovative companies to emerge from the region.”

Busan Future Growth Venture Fund Structure.