"Possible to Receive Investment from Overseas Newborn VCs"… Ministry of SMEs and Startups Revises Venture Company Verification Requirements

Implementation of Revised Venture Company Verification Guidelines
Recognition of Investments from Emerging Overseas VCs
Explicit Evaluation of ESG Management Performance

The Ministry of SMEs and Startups is significantly revising the criteria for verifying venture companies to keep pace with changes in the global investment environment. Investments from overseas emerging venture capital (VC) firms will now be recognized as a requirement for venture certification, and ESG (Environmental, Social, and Governance) management performance will also be officially reflected in evaluations.

On the 1st, the Ministry announced the implementation of a revised version of the Venture Company Verification Guidelines, which reorganizes the evaluation criteria for venture companies.

First, when verifying a venture company, successful investment attraction from foreign investment firms that are not well known domestically will also be recognized as eligible investment performance.

Until now, the requirements for investment entities that could be recognized as overseas investment achievements for venture applicants under the 'venture investment type' were limited and enumerated. Therefore, investment performance received from emerging overseas venture capital (VC) firms was difficult to be immediately reflected.

Going forward, foreign investment firms that the Minister of SMEs and Startups judges to have international credibility and investment performance will be immediately recognized as eligible investment entities. This is intended to enable the domestic venture system to respond swiftly to changes in the global VC market.

In particular, it is expected that companies seeking investment attraction and listing opportunities based on networks with Korean VCs active in Silicon Valley and other overseas locations will be able to access the venture company system more conveniently.

ESG management adoption performance will also be explicitly evaluated when verifying venture companies.

Venture applicants under the 'research and development type' and 'innovation growth type' were required to undergo quantitative and qualitative evaluations of business growth potential, but the existing finance-centered evaluation indicators could only indirectly assess non-financial achievements such as ESG management efforts.

Now, the appropriateness of ESG management adoption will be officially and qualitatively evaluated according to 14 detailed evaluation criteria covering Environment (E), Social (S), and Governance (G). These evaluation elements will be operated by awarding additional points so as not to burden early-stage venture companies.

Through this, it is expected that the overall ESG competitiveness of the domestic venture ecosystem will be strengthened, and the use of the venture system by innovative management-leading companies addressing national challenges such as climate change, low birth rates, and regional extinction will increase.

Meanwhile, verified venture companies can utilize special systems under the Venture Business Act and receive various benefits such as tax incentives, expanded guarantee limits from the Korea Technology Finance Corporation, and relaxed listing review criteria on KOSDAQ, as well as additional points and preferential conditions in various policy projects.

Kim Bong-deok, Director of Venture Policy at the Ministry of SMEs and Startups, said, "We need to be more sensitive to changes in the global venture ecosystem," adding, "We will continue to strive for the sustainable growth of Korean venture companies and the strengthening of their global status."