[Inside Chodong] Creating a Venture and Startup-Friendly Regulatory Environment is Essential

"We hope that, in this presidential election, voices from the field will be reflected in the system and have a tangible impact on regulatory policy." This statement by Jung Jieun, CEO of the AI-based law, regulation, and policy platform startup CODIT, encapsulates the hopes of the venture and startup industry ahead of the early presidential election triggered by the impeachment of the president. Recently, Jung expressed these expectations while releasing an issue paper with the Korea Startup Forum titled "Analysis of the 2025 OECD Regulatory Policy Outlook and Korea's Response Strategies." Regardless, the prevailing view in the industry is that, with the presidential election being held early and candidates competing with their campaign pledges, now is the opportunity to reduce regulatory uncertainty and inefficiency that the venture and startup ecosystem faces in practice.

The reason the industry is pinning its hopes on this early election lies in the current limitations faced by the venture and startup ecosystem. Both domestic and international uncertainties are intensifying, leading to a decline in the number of new startups, and investments in early-stage companies (those less than three years old) have decreased for two consecutive years, showing that venture investment remains subdued. The ratio of investment to GDP stands at 0.26%, just one-fifth the level of advanced economies. Last year, only two new unicorn companies emerged, and "deep tech unicorns" based on advanced technologies are rare. Despite government support, the industry soberly assesses that it will still take more time for the technological competitiveness of advanced sectors such as AI and biotech to reach a level where they can compete in the global market.

To make matters worse, the Korean economy is currently facing crises such as rising interest rates, inflation, and exchange rates, as well as domestic and international economic uncertainties, including the protectionist policies of the Trump administration. More than half (52.3%) of venture companies believe that policy changes under the Trump administration will negatively impact their business environment. As a result, the Venture Business Sentiment Index (BSI) for the first quarter of this year fell to its lowest level on record.

The industry diagnoses that, in addition to external factors, sweeping domestic regulations have contributed to this crisis. Entry barriers for new industries such as AI, mobility, and digital healthcare remain unresolved. Of the global top 100 unicorn companies, 17 are unable to operate in Korea due to regulations. Services such as home-sharing, ride-sharing, telemedicine, and genetic testing are blocked by domestic regulatory laws. Multiple overlapping regulations are stifling innovation and weakening global competitiveness. Furthermore, conflicts between platforms and professional sectors have intensified, hindering the development of new businesses. Rigid systems, such as the uniform 52-hour workweek, have also been criticized for undermining the core competitiveness, voluntary passion, and flexibility that are the hallmarks of venture company culture.

The tasks that the venture and startup industry seeks to have reflected in campaign pledges can be summarized as two main points: the dismantling of regulations that hinder innovation, and the recovery of the venture investment market. This is not just for the benefit of the venture and startup sector. Following the 1997 IMF foreign exchange crisis, the 2008 financial crisis, and most recently the COVID-19 pandemic, venture companies have played the role of savior during difficult times, growing into a key pillar of the Korean economy. The solution to overcoming the current economic crisis can also be found in revitalizing the venture and startup ecosystem to raise Korea's potential growth rate.

Within the industry, there is a growing movement to make policy proposals to each political party aimed at creating a regulatory environment friendly to ventures and startups. These proposals contain practical regulatory improvement measures that reflect voices from the field. Now is the time to listen to these voices for the sustainable growth of the Korean economy.