[Reporter’s Notebook] The Founding of a Major VC Fund Is Not Something to Overlook

The "entrepreneurial move" of Ryu Joonghee, former CEO of FuturePlay, has sent aftershocks through the venture capital (VC) industry for nearly a month. This began after he handed over the position of representative fund manager (key person) of the "FuturePlay New Entertainment Fund" to his successor and announced his intention to devote himself to managing "RealWorld," a next-generation technology company based on robotics and artificial intelligence (AI). While some defend his decision as a "fully possible career transition," many others criticize it as "an act of betraying the trust of limited partners (LPs)."

Ryu, who holds a PhD in Electrical and Electronic Engineering from KAIST, is a founder who established the facial recognition technology company Olaworks and sold it to Intel in 2013. He later founded FuturePlay, focusing on nurturing deep-tech startups as both an accelerator (AC) and VC. The fund from which he has stepped down was established at a scale of 17.525 billion KRW and has about four years remaining until maturity. Ryu’s side stated, "After deciding to start a new company, we completed the official consent process through sufficient prior explanation to shareholders and LPs," but those who trusted him and entrusted their funds cannot help but feel bewildered.

Institutional improvements are urgently needed to prepare for similar cases in the future. The response should be based on "system operation," not debates about individuals. Currently, the Korean VC industry essentially lacks institutional mechanisms to coordinate the sudden departure or conflicts of interest of a key person. Even if a key person suddenly steps down during fund management, there are few cases where new investments are halted, and there are no clear procedures for fee reductions or fund liquidation. It is also not uncommon for LPs to become aware of the situation only after the fact.

The United States, where institutional procedures are well established, is different. The ecosystem is protected by the system through mechanisms such as the Key Person Clause and Restrictive Covenant. If a key person leaves without the consent of the majority of LPs, fund management is suspended. Fee adjustments or even fund liquidation may be considered. Various clauses are also included to prevent conflicts of interest involving key personnel, such as non-compete, non-solicitation, and confidentiality obligations. While Korea has some similar clauses, their effectiveness is minimal. Even when specified in the commitment agreements of the Korea Fund of Funds, they are often limited to "prior notification" and rarely result in sanctions.

The startup ecosystem ultimately operates on trust. Founders design their businesses based on the consistent support of their partners, and LPs entrust their funds because they share the vision of the representative. If the flow is interrupted in the middle and the responsible party leaves for a new venture, the very foundation of trust can be shaken. The CEO of a small- to mid-sized VC commented on this matter, saying, "Now is the time to design contracts and procedures, not just rely on moral expectations." Establishing minimum rules for both founders and investors is no longer a choice but a condition for the sustainability of the ecosystem. There is simply too much at stake to end it with, "It could happen."