Lee Jaemyung's Government-Led Startup Ecosystem: Industry Divided Between Expectations and Concerns

Government-Led Expansion of the Startup Ecosystem Announced
Full-Scale Funding Through the Fund of Funds and BDCs
Concerns Raised Over Potential Erosion of Private Sector Autonomy

President Lee Jaemyung has pledged to revitalize the startup ecosystem through government-led initiatives, signaling a shift in policy direction. Throughout the election campaign, he emphasized the need to increase the government's role in the startup ecosystem, announcing plans to expand venture investment using public funds and to reform related systems. The industry is expressing both anticipation for increased capital inflows and concerns that government intervention could undermine the autonomy and dynamism of the private market.

Expectations Rise for Increased Funding... Expansion of the Fund of Funds and Introduction of BDCs

According to President Lee's policy pledges on June 4, he has promised to extend the duration and increase the investment budget of the Fund of Funds to stimulate the venture market. Over the past 20 years, more than 10 trillion won has been invested in this fund, and he plans to continuously expand its budget to create a "40 trillion won private venture market." In addition, he announced plans to establish a public financial pool that would channel surplus funds from retirement pensions and pension funds into venture investment.

The introduction of Business Development Companies (BDCs), which would allow individual investors to participate in unlisted investments, has also been proposed. To decentralize the startup ecosystem currently concentrated in the Seoul metropolitan area, the policy includes expanding regional growth funds, establishing Startup Parks, and strengthening the TIPS program with a focus on non-metropolitan regions.

However, there are differing views within the industry regarding government-led infrastructure expansion. Some point out that market autonomy could be compromised. An IT startup CEO said, "While the expansion of support is welcome, if the government leads the ecosystem, it could actually dampen the dynamism of the private sector. For the ecosystem to grow sustainably, private sector autonomy must also be guaranteed."

A representative from the venture investment industry also commented, "There is no disagreement that policy funds should be scaled up as a catalyst to increase private investment. However, if reliance on government programs grows, capital may flow only to government-backed projects, reducing diversity. In fact, quite a few investment firms have already established internal policies not to participate in government projects."

Labor Policy Poses a Hurdle... Questions Remain About Feasibility

President Lee has pledged to overhaul unreasonable regulations that hinder startups and to expand the exit market through the activation of mergers and acquisitions (M&A). He also plans to broaden the application of regulatory sandboxes and transition to a negative regulatory system.

However, there are concerns that the "labor respect" policy stance, including the full application of the Labor Standards Act, could conflict with the startup environment, where flexible employment and rapid decision-making are essential.

If President Lee's pledges are implemented as promised, policy support would cover the entire cycle from startup to exit, but questions remain about the feasibility. Previously, the Yoon Suk-yeol administration also made revitalizing the private-sector-driven venture ecosystem a key pledge, but most evaluations point out that actual policy implementation was lacking. In particular, institutional reforms such as the revision of the 52-hour workweek, which the industry strongly demanded, were not properly realized and remain unresolved issues.

The Korea Venture Business Association stated, "In this era of low growth, the drive and vitality for challenge and growth in the venture sector are disappearing," adding, "We hope that the pledges made during the election period will be implemented as effective policies that can be felt by companies on the ground."