"Mother Fund, the Driving Force of the Past 20 Years, Needs Redesign for Global Competition"

Mother Fund 20th Anniversary "Mother Fund Policy Forum"
"Need to Discuss Extension of the Mother Fund Before Its 2035 Sunset"
"Strengthening the Virtuous Cycle Through Exit Market Revitalization and Increased Pension Fund Inflow"

There have been calls for the Mother Fund, which has served as a catalyst for the Korean venture investment market for the past 20 years, to be redesigned to better suit the global competitive environment. As capital continues to flow into the United States and more domestic startups are converting into overseas corporations (flipping), there are arguments that policy funds should more broadly support global investments. Some also suggested that the lifespan of the Mother Fund, which is set to sunset in 2035, should be extended.

At the "Mother Fund Policy Forum" held on the 14th at the Kensington Hotel in Yeouido, Seoul, various opinions were raised on the future direction of policy fund operations, including these perspectives. The forum was organized to review the performance of the Mother Fund and discuss key issues in the venture investment market, such as extending the fund's lifespan, expanding the inflow of private capital, and revitalizing the exit market. Yoo Shin Jung, Professor at Sogang University Graduate School of Business, served as chair, with participation from Seunghyup Lee, Professor of Business Administration at Chung-Ang University, Nam Kimoon, CEO of Smilegate Investment, Sujin Lee, Partner Lawyer at Mission Law Firm, and Jeon Hwasung, President of the Early Investment Accelerator Association.

At the "Mother Fund Policy Forum" held on the 14th at the Kensington Hotel in Yeouido, Seoul, industry officials are discussing various issues related to the Mother Fund. From the left: Professor Yoo Shin Jung of Sogang University Graduate School of Business, Professor Seunghyup Lee of Chung-Ang University Business Administration Department, Nam Kimoon, CEO of Smilegate Investment, Sujin Lee, Partner Lawyer at Mission Law Firm, and Jeon Hwasung, President of the Early Investment Accelerator Association. Photo by Lee Sungmin

Nam Kimoon, CEO of Smilegate Investment, stated, "The Mother Fund has proactively led areas that require long-term investment, such as ESG and environmental sectors, which private LPs (Limited Partners) tend to avoid." He added, "The fund has done well to balance policy objectives and returns." He continued, "Recently, capital has been flocking to the United States, and there has been a surge in flipping among domestic startups. Rather than viewing it as a problem when companies that have received policy finance expand overseas, I urge that policy directions be guided with global competition in mind."

There were also suggestions to extend the sunset date of the Mother Fund, currently scheduled for 2035. Professor Seunghyup Lee said, "When the fund was established in 2005, it was expected that private venture investment would be sufficient after 30 years, but there is still a long way to go. It is time to reassess not only the total investment volume but also which sectors should be prioritized for policy funding." Attorney Sujin Lee also explained, "The legal duration could be removed, or the structure could be revised so that extensions are possible if certain conditions are met."

Previously, Assemblyman Jung Jinwook of the Democratic Party of Korea sponsored an amendment to the Venture Investment Promotion Act, which would add provisions to extend the Mother Fund's lifespan in 10-year increments, subject to approval by the general meeting of members, instead of the current 30-year limit stipulated in the fund's regulations.

The industry also expressed the opinion that policy funds should contribute more to revitalizing the exit market. Jeon Hwasung, President of the Early Investment Accelerator Association, said, "While the market centered on KOSPI is improving, the KOSDAQ market still suffers from a collapse in supply and demand. If the Mother Fund could provide more support for KOSDAQ funds, which the industry has long discussed, it would complete a virtuous cycle leading to exits and reinvestment by venture capital and accelerator firms."

Expanding the inflow of private capital was also identified as a key task. Kim Hakkyun, Chairman of the Venture Capital Association, emphasized, "Over the past five years, the average return of venture capital funds has exceeded 9 percent. While individual ventures are high-risk, data shows that portfolio funds are a stable investment destination. The ecosystem will only grow if more private capital, such as pension funds, is brought in."

Meanwhile, the Ministry of SMEs and Startups plans to incorporate the outcomes of this discussion into the "Comprehensive Strategy for Becoming One of the Top Four Global Venture Powerhouses," which will be announced later this year. Hansung Sook, Minister of SMEs and Startups, stated, "For the past 20 years, the Mother Fund has been a strong pillar and growth engine for the domestic venture investment ecosystem. Going forward, we will strengthen the role of the Mother Fund and strive to establish it as a sustainable investment platform for the venture ecosystem, so that a diverse range of capital can flow into the venture investment market."