"High Reliance on Policy Finance in Domestic Venture Market... Active Private Capital Participation Needed"

15th Roundtable Held by Hana Institute of Finance and Korea Financial Research Center

Although the domestic venture capital market has grown to rank among the top in the Organisation for Economic Co-operation and Development (OECD), concerns have been raised about its heavy reliance on policy finance, with calls for more active participation from private capital.

According to Hana Bank on November 16, Professor Han Jaejun of Inha University and Research Fellow Kim Hyunyeol of the Korea Institute of Finance stated this at a roundtable held on November 14 by the Hana Institute of Finance and the Korea Financial Research Center under the theme "Key Tasks for Promoting Productive Finance: Focusing on Private Venture Investment."

Professor Yoon and Dr. Kim emphasized that, in order to achieve a qualitative transformation in the venture investment industry, the policy fund performance evaluation system should be restructured to focus on "alignment with policy objectives" and "contribution to corporate growth," rather than simply the scale of investment.

They also suggested that regulatory reforms are needed to vitalize corporate venture capital (CVC) operated by large companies. These reforms should include increasing the proportion of external capital contributions to holding company CVCs, easing restrictions on overseas investments, and allowing CVCs in the form of accelerator companies (ACs).

They further highlighted the need to expand venture fund investments by institutional investors such as pension funds and retirement pensions.

Professor Yoon Seonjung of Dongguk University and Professor Han pointed out that the domestic venture investment exit structure is excessively skewed toward initial public offerings (IPOs), and stressed the need to shift toward an early exit ecosystem centered on mergers and acquisitions (M&A).

They cited the fact that, while it takes an average of 14 years for Korean startups to reach an IPO, in the United States, exits are achieved within an average of five years, mainly through M&A.

Professor Yoon Seungyoung of Hankuk University of Foreign Studies emphasized the importance of establishing a double taxation prevention incentive structure-such as linking corporate tax exemptions and dividend income tax reductions-for the successful implementation of the Business Development Company (BDC) system, and called for measures to encourage private investor participation.

This content was produced with the assistance of AI translation services.