[Reporter’s Notebook] Record Number of Business Closures... Time to Build a Structure for Survival

"What’s the point of just increasing the numbers? Six out of ten startups fail to survive for five years."

A representative of an accelerator (AC) I met recently shook his head as he mentioned the low survival rate of startups. He said, "Successive governments have called for revitalizing venture investment, but in reality, they have only focused on increasing the number of startups," adding, "Now is the time to fundamentally change the direction of early-stage investment policies."

The statistics support this concern. According to the National Data Office’s “2024 Business Demography Administrative Statistics,” the number of new businesses in 2024 hit its lowest level in six years, while the number of closures (as of 2023) was the highest since records began. The five-year survival rate for new businesses was only 36.4%. This means that six out of ten startups are forced out of the market before reaching their fifth year.

The average five-year survival rate for new businesses in the Organisation for Economic Co-operation and Development (OECD) is 45.4%, which is 9 percentage points higher than Korea’s rate. This shows that while Korea’s startup ecosystem is relatively lenient when it comes to “entry,” its structures to support “survival” are weak. This is why there are growing calls for policy focus to shift from “how many startups are created” to “how many survive over time.”

The Lee Jaemyung administration is working to vitalize the venture ecosystem this year by creating a National Growth Fund worth 150 trillion won. Regulatory easing has also been pursued. With the recent passage of the “Partial Amendment to the Act on the Promotion of Venture Investment” in the National Assembly, accelerators can now invest through private investment associations not only in “startups less than three years old,” but also in “companies with no prior investment history and within five years of founding.”

However, there are still clear shortcomings. While the range of investment targets has been expanded, the clause specifying “startups with no prior investment history” means it remains difficult to secure follow-up investments after the initial round. Furthermore, since this easing measure only applies to private investment associations, accelerators operating institutional investment associations still face a heavy regulatory burden. These institutional limitations highlight the need for regulatory easing and support for accelerators, as they are essentially responsible for validating business models and filtering out early-stage failures.

Now, the success or failure of venture policy should be measured not by “how much capital was injected,” but by “how many companies survived.” Redesigning the regulatory and support framework so that accelerators, who play a key role in reducing the failure rate of early-stage companies and supporting them through their growth phase, can fully perform their roles is the starting point for building a “survival-oriented structure.” This is why a policy shift that puts survival, not just numbers, at the center is needed.