[Reporter’s Notebook] Beyond "Startups for All," We Must Make Room for "Good Failures"

Startup Promotion Policies Must Focus on Both Quantity and Quality
The Core of Policy Should Be "What Happens After Failure"

"The money is not going to people who will really start a business, but to people who will not."

This was what an executive at a venture capital firm said in a recent conversation. When asked about his expectations for the government's policies to promote entrepreneurship, he replied, "To be honest, isn't this a kind of populism?" and voiced concern that "with the current approach, even people who should not be starting a business will end up doing so, and only the business closure rate will rise further."

On January 30, the government held the National Startup Era Strategy Meeting and announced a "National Startup" policy to spark a boom in ventures and startups. The stated aim is to ease the so-called "K-shaped growth" structure and make entrepreneurship a new ladder for social mobility. It also unveiled the "Startup for All Project." This project is designed to discover and support 5,000 entrepreneurial talents nationwide, providing 2 million won in startup activity funds per person so that anyone with an idea can take on the challenge. Through a step-by-step audition process, the final winner will receive more than 1 billion won in combined prize money and investment. A 50 billion won "Startup Boom Fund" will also be created.

However, many in the venture investment field argue that the distorted structure of subsidies must be fixed first. The aforementioned investment firm executive pointed out that "there are countless professor-founders who receive projects worth several hundred million won, run their labs a bit, then shut down, and student founders who say 'startup is just a resume booster and the real goal is to get a job at Samsung Electronics'." When the number of ghost or nominal startups increases, the damage is not confined to the startup scene alone. It creates a bubble in the early-stage startup market and pushes up valuations, making it harder for private investors to find good companies at reasonable prices.

The core of startup policy must not stop at "increasing the number of first-time founders." According to statistics from the National Data Office, 2 out of every 3 startups in Korea close down within 5 years. In the same year, a "Status Report on Companies Supported for Second-Chance Entrepreneurship" by the Korea Institute of Startup & Entrepreneurship Development analyzed that the 5-year survival rate of companies that received support for re-startups was 2.4 times higher than that of new firms. This shows that what matters more than failure itself is having a structure that can connect failure back into new business.

In Korea, startup failure still often leads to bad credit, social stigma, and difficulty in making a comeback. This is different from the "virtuous cycle" seen in venture-advanced countries such as the United States and Israel, where failed founders are re-evaluated as talented individuals with valuable experience and move on to their next startup or into the investment industry. Because of the fear of failure, the number of second-chance startup attempts in Korea is also less than half that of the United States and China.

Founders with good ideas and strong execution will eventually start a business, with or without subsidies. The design of "to whom, and under what structure" limited resources are allocated needs to become much more sophisticated. What is needed are institutional reforms so that a record of failure is not excessively reflected in credit ratings, a substantial expansion of guarantees for second-chance founders, and stronger linkages that connect experienced re-founders with private investment. The priority is not to increase the sheer number of startups, but to build a structure in which founders who have learned from failure can try again.