In 4Q 2017, the MSS to Create KRW 1.4 trillion Worth of Venture Funds to Support Innovation-Driven Growth
- Division
- 국제협력과
- Date
- 2017.11.06
- Writer
- 박강범
- File
- Headline
- The MSS selected VCs to manage FoFs with a total worth of KRW 860 billion, which includes KRW 800 billion from the Supplementary Budget.
The Ministry of SMEs and Startups (“MSS," Vice Minister Su-gyu Choi) and the Korea Venture Investment Corporation (CEO Kang-rae Cho) announced that they selected venture capitals (“VCs”) to manage venture funds worth KRW 1.4 trillion, which will include KRW 860 billion invested by Fund of Funds (“FoFs”)
The investment program is aimed at promoting growth driven by innovation.
The MSS plans to invest a supplementary budget of KRW 800 billion in the FoFs, which is the largest government investment in FoFs to date.
The MSS lost no time in having the budget approved by the National Assembly so that the funds can be created within the year and investments can be made in innovative startups and venture companies early on.
A total of 99 VCs submitted applications. The total amount requested by the VCs stands at KRW 3,134.9 billion, 3.6 times higher than the total amount to be invested through the FoFs (KRW 870 billion).
1. Result and Analysis by Category
The MSS selected 48 VCs for five categories including youth startups, the Fourth Industrial Revolution, and turnaround support. By the end of this year, the MSS will create venture funds worth KRW 1.4 trillion, which will consist of KRW 860 billion from FoFs and KRW 585 billion from the private sector.
The total value is KRW 160 billion higher than the original target at the time of the program’s announcement, KRW 1.286.5 billion.
The MSS was able to secure more investments than the original target because the VCs that applied for the Fourth Industrial Revolution category were matched with more funds from the private sector than originally planned.
By fund sizes, Several are expected to be created: 8 funds worth KRW 50 billion or higher, 10 funds worth between KRW 30 billion and KRW 50 billion, and 30 funds worth less than KRW 30 billion. The average worth of a single fund is expected to be the highest in the Fourth Industrial Revolution category, which stands at KRW 44 billion.
Of the VCs selected for the program, Atinum Investment plans to create the largest fund worth KRW 140 billion (KRW 37.5 billion from the FoFs).
The selection results can be broken down by category as follows.
(Youth Startup) To maximize the opportunities for youth startups with technical expertise and innovative ideas, the MSS selected 21 VCs for the youth startup category, which is the highest among the five categories.
(Fourth Industrial Revolution) The VCs selected for the Fourth Industrial Revolution category mostly consist of larger funds. This is to secure a head start in the Fourth industries where the future of the Korean economy lies, and ensure that businesses in the sector can secure investments from their inception until their growth.(the average size of the funds in this category is KRW 44 billion)
The private VCs, in their proposals, listed artificial intelligence (AI), virtual reality (VR) and augmented reality (AR), big data, and healthcare sectors as the main targets for the Fourth Industrial Revolution funds.
Once the recently formed “Fourth Industrial Revolution Committee” decides on the future policies, the MSS plans to incorporate the policies in its selection of investment targets.
(Turnaround Support) To ensure that entrepreneurs can come back from their failures and put their experiences to creating new innovative startups, the MSS has set aside 80% of investments from the FoFs for the turnaround support category. Also, 11 VCs will be forming KRW 312.5 billion worth of funds as originally planned.
(Local Government Investments) As for local governments, Daejeon (KRW 5 billion), Busan (KRW 1.5 billion), and Ulsan (KRW 3 billion) will participate in the program as investors. In addition, Daegu plans to invest KRW 6 billion in youth startup funds to be managed by Inlight Ventures, a local venture capitalist in Daegu. These investments are expected to promote investments in local businesses.
The VCs selected for the program includes a wide variety of capitals, from newly created VCs (10), limited liability companies (8), and new technology financial companies (6). This diversity is likely to improve the dynamics of the venture investment market.
In addition, Shinhan Investment, a Shinhan Financial Group subsidiary in the securities market, and Shinhan Capital, a new technology finance company, were selected as VCs and joint GPs for the program, whereby the group expressed its high interest in jumping into the venture investment market.
2.Venture Investment Market Outlook for 2017 Year's-end
The total worth of new venture funds created by the end of this August stands at KRW 1,858.4 billion. Combined with the funds to be created by year's-end through the investment program, the total worth is expected to exceed KRW 3,800 billion.
The total of new investments also increased by 13.8% YoY to KRW 1,486.5 billion. Considering the fact that the overall investments are growing faster than the previous year, the amount will reach a record high of KRW 2,300 billion by year-end.
The investment program is aimed at promoting growth driven by innovation.
The MSS plans to invest a supplementary budget of KRW 800 billion in the FoFs, which is the largest government investment in FoFs to date.
The MSS lost no time in having the budget approved by the National Assembly so that the funds can be created within the year and investments can be made in innovative startups and venture companies early on.
A total of 99 VCs submitted applications. The total amount requested by the VCs stands at KRW 3,134.9 billion, 3.6 times higher than the total amount to be invested through the FoFs (KRW 870 billion).
1. Result and Analysis by Category
The MSS selected 48 VCs for five categories including youth startups, the Fourth Industrial Revolution, and turnaround support. By the end of this year, the MSS will create venture funds worth KRW 1.4 trillion, which will consist of KRW 860 billion from FoFs and KRW 585 billion from the private sector.
The total value is KRW 160 billion higher than the original target at the time of the program’s announcement, KRW 1.286.5 billion.
The MSS was able to secure more investments than the original target because the VCs that applied for the Fourth Industrial Revolution category were matched with more funds from the private sector than originally planned.
By fund sizes, Several are expected to be created: 8 funds worth KRW 50 billion or higher, 10 funds worth between KRW 30 billion and KRW 50 billion, and 30 funds worth less than KRW 30 billion. The average worth of a single fund is expected to be the highest in the Fourth Industrial Revolution category, which stands at KRW 44 billion.
Of the VCs selected for the program, Atinum Investment plans to create the largest fund worth KRW 140 billion (KRW 37.5 billion from the FoFs).
The selection results can be broken down by category as follows.
(Youth Startup) To maximize the opportunities for youth startups with technical expertise and innovative ideas, the MSS selected 21 VCs for the youth startup category, which is the highest among the five categories.
(Fourth Industrial Revolution) The VCs selected for the Fourth Industrial Revolution category mostly consist of larger funds. This is to secure a head start in the Fourth industries where the future of the Korean economy lies, and ensure that businesses in the sector can secure investments from their inception until their growth.(the average size of the funds in this category is KRW 44 billion)
The private VCs, in their proposals, listed artificial intelligence (AI), virtual reality (VR) and augmented reality (AR), big data, and healthcare sectors as the main targets for the Fourth Industrial Revolution funds.
Once the recently formed “Fourth Industrial Revolution Committee” decides on the future policies, the MSS plans to incorporate the policies in its selection of investment targets.
(Turnaround Support) To ensure that entrepreneurs can come back from their failures and put their experiences to creating new innovative startups, the MSS has set aside 80% of investments from the FoFs for the turnaround support category. Also, 11 VCs will be forming KRW 312.5 billion worth of funds as originally planned.
(Local Government Investments) As for local governments, Daejeon (KRW 5 billion), Busan (KRW 1.5 billion), and Ulsan (KRW 3 billion) will participate in the program as investors. In addition, Daegu plans to invest KRW 6 billion in youth startup funds to be managed by Inlight Ventures, a local venture capitalist in Daegu. These investments are expected to promote investments in local businesses.
The VCs selected for the program includes a wide variety of capitals, from newly created VCs (10), limited liability companies (8), and new technology financial companies (6). This diversity is likely to improve the dynamics of the venture investment market.
In addition, Shinhan Investment, a Shinhan Financial Group subsidiary in the securities market, and Shinhan Capital, a new technology finance company, were selected as VCs and joint GPs for the program, whereby the group expressed its high interest in jumping into the venture investment market.
2.Venture Investment Market Outlook for 2017 Year's-end
The total worth of new venture funds created by the end of this August stands at KRW 1,858.4 billion. Combined with the funds to be created by year's-end through the investment program, the total worth is expected to exceed KRW 3,800 billion.
The total of new investments also increased by 13.8% YoY to KRW 1,486.5 billion. Considering the fact that the overall investments are growing faster than the previous year, the amount will reach a record high of KRW 2,300 billion by year-end.