The Ministry of SMEs and Startups' 15 trillion won budget era is ending "distributive" support and widening the "super gap."
2025 marks a complete paradigm shift in South Korea's startup policy, from "universal support" to "selective, intensive nurturing." The Ministry of SMEs and Startups has allocated a budget of 15.3 trillion won for this year and announced a major overhaul of the TIPS program, which has driven the growth of the startup ecosystem. The key message is "watering promising seedlings."
The most notable change is the "TIPS Enhancement" plan, which will be implemented starting in 2026. Instead of simplifying the previously complex support system, the government has significantly raised the barriers to entry. The pre-investment requirement from private investors will likely be increased from 100 million won to 200 million won (based on the Seoul metropolitan area).
This is interpreted as a strong commitment to excluding companies that have not been verified by the market from the very beginning of the government's support process. With only companies that pass the pre-investment screening of private investors eligible for government support, a "private-sector-led selection" structure is effectively being institutionalized.
Instead, the support provided to selected companies is groundbreaking. The maximum grant amount has been increased to 1 billion won (including private investment), and a new program, "Global TIPS," has been established for companies that have secured over $1 million in investment from overseas venture capital (VC) firms, accelerating their overseas expansion.
AI and local governments: Two pillars of budgetary investment
The flow of policy funding is precisely directed toward "AI hyper-gap" and "responding to local extinction." The Mother Fund budget was increased to 1.1 trillion won, focusing on national strategic technology areas such as AI, robotics, and bio.
What's noteworthy is that these policies are actually yielding results. Thanks to the efforts of the Startup Korea Fund and regional venture funds, 13 startups, including A Biomaterials, outside the metropolitan area have secured large-scale series investments exceeding 10 billion won by 2025. This suggests that technology-based startups in regional hubs like Busan and Daejeon are beginning to gain self-reliance, capitalizing on the policy funding.
The Ministry of SMEs and Startups is expanding the creation of venture funds linked to specialized regional industries and pursuing a strategy to promote technology commercialization through collaboration with university research institutes and regional hub organizations. This is seen as an attempt to alleviate the concentration of startups in the metropolitan area and promote balanced development in the regional startup ecosystem.
Discussions on succession and growth financing are accelerating, and the introduction of BDCs is becoming a public issue.
In the second half of 2025, the government began actively pursuing legislative initiatives aimed at facilitating the smooth succession of small and medium-sized enterprises (SMEs). In particular, discussions were underway on a special law to institutionalize M&A-type corporate succession. This is seen as an attempt to institutionally revitalize the SME M&A market.
Previously, when small and medium-sized business owners retired or closed down, the lack of a proper succession path often resulted in business closures or diminished value. The new Special Act on Succession contains measures to promote the transfer of management rights through M&A and to ease the burden of the succession process through tax benefits and financial support.
In addition, discussions on restructuring growth finance infrastructure, including the introduction of "Business Growth Collective Investment Vehicles (BDCs)," have become public, and structural alternatives have been proposed to attract private long-term capital. BDCs are investment vehicles specializing in long-term investments in unlisted small and medium-sized enterprises (SMEs). They have already become a key pillar of startup and growth company financing in the US and Europe.
While policy proposals have received largely positive reviews, budgetary priorities and limitations in administrative execution remain as variables in actual implementation. One policy expert noted, "The direction of the system is clear, but to create tangible changes in the field, streamlining administrative procedures and strengthening enforcement must go hand in hand."
Going global is no longer an option, but a necessity.
Another key element of the TIPS restructuring is strengthening its "global orientation." The newly established "Global TIPS" will target companies that have already attracted investment from overseas venture capital firms and will provide intensive marketing, networking, and localization support necessary for entering overseas markets.
This carries a powerful message: clearly recognize the limitations of the domestic market and design a business model that meets global standards from the outset. Indeed, a significant number of startups that have recently attracted investment have targeted overseas markets from the very beginning, adopting strategies such as building English-based services and global networks.
Regarding the policy shift, an anonymous industry expert analyzed, "The government is abandoning the practice of splitting the budget and distributing it to the majority, and is beginning to tolerate a 'winner-takes-all' structure aimed at fostering global unicorns." He also assessed, "The 2026 TIPS reform plan sends a clear signal to early-stage startups that 'domestic-only services are out of the question.'"
Demands for deregulation persist… Urgent need for administrative streamlining
At the same time, entrepreneurs continue to call for deregulation, including streamlining administrative procedures and documentation, which they point out as practical obstacles to startup growth. Surveys and reports have also consistently ranked deregulation as a top priority.
In particular, there are concerns that the TIPS application process requires an excessive amount of documentation and supporting documents, and that the lengthy review period often hinders the actual implementation of projects. The government is considering streamlining the document submission process and shortening the review period through a digital administrative system.
If the succession law and BDC introduction are legislated and institutionalized, the M&A and scale-up environment will likely improve, strengthening the virtuous cycle of recovery and reinvestment. However, there is growing industry consensus that enforcement and streamlining of administrative procedures are necessary to ensure effectiveness.
A startup CEO emphasized, “While the policy direction is very positive, implementing it in practice requires complex administrative procedures and strict requirements, so the perceived change is limited.” He added, “Enhancing the efficiency of the implementation process is just as important as policy design.”
Ensuring effectiveness is key… Enforcement power determines success or failure.
The policy environment of 2026 will present opportunities for prepared startups and disaster for those who aren't. Competition for TIPS appointments will be fiercer than ever, and "global expansion" will no longer be a mere slogan; it will become a prerequisite for survival.
As the government's policy focus shifts from "welfare" to "nurturing" and from "domestic" to "overseas," entrepreneurs must also design business models that meet global standards from the outset. In this new ecosystem, shaped by the interplay of private investment and policy support, only startups with both technological prowess and market validation will be able to advance to the next level.
The succession and growth financing system's succession and growth potential will be a turning point in determining whether the Korean venture ecosystem can achieve a virtuous cycle of investment, growth, recovery, and reinvestment. For the system to truly take hold, continuous communication and improvement efforts are necessary between policymakers, practitioners, and startup ecosystem participants.