The Ministry of SMEs and Startups (Minister Oh Young-joo, hereinafter referred to as the Ministry of SMEs and Startups) announced that it plans to create a venture fund of 1.9 trillion won by investing 1 trillion won through the '2025 Mother Fund 1st Regular Subscription Notice'.
This is the Ministry of SMEs and Startups' announcement of the entire 1 trillion won budget for the 25-year mother fund, reflecting the government's intention to support the recovery of venture investment by providing early relief.
◆ Direction of investment in the mother fund
The main investment areas of this first regular investment project are as follows.
▲ We will invest 180 billion won, the largest ever, in the 'Global Fund' to support domestic startups in attracting overseas investment, and create a fund of over 1 trillion won. Starting this year, we will allow domestic venture capitals to participate in global fund investment projects on their own, and support them to expand their global investment network based on their experience in operating global funds.
▲ The largest ever investment of 200 billion won will be made in the 'Local Era Venture Fund' that focuses on non-metropolitan ventures and startups. The 'Local Era Venture Fund' is expected to raise over 1 trillion won over three years ('25~'27) through the mother fund, local governments, local banks, and regional key companies, and the '25 formation area will be selected in February. The mother fund will provide bold incentives such as priority loss reserves and excess profit transfers so that the private sector can more boldly engage in local venture investment.
▲ Considering the recent decline in initial investment, we will invest KRW 100 billion in the early stage startup sector, a 25% increase from the previous year.
▲ In order to foster entrepreneurial small business owners, the 'Lycon Fund', newly established in 2024, will continue to be raised at a scale of 25 billion won. Starting this year, it will be raised as a fund to invest in entrepreneurial small business owners nationwide, including the metropolitan area.
▲ The investment policy in the bio sector, where investment difficulties have been discussed recently, will also be strengthened. 30 billion won will be invested in the 'Bio' fund to foster early-stage pharmaceutical and bio venture companies in the pre-clinical stage, creating a new fund of more than 50 billion won.
▲ The M&A fund to support the succession of small and medium-sized enterprises will be established for the first time with a scale of over 75 billion won. As the proportion of CEOs of manufacturing small and medium-sized enterprises aged 60 or older has increased to one-third of the total, this reflects the need for smooth business succession such as third-party M&A to enable sustainable management of small and medium-sized enterprises without successors.
▲ 10% of the investment budget, or 100 billion won, will be stably invested in the 'Rookie League' to support the entry and stabilization of new and small venture capitals into the venture investment market. Support for blind spots in investment will also continue through the creation of 'Women (16.7 billion won)', 'Youth Entrepreneurship (66.7 billion won)', and 'Release (50 billion won)' funds.
Meanwhile, the 'Startup Korea Fund' and 'LP First Step Fund', which are being created through joint investment by the mother fund with large corporations, financial institutions, pension funds, and mutual aid associations, will begin surveying willingness to participate from investors on the 24th, and a separate announcement will be made to select an operator when the consultation on investor participation is completed.
◆ Direction of improvement of the system for the mother fund investment project
In addition, we will reorganize the mother fund investment business to be more market-friendly so that venture capital can remain faithful to its original risk investment role even in difficult times such as increasing economic uncertainty.
In order to promote a virtuous cycle of 'investment → recovery → reinvestment', we will support the activation of the intermediate recovery market by temporarily recognizing up to 20% of the primary investment for the purchase of old stocks for two years ('25~'26).
We actively give preference to asset management companies that actively engage in early investment. Asset management companies that propose early investment obligations are given additional points during the selection evaluation and are given preferential selection. In the case of companies that have been in business for less than 5 years and have difficulty generating sales, management fees are exceptionally not reduced even if their financial statements deteriorate after investment.
In order to dramatically expand investment attraction opportunities for non-metropolitan venture and startups, the local investment portion of general funds, not local-only funds, will be recognized as 120% of the primary investment. Local funds will be headquartered in local areas and will be given preferential treatment in selecting management companies with abundant local investment performance to foster specialized management companies in local areas.
In order to strengthen the role of patient capital in mother funds, the current investment period restriction of 4 years or less will be abolished, and in some fields such as startups and bio, funds with long-term operation periods of 10 years or more will be given preferential selection.
Lastly, in order to encourage venture capital's challenging investment, the impairment loss guidelines, which serve as the basis for management fee payment, were revised to be more market-friendly.
In cases where management improvement of the investment company is expected, management fee reduction can be postponed under the review of an accounting auditor, and in cases where management fees are reduced due to capital impairment of the investment company, etc., and then the investment funds are recovered, the reduced management fees are paid retroactively. Management fee payment systems are also diversified and can be selected according to the fund management strategy.
Minister Oh Young-joo said, “At CES 2025, 127 domestic SMEs and venture companies won innovation awards, establishing Korea’s presence on the global stage,” and added, “The mother fund will support the steady growth of the domestic venture investment market so that these innovative SMEs and venture companies can grow through sufficient venture investment.”
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