The Korea Herald is publishing a series of articles scrutinizing key aspects and sectors related to the creative economy the Park Geun-hye government is promoting as a national agenda. The series will feature interviews with top government officials and IT gurus, and strategies to embody the policy. The special articles were made in cooperation with the Ministry of Science, ICT and Future Planning and the Ministry of Trade, Industry and Energy. This is the fifth installment of the creative economy series. ― Ed.
Creating an ecosystem where venture companies and start-ups have room to grow and prosper is one of the Park Geun-hye government’s key pledges as a part of its drive to foster a “creative economy.”
While it looks like something Korea should already be doing, given its reputation as one of the world’s most wired nations and a leader in the global IT sector, this pledge reflects just how behind the nation is in that field.
As IT guru-turned-politician Ahn Cheol-soo previously said on numerous occasions, Korea does not use its high-tech development to nurture start-ups or to encourage entrepreneurship in general.
“We need an ecosystem that allows people to set up venture firms and not be afraid of making mistakes or failing,” Ahn had said when he was with Seoul National University and still leading AhnLab, his antivirus enterprise.
|Kim Ki-moon (fourth from left), chairman of the Korea Federation of Small and Medium Business, and representatives of venture firms and smaller companies pose to celebrate the launch of a committee supporting creative economy policies at a Jeju hotel on June 19. (Korea Federation of Small and Medium Business)|
To do this, Ahn and many others with similar views have called on measures to keep the conglomerates out of dominant roles and prevent them from blotting out their smaller counterparts.
Taking a cue from these views, and also based on reality checks of its own, the government has been seeking to build an infrastructure that would nurture start-ups by helping them set up business, grow, recoup their investments and use the proceeds to further develop their companies.
“This has to happen as naturally as water flows,” said Choi Mun-kee, minister of science, ICT and future planning.
So far, figures show that there is virtually no way for investors to recoup their investments in venture firms, while it takes up to 14 years for a company to get listed on the KOSDAQ index.
The ministry, working together with both the government and the private sector, is now seeking to address these and other related problems.Bolstering reinvestment
Drawing from the experiences of the earlier generation of start-ups and their CEOs on starting and maintaining a venture company is a key point of the new pro-entrepreneurial measures that are being unveiled.
Some succeeded while others failed, but what they all have in common is valuable information on what works and what doesn’t.
Their investment also would be much appreciated, and for a price, since the government has set up plans to grant a 10 percent tax cut for those who reinvest funds they attained by cashing in on the stocks of their own companies for the purpose of management replacements.
Angel investors, meanwhile, would get a 50 percent tax cut for investments of up to 50 million won, up from the existing 30 percent.
Further, the government also will support these angel investors through an “angel matching fund.”
In regards to opinions that this is not enough, the science ministry said it would now be expanded. If venture companies decide to invest in other start-ups, the government will create a fund of their own worth up to 100 billion won to offer support.
Further, for large-scale investment up to 200 million won, the government will offer matching R&D funding. KONEX to give start-ups chance at listing, funding
The Korea New Exchange is cited as yet another measure the government has implemented to lay the foundation for a healthy and flourishing environment for start-ups and ventures.
As the Financial Supervisory Commission earlier said, this new stock exchange for venture firms was created to help form a new market paradigm that can lead anyone to come up with creative ideas and secure investment for business.
The KONEX is also expected to further bridge the gap between venture entrepreneurs and investors, and boost the circulation of capital allowing start-ups to use the investments for expansion and investors to retrieve and reinvest in new emerging tech companies.
This so-called venture ecosystem will “put forth buds in (the Korean) Death Valley,” the FSC chairman had said.
Korea’s start-up industry is often referred to as Death Valley as opposed to Silicon Valley in the U.S., as most domestic start-ups fail to attract investment.
While these measures are necessary, for a fundamental change, the mindset of Koreans must be replaced with an entrepreneurship-friendly mindset for people to feel confident in opening new businesses.
In turn, the newly created enterprises would rejuvenate the markets and give Korea the leg-up it needs to join the ranks of even more advanced nations.
“The government is only playing the middle man. The real changes must come from the private sector, the companies, and the people, the entrepreneurs,” Minister Choi said.
By Kim Ji-hyun (email@example.com