SEOUL, May 26 (Korea Bizwire) — The government plans to raise 500 billion won (US$447.5 million) in funds to help entrepreneurs at venture startups restart business when they fail, officials said Thursday.
In South Korea, a failure in a venture startup often leads to ruin, prompting young entrepreneurs to shun risk-taking, which has been cited for hindering the nation’s goal to replicate Silicon Valley’s success.
The Financial Services Commission, the nation’s top financial regulator, and the Small and Medium Business Administration, which is in charge of small and medium-sized firms, will inject 300 billion won and 200 billion won, respectively, into the fund.
Financial support for venture startup failures was part of President Moon Jae-in’s election pledges.
The plan to set up the 500 billion won fund was reported to the State Affairs Planning Advisory Committee, a de facto transition team for President Moon, earlier in the day, the committee’s spokesman Park Kwang-on said.
The fund is aimed at allowing failed venture firms to get financial support if they have a technological edge, Park told reporters.
The safety net is important since the number of venture startups in South Korea has exceeded a record 30,000 due to low entry barriers over the past decade.
Data by the Korea Chamber of Commerce and Industry showed in February that nearly six in 10 local venture companies go belly-up within three years after they are established due to an insufficient investment system and difficulties finding a market.
The figure is the second highest among the 26 surveyed members of the Organization for Economic Cooperation and Development.