Announcement of’Technology-Based Venture and Startup Complex Finance Support Plan’
Promoting the introduction of the Silicon Valley-style’conditional investment loan’ system in Korea
Minister of SMEs and Startups Park Young-sun is announcing a detailed plan for the implementation of the supporting fund at the Seoul Government Complex in Jongno-gu, Seoul on the 12th. / Reporter Kang Jin-hyung
[아시아경제 김희윤 기자] The government will support complex financing worth 3 trillion won by next year to support the growth of technology-based startups and venture companies without collateral.
The Ministry of SMEs and Startups announced on the 13th the’Technology-based venture and start-up complex finance support plan’ that enables technology-based start-ups and venture companies to grow into unicorn companies without shaking.
Promote the introduction of the Silicon Valley-style’conditional investment loan’ system
This support plan targets technology-based innovative start-ups and venture companies. Although the technology is excellent, the main goal is to prepare a system to reduce the risk of funding organizations in consideration of the characteristics of companies that involve high risk when funding.
First, the government revised the Venture Investment Act to promote the introduction of the Silicon Valley-style’conditional investment loan’ system in Korea. The conditional investment loan is a system in which the lender receives a small amount of equity acquisition rights instead of giving low-interest loans to companies that have already received venture investment but are likely to invest further. In fact, Silicon Valley Bank in the United States usually acquires the right to take over 1 to 2% of the loan amount.
From the perspective of lenders, loans to companies with high potential for follow-up investment increase the likelihood of recovery, and at the same time, through the acquisition of shares, the company can earn higher than the interest rate when it grows. From the perspective of a company, it is possible to increase the possibility of subsequent investment while growing the company by receiving a loan, and it can prevent the diluting of the equity of the founder.
After the revision of the law, the Ministry of SMEs will conduct a pilot operation through a policy loan from the Small and Medium Venture Business Corporation, and plan to spread it to other public funds and private financial institutions in the future. Until the revision of the law, it plans to expand the’Investment Option Guarantee’ of the Technology Guarantee Fund, which has a similar effect to the conditional investment loan, to an annual scale of 200 billion won.
A new’Patent Investment Option Guarantee’ is also introduced, in which a part of the guarantee amount is converted into a patent (IP) share (loan repayment). This guarantee, similar to investment conditional loans, allows the guarantor institution to convert a portion of the deposit amount into a stake in the subject company. However, the guarantee with the patent investment option is converted to the ownership of the patent, not the ownership of the company.
In addition, to promote venture investment in early start-ups and diversify investment methods, a’conditional equity conversion contract’ system used in Silicon Valley, etc. will be introduced. This system is a form of a contract that receives principal and interest during the investment period if follow-up investment is not carried out, and issues convertible bonds under the commercial law if follow-up investment is carried out. It is a Silicon Valley investment method commonly used by early startups.
The government will establish a project-level technology development commercialization financing of 500 billion won by next year by evaluating the possibility of commercialization of technology development success projects without looking at the existing debts of companies.
Investment-type technology development that links technology development and venture investment, and post-paid technology development that links technology development and guarantees will also be expanded from a total of 30.8 billion won last year to 54.5 billion won this year.
The’carbon valuation-based Green New Deal Guarantee’, which supports finance by evaluating the amount of GHG reduction in green technology development projects in currency units, will also be implemented in earnest from this year. It is expected to be provided in an annual amount of 450 billion won through cooperation between the Ministry of Industry and the Small and Medium Business Administration, such as contributions to the Technology Guarantee Fund of the Electric Power Industry Infrastructure Fund.
Complement and revitalize the complex financial system
The complex financial system is also reinforced to compensate for the blind spot of venture investment. First, it plans to provide guarantees to start-up investment companies for the rapid formation and execution of venture funds. In order to form venture funds, start-up investment companies usually invest about 10% of the fund formation amount into the fund. If guarantees are provided, formation of additional funds is expected to be easier.
In addition, for companies suffering temporary difficulties due to the novel coronavirus infection (Corona 19) and companies located in the non-metropolitan area, 160 billion won will be created for the’Strut Fund’ and 500 billion won for the Local New Deal Venture Fund.
The support fund is invested in concerts with reduced face-to-face opportunities, travel/tourism, wholesale and retail, and export-declining companies, and the regional New Deal venture fund will be expanded by region after pilot creation in Busan.
In addition, by next year, the company decided to build a’venture investment artificial intelligence online matching platform’ to resolve information asymmetry between companies and investors and induce rapid investment in technology companies. This allows companies and investors to explore and link investment possibilities.
Two local angel investment hubs will be created this year to stimulate initial investment in non-metropolitan companies.
Mid-term Minister Park Young-seon said, “We will seamlessly implement’Technology Startups and Venture Company Customized Complex Finance’ so that the fever of the 2nd venture boom that has come back next to us will not fade.” I will make it a support to create jobs.”
Reporter Kim Hee-yoon [email protected]