Korean government establishes $178m venture fund

South Korea hopes to boost SMEs and employment with the fund, and has plans to raise two more investment vehicles in partnership with financial companies.

The South Korean Government has created a W200 billion ($178 million; €123 million) venture fund to invest in the country’s small- and medium-sized enterprises (SMEs).

The fund was launched about a year ago and is sponsored by the Korea government, Korea Venture Investment Corporation and Korea’s Small & Medium Business Administration, Kim Young Tae, the fund’s director, told sister news site PEI Asia.

The sector-agnostic fund will make investments of up to W30 billion which are focused on creating jobs for Koreans. It is also able to invest in foreign companies, subject to government regulation, according to Kim.

“Making equity investments in SMEs is one important way in which we encourage and support innovative businesses,” Kim said.

The South Korean government also wents to set up two more funds, said Tae. It is in talks with financial companies in China and Singapore to raise an Asian joint investment fund of more than W100 billion. It is also mulling an M&A fund, which targets SMEs in the green technology sector.

The government has been a strong supporter of Korea’s venture capital and private equity industry. At the beginning of 2009, it launched an initiative called the “New Growth Momentum” designed to stimulate the slowing economy. The initiative comprises funds of funds such as the Green Growth Fund, Bio Fund and High-Tech Convergence Fund. These funds of funds commit capital to venture capital and private equity firms which invest in the green technology, biotechnology and information technology sectors respectively.

Korea Venture Investment Corporation is a government-backed fund of funds set up to promote the growth of Korea’s private equity industry. To date, it has committed about $1 billion into 120 private equity and venture capital funds in the country.

Set up in 1996, the Small & Medium Business Administration develops and implements measures, including financing and marketing measures, to promote and support the country’s SMEs.