Korean investment in local start-ups reached a record high of 2.54 trillion won ($2.3 billion) last year, shooting up 61.9 percent over 2013, largely thanks to contributions from the private sector. According to data disclosed on Tuesday by the Small and Medium Business Administration (SMBA), more than half of the new investments came from the private sector, including commercial banks, pension funds, conglomerates and successful start-ups that have grown into large businesses.
The private sector’s contribution of 1.5 trillion won to local start-ups in 2014 showed a drastic increase over the previous two years, due to the Park Geun-hye administration’s efforts to boost start-ups. National policy funds – central and regional governments, the state-run Korea Development Bank and their joint funds – put about 1 trillion won into start-ups last year.
The SMBA added that there were 481 start-up funds operating at the end of last year, holding a total of 12.2 trillion won. The SMBA said that the bigger boost from the private sector is a sign that the nation’s start-up ecosystem has improved and became more attractive to investors.
Small and midsize companies in Korea will be given more funding support by the government for their research and development this year. According to the Small and Medium Business Administration yesterday, the government will spend 818.4 billion won ($779 million) in 2014 in the R&D sector for SMEs, up 1.8 percent, or 14.7 billion, compared to the previous year.
The move is in line with the current administration’s focus on boosting a so-called creative economy and realizing “economic democratization” by nurturing SMEs. Not all SMEs, however, will benefit from the extended funding this year. The SMBA has categorized SMEs into different groups based on their performances and companies in each category are expected to receive different amounts of support after deliberation by the government.
Korean start-ups have grown over the past eight years with 416 companies now having annual revenues of more than 100 billion won ($89.3 million). Companies such as Nexon and NHN now have yearly sales of over 1 trillion won.
The Small and Medium Business Administration (SMBA) and the Korea Venture Business Association (KOVA) released the Venture 100 Billion Club yesterday, an annual survey of start-ups with sales of more than 100 billion won. Despite the ups and downs of the economy since the 2008 global financial meltdown, start-ups showed notable gains in the past eight years. Six companies currently report 1 trillion won in sales annually and 54 companies reached the 100 billion won sales mark last year.
Meanwhile, 19 companies saw their sales dip below 100 billion won. Among the 54 companies, 14 of them were in the computer, semiconductor and electronic components industry and 11 were in food and beverage, textiles and non-metals industries.