President Moon Jae-in invited venture entrepreneurs and startup founders to Cheong Wa Dae last week, encouraging their creation of the “second venture boom” amid the COVID-19 pandemic and promising to spare no support. In keeping with the President's move, related government ministries and agencies also announced the supplementary measures to propel Korea to become one of the world's top four “venture powerhouses.”
The government's policy to step up systemic reforms to ensure the smooth inflows of human and financial resources into this field is welcome. However, one cannot but call into question such a policy as government officials shout the empty slogan of making the second venture boom. These officials stressed that the investment into ventures reached a record high with 4.3 trillion won ($3.67 billion) last year and the number of venture employees also increased by 67,000 from 2019.
The headline figures appear to have improved. However, policymakers must pay attention to the report that Korea has only one out of the total 291 unicorns ― startups with a valuation of $1 billion or more ― to have emerged worldwide this year. Already, the total number of Korean unicorns (11) is no match for the U.S. (388), China (157) and India (36). Still, the gap is likely to widen even further.
The government is unveiling various support measures, including increasing tax-free limits for stock options, scrapping a sunset clause in the special law for ventures and doubling the M&A venture fund. All these are missing focus, however. To enlarge the size of ventures, the participation of large businesses in acquiring them is imperative, but the complementary steps do not contain such deregulations.
This is no way to sprout the second venture boom. Policymakers should look at why 72.9 percent of global startup investments are concentrated in the U.S. and China, with Korea receiving only 1.5 percent of them. There are good reasons highly skilled foreign workers and capitalists have little interest in the Korean venture market that is strengthening business regulations instead of easing them. The government should focus its policy on changing the country's venture investment market to a far freer one than now before it's too late.