Just 10.5% of gov’t unicorn fund deployed

Just 10.5% of gov’t unicorn fund deployed

Just 10.5 percent of the 706.3 billion won ($520 million) raised across a group of government-backed venture funds designed to nurture artificial intelligence and deep-tech startups into unicorns had been invested in companies by the end of June.

The 11 funds established under Korea Venture Investment Corp.’s NEXT UNICORN Project had invested 74 billion won in 40 companies, according to data analyzed by the office of People Power Party Rep. Choi Soo-jin, a member of the National Assembly’s Trade, Industry, Energy, SMEs and Startups Committee, on Monday.

KVIC, an organization under the Ministry of SMEs and Startups, launched the project last year by committing 300 billion won to the Korea Fund of Funds through the government’s second supplementary budget.

The plan was to use government contributions as seed capital to attract private funds, expand the overall pool of venture capital and provide financing to promising AI and deep-tech companies at each stage of growth.

The Korea Fund of Funds is a fund-of-funds structure under which the government invests in subfunds managed by private venture capital firms instead of investing directly in companies.

When the project was launched last year, 150 billion won from the Korea Fund of Funds was allocated to each of its startup and scale-up categories.

Nine startup funds targeting early-stage companies were formed with a combined 344.6 billion won and invested 52.2 billion won in 35 companies. The deployed capital represented 15.1 percent of the startup funds’ total size.

The investment rate was even lower for the two scale-up funds, which were designed to make large follow-on investments in growth-stage companies. The funds raised a combined 361.7 billion won but invested only 21.8 billion won in five companies, equivalent to 6 percent of their total capital.

Concerns that a substantial gap could emerge between fund formation and actual corporate investment were raised from the outset. According to Choi’s office, the National Assembly warned in review reports issued in June and November last year that it could be difficult for the program to provide meaningful funding to companies within the year.

“The government made a grand announcement that it would use 300 billion won in taxpayer money as seed capital for a 13.5 trillion won deep-tech development initiative, but the actual investment rate remains at around 10 percent,” Choi said.

“We will thoroughly examine the ineffective operation of the unicorn funds during the National Assembly audit and demand sweeping reforms,” she added.

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