FKI calls for further easing of new CVC rules to spur investment

Su-Bin Lee 2
2020-08-19 23:41:36 isb@hankyung.com
The South Korean government, which recently decided to allow holding companies of conglomerates to run corporate venture capital (CVC) units, needs to keep related red tape to the minimum to facilitate active investment in start-ups, the Federation of Korean Industries (FKI) said in a Aug. 19 statement.

The nation's top business lobby group said that the new rules may lose their effectiveness if the government sticks to proposed regulations, such as the ban on conglomerates’ external capital financing for CVCs and allowing big companies to create venture capital units only if they are wholly owned by a holding entity.

Under current rules, holding companies of large firms are prohibited from establishing CVCs due to a ban on non-financial companies owning financial units. Under the principle of separation of financial and industrial capital, the country has been prohibiting holding firms from having CVCs. Accordingly, some business groups -- such as SK, LG, Lotte, CJ and Kolon -- have created CVCs indirectly, outside their holding firms or in the form of overseas affiliates.

But the government said in late July that it would revise the Fair Trade Act by the end of this year to allow conglomerates to own venture capital units in the form of a wholly owned subsidiaries.

ON EQUAL FOOTING WITH GLOBAL RIVALS

The FKI, however, said on Wednesday the government should ease the rules further to allow local companies to better compete with their foreign rivals such as Japan’s Mitsubishi UFJ Financial Group, which is allowed to have its CVC, Mitsubishi UFJ Capital, not as a wholly owned firm but as an affiliate.

In China, CVCs are allowed to receive outside capital, including state-run funds. Legend Capital Management Co., a subsidiary of Legend Holdings Corp., manages $7.6 billion won in funds, of which only 26.6% comes from Legend Holdings’ other units, while the remainder is financed from external sources.

In the US, business-friendly rules allow GV, formerly Google Ventures, to actively invest in start-ups through $4.5 billion in funding. GV has succeeded in aiding the IPOs of 25 start-ups and arranged M&As of 125 firms since 2009, according to the FKI.

“In foreign countries, companies are allowed to create CVCs more liberally, taking into account their situations. To revitalize the venture ecosystem in Korea, we also need to deregulate further in the establishment and operations of CVCs,” said Yoo Hwan-ik, a senior FKI official.

Corporate venture capital is growing its influence in the global venture capital market, with CVCs accounting for 25% of total venture capital investments in 2019, up from 19% in 2014.

Write to Su-Bin Lee at isb@hankyung.com

Korea’s venture capital firms poised to grow, no bubble seen in market

Korea’s venture capital firms poised to grow, no bubble seen in market

Chung Sung-in, chairman of the Korea Venture Capital Association Growth in South Korea’s venture capital investments has been slow relative to the pace of the country’s economic growth, creating an opportunity for VC companies to further expand in the pandemic era, according to an i

Venture capital investments hit all-time high in S.Korea

Venture capital investments hit all-time high in S.Korea

IF (Imagine Future) 2020 Gangnam, a startup festival held in Gangnam, Seoul Venture capital investments in South Korea are seeing a speedy recovery after facing a setback earlier this year due to the COVID-19 crisis. Over the past month more than 10 startups have been able to secure around 10 b

NPS boosts private debt and venture capital investment in Q1

NPS boosts private debt and venture capital investment in Q1

The National Pension Service (NPS) has beefed up investments in private debt and venture capital funds by adding Antares Capital Advisers and Insight Partners to its roster of overseas alternative investment managers in the first quarter.Including the two US companies, NPS increased the pool of its

Korean military fund to commit $30 mn to two US venture capital FoFs

Korean military fund to commit $30 mn to two US venture capital FoFs

The Military Mutual Aid Association (MMAA) will commit $30 million in aggregate to two US venture capital funds of funds in its first investment in a global venture capital fund, targeting annual returns of between 15% and 20%. Korea Scientists and Engineers Mutual-aid Association (SEMA) has also d

[Interview] Korea scientists’ fund zooms in on Europe renewable energy, U.S. venture capital

[Interview] Korea scientists’ fund zooms in on Europe renewable energy, U.S. venture capital

The Korea Scientists and Engineers Mutual-aid Association (SEMA), overseeing 4 trillion won ($3.4 billion) in assets, is interested in property and renewable energy projects in Europe and also planning to start investment in U.S. venture capital firms, its chief investment officer said. The assoc

(* comment hide *}