Korean Venture Capital Association Korean Venture Capital Association calls for more pivotal role for venture capital For Korea to become an advanced nation in terms of venture capital, it is pointed out that it is necessary to receive financing from prominent overseas investment institutions, including the United States, or to operate co-investment as well as joint funds with top-tier venture capitals of the United States. In forging joint funds with top-tier venture capital of the Unites States, it is thus also necessary for the government to support such financing; for instance such as supporting 50 percent of commitments of fund formation and enlarging autonomy of fund operation. In the case of Singapore's TIF (Technopreneurship Investment Fund), this Fund allows top-tier venture capitals to establish their branches within Singapore or to hold regular workshops and to do consulting for the government as consideration while financing venture funds operated by top-tier venture capital of the United States. In an exclusive interview with the Korea IT Times regarding advancement of Korean venture capital, Chairman Koh Jeong-Suk, Korean Venture Capital Association who concurrently serves as president of Ilshin Investment Co., Ltd., said that top-tier venture capitals such as Walden International, HSBC Technology Fund & DFJ have investment experiences in Korea, or are interested in Korea, plus overseas venture capitals etc. which expanded into Korea. Yet, the chairman points out that in his opinion, the possibility that the abovementioned top-tier VCs would attempt joint ventures with Korea, seemed to be low. In particular, such possibilities might arise when Korean enterprises made inroads into China by forging joint ventures with China, as in the case of Kleiner Perkins, Sequoia, Mayfield, NEA etc., but he noted that at the moment, this was not the case. In this regard, Koh proposes that for the sake of venture industry activation, it is desirable to secure venture capital's stable investment financial resources and necessary to enlarge R&D specialization or technology commercialization funds. In that respect, the chairman compared Korean venture capital with the U.S. venture capital, pointing out that venture funds' stable financing groundwork is fragile. Actually, in the case of the United States, over 90 percent, such as a pension or institutional investor finances funds are stable irrespective of business circumstance whereas in the case of Korea, the government or investment company at the most are assessed to be stable financial sources and their financing's relative importance also is no more than 45percent. The U.S. venture capital investment has posted $22.13 billion in 2005, the largest scale since 2001, according to Reuter. Among the U.S. VC companies' investment, IT field recorded No. 1 with a total of 2,200 cases. On one hand, in particular in the case of pension funds, the U.S' financing ratio is over 40%, but Korea is no more than approx. 13% and leans upon national pension. Koh further notes that there are many difficulties in initial investment with a fund of five years since an average listing takes roughly 9.2 years in KOSDAQ listing corporation as of 2004, explaining that Korea's fund exit routes are shortterm with five years in comparison with the U.S.' 10 years. Moreover, venture capital exit means is being centralized in IPO (initial public offering) in Korea whereas the U.S. holds diverse exit means such as IPO, M&A, Secondary Market and so on. In terms of infrastructure building, government policies for venture financing has been in the meanwhile focused on nurturing & strengthening venture capital, revitalizing KOSDAQ, activating M&A market, restructuring OTC market, and enhancing tax benefits. Nonetheless, for one example, as to reasons for inactive M&A market in Korea, Koh names still negative connotation attached to M&A, unfavorable tax implications of equity swap, and ceiling on conglomerate's total shareholding deters large corporations from acquiring venture companies. Turnaround from the second half of 2005. With regard to recent venture capital movement, the chairman pointed out that venture investment financial resources are on the increase since the government's "Venture Activation All-out Measures". The cumulative total of venture investment financial resources has increased from 4.5455 trillion won (approx. $ 4.43 billion) in 2000 to 5.4732 trillion won (approx. $ 5.3 billion) as of December 2005. New investment performance also by year is on the rise. As to this year's investment profit rate, Koh forecasts that it will be better than 2005, adding that Korea has turned around from the second half of 2005 and new investment or fund-raising will be got attained in abundance this year than last year. In connection with a pending problem of venture capital business circles, he proposes that it is necessary to enlarge institutional investor's financing to venture fund including KDB (the Korea Development Bank)'s venture fund financing enlargement and pension fund's Pooling system introduction operation. Concerning Korea's ICT infrastructure, the chairman explains that Korea is most competitive in ICT industry among OECD (Organization for Economic Cooperation & Development), holding the first place in terms of Broadband Subscribers as well as Mobile Phone Subscriber Ratio and the second place in terms of Internet use respectively. Korea particularly is being valued that its venture system is well-equipped following the United States in the world thanks to Venture Certification System etc., which was introduced through legislation of Act on Special Measures for the Promotion of Venture Businesses in 1997. According to procedures classified into the following three categories such as VC investment, R&D focus, and new technology, Small and Medium Business Administration (SMBA) designates qualified venture-type companies as "Venture." However, in that regard chairman Koh cautioned that venture capitals' role and responsibility, whose capacity has been fragile at home in terms of their special background or employing qualified men, has become more pivotal.