A quiet but decisive shift is underway in Korea’s venture landscape. The government is no longer just funding startups — it is rebuilding the foundation of how national capital, private investors, and innovation policies work together. With the new venture investment laws now in force, Korea’s innovation engine is entering a long-term cycle designed for global competitiveness and financial accountability.

Korea Launches Institutional Reform to Strengthen Venture Growth

The Korean government has enacted the first full-scale legal overhaul to implement its Venture 4 Powerhouse Strategy, a long-term roadmap aimed at establishing the nation as one of the world’s top four venture ecosystems.

Approved during the December 23 Cabinet meeting, the legislative package amends the Venture Investment Promotion Act, Venture Business Promotion Act, SME Promotion Act, and related decrees—marking the start of Korea’s most comprehensive policy realignment since the Mother Fund (Fund of Funds) system was introduced in 2005.

The reforms allow the Venture Investment Mother Fund (Fund of Funds)—the government’s core venture capital pool—to extend its operational lifespan in 10-year increments with investor approval.

This eliminates the fund’s 2035 expiration deadline and ensures continuity for long-term investments in strategic industries such as AI, deep tech, semiconductors, and mobility.

According to the Ministry of SMEs and Startups (MSS), the move aims to secure stable capital flow into sectors that require longer return cycles while enhancing transparency and oversight through regular National Assembly reporting.

A Unified Framework for Long-Term Venture Investment

The Mother Fund (Fund of Funds)’s investment and account transfer reports will now be submitted regularly to the National Assembly, ensuring fiscal accountability across government-led venture financing. A new Mother Fund (Fund of Funds) Management Committee—jointly operated by the MSS and other ministries—will oversee fund governance and operational transparency.

The amendment also expands the definition of statutory venture funds under the National Finance Act, enabling public funds, pension funds, and other institutional investors to participate directly in venture investment. This shift opens new capital channels for venture financing—transitioning Korea’s startup ecosystem from government dependency toward multi-source, market-driven sustainability.

At the same time, investment compliance rules have been relaxed to match real-world market dynamics. Angel investment associations, accelerators, venture capital firms, and venture funds now have five years—up from three—to fulfill their investment obligations. Excessive annual or per-fund restrictions have been consolidated to allow more strategic allocation of capital across portfolios.

Policy Expansion: Stock Options, Accountability, and Startup Flexibility

The legal reforms also tackle long-standing issues limiting startup growth.
Startups may now issue stock options below market price up to KRW 2 billion (previously KRW 500 million), enabling talent acquisition without overburdening limited cash reserves.

An MSS official noted that this change “provides flexibility for startups to compete for key talent while aligning incentives for long-term growth.”

The government also codified the limitation of third-party joint liability during venture transactions—a provision that previously existed only as a ministry directive.
By elevating this rule to statutory law, the government aims to curb unfair liability transfers between investors and founders, promoting accountability and restoring trust within Korea’s venture capital ecosystem.

Building a Venture Culture: Legal Basis for ‘Venture Business Week’

The Venture Business Promotion Act now formally establishes a legal foundation for an annual Venture Business Week, during which the central and local governments can host official recognition events, exhibitions, and award programs for exemplary entrepreneurs.
This institutionalization of “venture culture” represents a soft-power strategy to nurture national awareness, attract young founders, and reinforce the venture sector’s role as a growth engine for Korea’s innovation economy.

The Prestigious Long-Standing Enterprise program—recognizing mid-sized companies that have sustained growth across generations—will also expand eligibility to include construction, finance, and insurance. The change acknowledges evolving industry dynamics, where fintech, insurtech, and other emerging sectors are now key contributors to Korea’s economic transformation.

Policy Continuity, Regional Balance, and Investor Confidence

The Venture 4 Powerhouse reforms are designed to link capital reform with ecosystem evolution. By allowing the Mother Fund (Fund of Funds)’s long-term continuity and expanding participation to pension and public funds, Korea aims to prevent cyclical investment gaps that have historically disrupted startup growth.

The easing of compliance and liability rules is expected to encourage broader participation by institutional investors and professional fund managers, while startups gain breathing room to pursue commercialization without excessive administrative constraints.

For global investors and policymakers, this reform signals Korea’s commitment to long-horizon innovation governance—integrating financial discipline, legal clarity, and market flexibility. The inclusion of regional innovation provisions also supports balanced development by encouraging R&D and venture creation outside the Seoul metropolitan area.

Toward a Sustainable Venture Nation

The government’s legislative overhaul marks the practical beginning of its Venture 4 Powerhouse strategy. The MSS emphasized that follow-up legislative and operational measures will continue through 2026 to reinforce the newly aligned framework.

Minister Han Seong-sook stated:

“This marks the real activation of Korea’s Venture Powerhouse Strategy. We will accelerate coordination with the National Assembly and related ministries to ensure these reforms are implemented effectively and deliver tangible results across the field.”

As Korea transitions toward a data- and deep-tech-driven economy, the alignment of capital policy, startup incentives, and governance transparency represents more than just administrative reform—it is the blueprint for a venture ecosystem built on longevity, accountability, and trust.

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