이 기사는 2020년 01월 14일 08:00 thebell 에 표출된 기사입니다.

South Korea‘s state-owned lender Korea Development Bank and state-led fund-of-funds management company Korea Growth Investment (K-Growth) set up a 100 billion won fund to foster materials, parts and equipment sectors. They lowered thresholds for venture capital (VC) by raising its contribution rate, and lowering hurdle for carried interest.

KDB held a roadshow to introduce the fund which aims to support materials, parts and equipment sectors on January 9 at its start-up IR center in Yeouido, Seoul, where dozens of VC firms attend to listen to the project and have Q&A sessions.

KDB launches two blind-pool funds worth 200 billion won exclusively to support materials, parts and equipment companies. Each fund has to be more than 100 billion won, while a maximum of 60 percent will be provided by the state. Of the total of 120 billion commitments, 100 billion will be backed by the state and 20 billion will be provided by KDB. At the same time, K-Growth launches 200 billion won worth project fund. with half the funds invested by the state-led fund-of-funds management company. K-Growth will receive applications from fund vehicles on a rolling basis.

The size of blind-pool funds is gigantic, considering the size of funds created by the government with the same purpose so far have been between 30 billion won to 50 billion won. The increase of the fund size reflects the trend of the VC industry and reveals the strong will of the government to enhance the competitiveness of the industry.

The latest project not only focuses on the improvement of the competitiveness of materials, parts and equipment sectors, but also adopts a market-friendly approach. KDB and K-Growth lowered the hurdle for carried interest to internal rate of return (IRR) of five percent to motivate investment firms. Also, they are open to take individual firms’ suggestions on reward system in accordance with each firm’s strategies.

The state-run bank and the state-led management company offer incentives to encourage more private investors to contribute to the fund. KDB and K-Growth offer incentives, including handing over some of profits generated from their commitments to limited partners (LPs) or allowing some compensation for losses. As the state commit 60 percent of the total, most of VC firms will primarily focus on how to raise the remaining 30 percent. Those incentives are likely to play a positive role in attracting private LPs.

The state-led firms are also likely to take comprehensive position on choosing main targets of the investments. KDB makes investments based on the Korea Standard of Industry Classification in principle. However, once the fund is closed, the bank said it will take more lenient stance by admitting more targets by holding an advisory committee meeting, etc.

K-Growth will give opportunities to new-born VC firms. As along as a VC firm qualifies terms of a deal, the new entrant can be named as an external manager without any discrimination. K-Growth aims to notify the results to applicants as fast as possible.

(By reporters Lee Yoon-jae and Seo Jung-eun)