This article was posted on the ChosunBiz MoneyMove site on Aug. 8, 2025, at 4:38 p.m.
The Korea Technology Finance Corporation (KOTEC) has placed the delivery-style food court startup Local under concentrated post-management after providing guarantees exceeding 1.3 billion won. The guarantee was approved based on venture capital (VC) investment, but the action was taken as a follow-up to the late realization that the founder had been sentenced to prison for breach of trust.
According to the VC industry on the 8th, KOTEC has recently designated Local as a 'watchlist corporation' for concentrated post-management and downgraded its classification from 'S1' (normal) to 'S3' (poor business stability). This action was taken after a reevaluation of the potential default risk of the guaranteeing corporation by KOTEC's risk compliance department.
KOTEC is a policy financing institution that provides guarantees for venture corporations with technology but lacking collateral. When a corporation cannot repay a loan, KOTEC must initiate subrogation, so it is known that KOTEC classifies and manages guaranteeing corporations respectively as ordinary corporations (S1·S2) and those with poor business stability (S3·S4).
This downgrade of the rating occurred about four months after KOTEC provided guarantees totaling 1.35 billion won to Local last March. At that time, Local utilized its investment acquisition of 3.5 billion won from VCs such as Bokwang Investment and Smart Study Ventures in July of last year to apply for and receive approval for an investment-linked guarantee product.
Local, which operates a so-called 'delivery food court' by bringing in recipes from famous restaurants and delivering them after cooking with robots, was established in 2023. It gained attention in the startup industry due to its serial founder being the creator of the delivery platform 'Vroong,' which was also referred to as a preliminary unicorn (a private company valued at over 1 trillion won).
The adjustment of KOTEC's guarantee rating appears to have been decisively influenced by the legal risks associated with Local's founder, CEO Yoo Jeong-beom. It was revealed late that Yoo was charged with violations of the Act on the Aggravated Punishment, etc., of Specific Economic Crimes (breach of trust) and was sentenced to four years in prison in the first trial last November. (Related article☞[Exclusive] 'Vroong' founder Yoo Jeong-beom sentenced to four years in prison in first trial... new company investors face loss risks)
Yoo was indicted in August 2023 for unauthorized withdrawal and consumption (breach of trust) of 3 billion won from company funds without board resolution or court approval during the situation when Vroong (then named Mesh Korea) entered corporate rehabilitation proceedings due to liquidity issues. He is currently undergoing a second trial at the Seoul High Court.
KOTEC has determined that while the breach of trust criminal case is related to the personal matters of the founder of Local, the trial results could impact corporate management, prompting the concentrated post-management. KOTEC stated, "This is a measure to swiftly address guarantee incidents by detecting signs of deterioration early and pursuing claims."
Some critics point out the need to enhance KOTEC's review system for investment-linked guarantee products. Investment-linked guarantees are a system in which KOTEC provides guarantee support for companies in which VCs invest a certain amount, but the structure effectively omits the verification of the founder's morality or legal risks.
In fact, it is reported that KOTEC was not aware that CEO Yoo was undergoing a criminal trial at the time of the guarantee review. The downgrade of the guarantee corporation rating this time also came as a follow-up measure only after reports regarding the founder of Local's breach of trust and inquiries by the People Power Party such as Representative Kang Seung-kyu.
A source in the startup industry noted, "In the case of early-stage startups like Local, the influence of the founder can be significant, so legal risks are likely to lead to guarantee incidents. There is uncertainty as to whether the business can continue if a four-year sentence is finalized, resulting in the absence of the CEO."
Meanwhile, KOTEC previously provided guarantees of 5 billion won to Vroong, a company founded by Yoo, but subsequently experienced a guarantee incident. When Vroong entered corporate rehabilitation procedures in November 2022, KOTEC executed subrogation for that amount. The subrogation amount was only repaid the following year after hy acquired Vroong.