This article was posted on the ChosunBiz MoneyMove (MM) site at 2:35 p.m. on Jan. 19, 2026.
LIPS, known as the "TIPS for small business owners," has degenerated into a "playground for money" for private operators. Launched in 2023 with the goal of increasing "entrepreneurial small business owners" by having the government provide loans and subsidies to small business owners discovered and invested in by the private sector, improper and poor investments such as unfair selection of investment targets have been revealed.
Private operators matched support funds after investing without on-site inspections and even carried out "revolving door investments" for the private investors' (LP) personal gain. One operator reportedly even promoted that franchise store opening funds could be covered by LIPS support funds and attracted prospective franchisees as LPs.
On the 19th, according to the office of Rep. Kang Seung-gyu of the People Power Party, the Ministry of SMEs and Startups and the Small Enterprise and Market Service conducted a special inspection of LIPS private operators at the end of last year and found many inappropriate and illegal acts, including fund intermediation and conflicts of interest during the formation of investment pools and investment processes by LIPS private operators who are accelerator creators (ACs).
Specifically, three private operators (Ground Up Ventures, Alpha Lab, Another Brain) were found to have five violations of the Venture Investment Act and five violations of LIPS operating guidelines. These operators uniformly failed to submit supporting documents requested by the Small Enterprise and Market Service regarding violations of the Venture Investment Act and operating guideline violations.
LIPS is a "private investment-linked small business support program" created by the Ministry of SMEs and Startups and the Small Enterprise and Market Service and has been implemented since 2023. It is centered on providing policy funds such as loans to small business owners who receive private investment, adopting the operating method of TIPS, a private investment-led technology startup support program.
Last year, LIPS II, which gives business subsidies (up to 200 million won) to promising small business owners, was also introduced. If an AC selected by the Small Enterprise and Market Service as a private operator discovers and invests in a small business owner, the government trusts the private sector's judgment and provides subsidies; last year, more than 60 billion won was injected, including loans.
Ground Up Ventures was found to have not hesitated to break the law to secure government support funds. It created a tailored investment pool to cover franchise store opening funds for a food delivery franchise company with government support funds and simply disbursed investment money to franchisees without separate investment screening.
Moreover, Ground Up Ventures even secured prospective franchisees as contributors. The franchise opening investment was covered using money paid by the franchisees, which constitutes a violation of the Venture Investment Act's prohibition on brokering third-party funds. Fortunately, Ground Up Ventures' investment did not lead to final selection for LIPS.
There are also signs that public funds were used to expand a particular individual's business. Alpha Lab invested in related-party corporations in which an LP of a private investment pool was a major shareholder and received more than 30 million won in support funds. Support meant for promising small business owners was effectively monopolized by the "insiders" connected to a specific operator.
Private operators were very uncooperative even after the Small Enterprise and Market Service requested explanations. All three companies that were caught avoided investigation by failing to respond twice in a row to requests for submission of supporting documents. Critics say this is the height of moral hazard, a direct violation of the private operators' duty of diligence as specified in Article 32 of the LIPS operating guidelines.
Some argue that while the government poured hundreds of millions of won in annual budgets, management of private operators was lax. Some operators charged management fees in the 7% range after raising contributions from prospective franchisees, but the LIPS operating guidelines did not even have separate regulations to limit this.
Rep. Kang Seung-gyu said it is welcome that the Ministry of SMEs and Startups' policy is expanding from supporting small and venture companies to revitalizing small business startups and support, but he emphasized that "during the early stages of the system's implementation, deviations by some private operators must be firmly corrected so that the policy can be properly enforced."
The Ministry of SMEs and Startups and the Small Enterprise and Market Service appear to be scrambling to come up with countermeasures. They immediately issued admonitions and warnings to the three operators found to have violated the Venture Investment Act and operating guidelines in the special inspection. In particular, Ground Up Ventures accumulated two admonitions and the ministry decided to terminate its LIPS private operator agreement this year.
The Ministry of SMEs and Startups also plans to codify in the operating guidelines that LPs may not recommend for investment companies in which they are major shareholders or have conflicts of interest to fundamentally block private gain. It also decided to significantly strengthen requirements for submission of supporting documents during the investment decision process and review screening procedures.
A ministry official at the Ministry of SMEs and Startups said they would restrict participation in projects for private operators who attempt to obtain policy funds through fraudulent means or who receive administrative measures for violations such as the Venture Investment Act and fail to comply, and added, "If there are funds obtained illegally, we will recover them and strengthen penalties."