On the 5th, the Ministry of Small and Medium Enterprises and Startups announced that the revised implementation rules for the 'Act on Promotion of Venture Investment' will come into effect. The ratio at which corporations can invest in personal investment associations focused on early-stage startups in the region will increase compared to before.
A personal investment association is a fund typically created by individuals pooling their money to invest in startups and venture corporations. However, when a startup planner forms the fund, it is allowed for corporations to invest up to 30% to expand the fund size, considering investment expertise and operational capability.
The main point of this revision is that when a startup planner creates a personal investment association to invest in early-stage startups in the region, the ratio at which corporations can invest has been increased to 40%, enhancing the autonomy of fund management.
In addition, if local governments or local public enterprises contribute at least 20% of the total formation amount to a personal investment association, the ratio of corporations' investment is allowed to be up to 49%. This adjustment took into account that the investment ratio for non-capital region corporations in personal investment associations established by local governments is about twice as high as the overall average.
The growth in the size of personal investment associations investing in early-stage startups outside the capital region is expected to contribute to alleviating the funding difficulties faced by corporations in their early growth stages.
With this revision, a basis has been established to allow the conversion registration of a new technology business investment association, operated by a new technology business financing company, into a venture investment association in the case of mergers and acquisitions (M&A) where the venture investment company becomes the surviving entity.
Previously, venture investment associations had to apply for registration with the Ministry of SMEs and Startups within 14 days after the formation general meeting. However, since the new technology business investment association is already completed, it can register as a venture investment association with the agreement of all members without needing to dissolve and re-form, reducing procedural burdens and increasing the convenience of fund management.
Minister Han Seong-suk said, 'Through this revision, we expect an active inflow of funds into personal investment associations investing in non-capital areas and an expansion of investments in local early-stage startups.' She added, 'We will continue to support the rational improvement of investment regulations to energize the local venture ecosystem.'