The FSC released a new plan for start-ups in 2014. Some of you might remember the article from April last year when the FSC introduced a plan to support start-ups in three steps: preliminary support, start-up, and afterwards.
The plan was to encourage young creative minds to start their own business by constructing sound financial environment. Though there has been massive support and some achievements were observed, it also revealed some flaws to be rectified. The newly-introduced plan for start-ups is divided into four steps, which is made more complicated compared to previous three-step support plan, according to the average start-up life cycle: start-up, early growth, maturity, and rebirth. Therefore, the new plan tries to cover as many start-ups as possible and provide more customized support for each start-up.
In the start-up period, the founder will be exempted from the burden of joint liability. Joint liability was what prevented young minds from starting their own business by making the founder take the responsibility and repay the debt when the business goes wrong. Therefore, the FSC decided to exempt the founders from taking all the responsibility if they meet suggested conditions. The conditions vary in two tracks: young entrepreneurs and professionals. Young entrepreneurs such as university students with technology rating higher than BB and the start-up within a year will be exempted from joint liability to maximum of 5years and 200million won. Professionals such as professors or researchers with the start-up within 3 years will be exempted from joint liability to maximum of 300million won. The beneficiaries are estimated as 1,000 start-ups a year.
In early-growth period, the trust guarantee funds will invest maximum 30billion won. Within 5 years after the start-up period, most start-ups lack the ability to make profits which makes private institutions hesitate to invest so guarantee funds play vital role in this period. Starting this April, hybrid of trust guarantee and investment will be implemented. Tentative blueprint of this system is to provide start-ups with seed money and turn it into investment in early-growth period. This option will be given only to selected financially stable firms.
In maturity period, the criteria for long-term and high sum guarantee applied to matured start-ups will be adjusted. In this period, however, the role of private investment is more to be highlighted. Therefore the trust guarantee funds play a leading role in investment so that the private investments follow suit. In the last rebirth period, it gives bankrupt start-ups one more chance. Starting July, support for re-start ups committee will improve the evaluation method so that start-ups that were divested of chance before gets to have another chance. Furthermore, the reduction of principal will be expanded from maximum 50% to 70%.
In reorganizing the plan, it will encourage creative minds to start their own business as well as to support them more effectively. Start-ups create jobs which is the aim of Park regime’s creative economy. I don’t want to be too optimistic but we don’t know if any of the start-ups could grow up to become another Samsung. Let’s keep our fingers crossed for that.
Yeajin Shim (email@example.com)