"Mandatory Investment Targets for ACs Should Be Expanded to Include Follow-on Investment Companies"

Unicorn Farm and Startup Alliance Hold Forum on ACs
"Mandatory Investment Ratio in Startups Under Three Years Old Seen as an Obstacle"

Venture industry insiders and experts have argued that, for the sustainability of the startup ecosystem, the mandatory investment targets of accelerators (ACs) should be expanded to include companies receiving follow-on investments.

On the 9th, a forum titled "The Role of Accelerators in the Startup Ecosystem and Institutional Challenges: Where Do Unicorns Begin?" was held at the National Assembly Members' Office Building in Yeouido, Seoul, hosted by Representatives Han-kyu Kim and Hyunjin Bae, co-CEOs of Unicorn Farm, and organized by Startup Alliance.

On September 9, at the National Assembly Member’s Office Building in Yeouido, Seoul, a forum titled "The Role of Accelerator Companies in the Startup Ecosystem and Institutional Challenges: Where Do Unicorns Begin?" was held, hosted by Assemblymen Hankyu Kim and Hyunjin Bae, co-CEOs of Unicorn Farm, and organized by Startup Alliance. Accelerators, or ACs, are investment companies whose work centers on investing in and providing professional mentorship to early-stage startups; in the Venture Investment Promotion Act, they are defined as "startup planners."

Participants in the forum emphasized the need to improve regulations related to ACs. Lee Jiyoung, Senior Specialist at Startup Alliance, in her presentation "The Role of Accelerator Companies in the Startup Ecosystem Seen Through Data," pointed out that the mandatory investment ratio requiring ACs to invest a certain percentage of their annual capital in startups less than three years old is undermining sustainability. She said, "It is necessary to improve the follow-on investment regulations so that, at the very least, companies initially discovered by the AC can be included as mandatory follow-on investment targets."

Park Sehun, Head of Regulatory Innovation Law at the Korea Legislation Research Institute, presented a proposal for improving the system to better support the growth of startups by ACs. He stated, "The mandatory investment targets of startup planners should be expanded to include companies less than five years old and those receiving follow-on investments." He also highlighted that "making explicit exceptions for affiliate companies involved in company building, and establishing new provisions to define and set the scope of credit lending, should be considered areas for regulatory improvement."

He also noted that, out of 531 ACs officially registered in the country, 20% have no investment record, and that this reality necessitates differentiated regulation for ACs. Park pointed out, "Despite the differences in size and expertise among registered ACs, the same regulations are applied to all. Therefore, it is necessary to consider a differentiated regulatory system based on accumulated investment records and the scale of professional staff." He emphasized, "The focus should not be on tightening entry regulations, but on ensuring the effectiveness of post-registration management."

At the discussion held on the 9th titled 'The Role of Accelerators in the Startup Ecosystem and Institutional Challenges: Where Do Unicorns Begin?', Lee Jiyoung, Senior Specialist at Startup Alliance, is presenting on the topic 'The Role of Accelerators in the Startup Ecosystem Based on Data'.

Venture industry stakeholders participating in the discussion also agreed on the necessity of improving AC-related regulations, sharing their on-the-ground challenges. Yongkwan Lee, CEO of Bluepoint Partners, said, "Because we are required to invest in companies less than three years old, in practice, there is almost no capital left for follow-on investments. Some sectors have startups that are still in early stages even after three to five years, so it would be helpful if the rigidity in mandatory investments could be eased." He added, "When making follow-on investments, incoming investors often closely evaluate whether the previous investors are also reinvesting."

Kyuyong Hwang, CEO of Startup Greenda, said, "As a company that grew after receiving AC investment, I believe that follow-on investments by ACs should also broadly qualify towards meeting mandatory investment requirements." He added, "Rather than applying a uniform approach based solely on the age of a company, it would be better for the regulatory system to reflect the unique characteristics of each industry sector."

Assemblyman Kim said, "As the co-CEO of Unicorn Farm at the National Assembly, I will carefully review the proposals put forward and strive to create an environment where startups with innovative ideas and potential can successfully enter the market and continue to grow."

Lee Gidae, Co-CEO of Startup Alliance, added, "The timeliness of today's discussion is particularly high, given active debate across the entire venture investment ecosystem and the recent submission of a proposed revision to the Venture Investment Act to permit AC follow-on investments. I hope that today's session will help advance institutional discussions around ACs to the next level by incorporating empirical data."

This content was produced with the assistance of AI translation services.