- South Korea is rolling out the “Four Venture Powerhouses” reforms to shift its startup ecosystem toward private-led venture funding through legal, regulatory, and tax changes.
- Targets for 2030 include a KRW 40T annual venture market, 10,000 AI/deep-tech startups, and 50 unicorns/decacorns, supported by expanded incentives and broader fund participation (including pensions and foreign capital).
- Key rule changes extend investment timelines, widen eligible vehicles, relax CVC and GP constraints, and lengthen the Mother Fund’s horizon to enable longer-term investing.
- Execution risks remain around scaling exits, improving talent flexibility, and ensuring regional and early-stage benefits.
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South Korea is implementing one of its most comprehensive venture policy reform packages in decades, marking a strategic shift from policy-driven startup support toward a private-led, market-driven venture ecosystem. The “Four Venture Powerhouses” or “Venture 4 Powerhouse” strategy lays out both the legal infrastructure and financial incentives needed to attract institutional, domestic, and foreign capital into deep tech, AI, and other strategic sectors.
On the financial side, goals are ambitious: KRW 40 trillion (~USD 30+ billion) in annual venture investment by 2030; 10,000 AI/deep tech startups; 50 unicorns and decacorns. To get there, the government has increased funding via the Mother Fund and other funds, expanded tax deductions, and relaxed participation requirements for foreign investors and pension funds in venture investment vehicles.
Regulatory reforms aim at flexibility and lowering entry/exit friction. Mandatory investment fulfillment periods for venture funds are extended from three to five years; divestment rules relaxed for startups acquired by large conglomerates; constraints on general partner commitments loosened; equity investment eligibility expanded; stock-option rules upgraded.
While the reform package addresses many of the systemic barriers identified by founders and VCs—such as liquidity, regulatory burdens, and the fear of failure—several strategic risks and open questions persist. These include whether exit markets (IPOs, M&A, secondary markets) can scale accordingly, whether labor/talent policies and corporate governance reforms will keep pace, and if regional/early-stage ecosystems will benefit equitably across Korea. Also, success depends on execution quality, inter-ministerial coordination, and global economic conditions impacting capital flows.
Supporting Notes
- The mandatory investment fulfillment period for venture investment companies is being extended from three years to five years, easing pressure to invest rapidly.
- The five-year mandatory divestment rule for startups acquired by conglomerates is abolished; CVCs get a nine-month grace period to exit in such cases.
- General partners are no longer required to invest 20% in each fund; a 40% fund-level investment threshold replaces that rule.
- Minimum sizes for private fund-of-funds lowered from KRW 100 billion to KRW 50 billion; minimum initial contribution reduced from KRW 20 billion to KRW 10 billion.
- Non-Korean investors may now contribute directly using USD without currency conversion.
- Corporate tax deduction for additional contributions to private venture funds raised from 3% to 5%, while maintaining the 5% deduction on total contributions.
- Mother Fund (Fund of Funds) can now extend lifespan in 10-year increments beyond 2035; legal reform passed on December 23, 2025.
- The age limit for eligible investee companies extended to 10 years (up from 7); stock option issuance cap raised from KRW 500 million to KRW 2 billion.
- Government sets targets: 10,000 AI/deep tech startups by 2030; create 50 unicorns/decacorns; build KRW 40 trillion annual venture investment market.
- M&A guarantees will be scaled up from ~KRW 30 billion currently to KRW 200 billion by 2030.