Local Era Venture Fund Selected by Busan City! Establishing a 100 Billion Won Busan Innovation Scale-up Mother Fund
Busan City has been finally selected as a local government participating in the ‘Local Era Venture Fund’ promoted by the Ministry of SMEs and Startups.
Accordingly, Busan City plans to create a 'Busan Innovation Scale-up Mother Fund' with a size of 100 billion won. This fund is planned to focus investments on promising innovative ventures and SMEs in regional strategic industries and smart advanced manufacturing industries.
Overview of Busan Innovation Scale-up Fund Establishment
Busan City has recently secured 60 billion won from the Ministry of SMEs and Startups' mother fund. Through this, including 30 billion won from financial institutions such as Busan Bank and 10 billion won from the city's own funds, a total of 100 billion won will be established into the mother fund.
Based on this mother fund, there are plans to create an additional 200 billion won worth of sub-funds. These funds will target Busan's nine strategic industries, smart advanced manufacturing industries, and entrepreneurial small businesses (Likons) as key investment subjects.
Sub-fund Creation and Investment Plans
Busan City aims to foster future new industries, enhance core industries, and build global city infrastructure through the funds being created this time. To achieve these goals, it plans to structure sub-funds in the following ways.
Busan City operates strategic industry funds targeting early and growth-stage startups and venture companies belonging to the nine strategic industries. This fund invests in various sectors including digital tech, energy tech, bio health, future mobility, converged parts and materials, lifestyle, marine, finance, and cultural tourism industries.
Additionally, the smart advanced manufacturing fund makes investments in manufacturing companies that belong to the smart manufacturing industry or are upgrading smart factory constructions. These funds support companies aiming for a level of advancement above the intermediate stage.
Finally, the Likon fund is a program that invests in small businesses creating new added value through manufacturing and service innovations in the realm of living culture, such as food, clothing, and shelter. Through this, Busan City is actively working to support and revitalize innovation in various fields.
Providing Incentives for Attracting Private Investment
Busan City plans to prepare various incentives to attract private capital.
First, by introducing a loss compensation system, if a loss occurs, the mother fund will bear the loss before private investors within 10% of the fund formation amount.
Second, through an excess return transfer system, if returns exceed the benchmark rate, up to 30% of the excess returns will be allocated to private investors.
Third, by granting a share purchase right (call option), private investors will be granted the right to purchase up to 30% of the shares held by the mother fund post-factum.
These incentives are expected to promote the participation of local investment firms and contribute to strengthening the regional venture ecosystem.
Future Plans and Expected Effects
Busan City plans to complete related procedures by the first half of 2025 and begin the substantial creation of mother and sub-funds in the second half. Through this, it expects to support the growth of startups and venture companies in Busan, along with enhancing the competitiveness of the local industry.
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