Key Takeaways
- • South Korea's venture capital industry is pushing back against the government's proposed tiered KOSDAQ system, warning that structural reforms risk creating funding cliffs for early-stage companies during market exits.
- • Kim Hak-kyun, Chairman of the Korea Venture Capital Association, has proposed a "KOSDAQ Activation Fund" linked to the National Growth Fund to expand institutional investor participation and deepen market liquidity, moving away from a retail-investor-dependent structure.
- • The association is advocating for easing lock-up regulations on new KOSDAQ listings and reforming the technology-specific listing system to enable listings based on technological capabilities rather than traditional financial metrics.
- • Institutional improvements targeting secondary fund markets and stake-trading mechanisms are being proposed to facilitate faster capital recovery for venture funds and enable reinvestment into new startups, creating a virtuous investment cycle.
- • The venture industry emphasizes that revitalizing the KOSDAQ exit market is critical to establishing South Korea as a top-four global venture powerhouse, requiring coordinated policy changes across listing regulations and institutional fund participation.
Summary
South Korea's venture capital industry is mounting formal resistance to government restructuring plans for the KOSDAQ market, citing concerns that proposed tiered market systems could create liquidity constraints and funding cliffs for early-stage venture exits. Kim Hak-kyun, Chairman of the Korea Venture Capital Association, outlined these concerns during a press briefing marking his first anniversary in office, presenting an alternative framework centered on deepening institutional participation and market activation.
The association's core proposal centers on establishing a "KOSDAQ Activation Fund" integrated with the government's National Growth Fund. This mechanism aims to systematically supply liquidity to the KOSDAQ market by expanding institutional investor involvement, deliberately moving away from the current structure dominated by retail investors. According to the association, this rebalancing is essential to create stable exit channels for venture capital investments and establish a self-sustaining reinvestment cycle where recovered capital flows back into new startup funding.
Beyond liquidity provision, the venture industry is advocating for specific regulatory reforms. The association proposes easing excessive lock-up restrictions imposed on newly listed companies and fundamentally restructuring the technology-specific listing system to prioritize technological capabilities as a listing criterion rather than traditional financial performance metrics. Additionally, the group aims to activate secondary fund markets and expand stake-trading mechanisms, reducing friction in capital recovery processes and accelerating fund recycling.
These proposals reflect broader strategic alignment with the government's stated objective of positioning South Korea among the world's top four venture powerhouses. However, the venture industry's formal pushback suggests that current policy approaches—particularly the tiered KOSDAQ system—are viewed as potentially counterproductive to this goal. By conditioning institutional participation and targeted regulatory relief on comprehensive exit market revitalization, the association is attempting to shift policy focus from market segmentation toward structural deepening of venture capital liquidity channels.
The association's core proposal centers on establishing a "KOSDAQ Activation Fund" integrated with the government's National Growth Fund. This mechanism aims to systematically supply liquidity to the KOSDAQ market by expanding institutional investor involvement, deliberately moving away from the current structure dominated by retail investors. According to the association, this rebalancing is essential to create stable exit channels for venture capital investments and establish a self-sustaining reinvestment cycle where recovered capital flows back into new startup funding.
Beyond liquidity provision, the venture industry is advocating for specific regulatory reforms. The association proposes easing excessive lock-up restrictions imposed on newly listed companies and fundamentally restructuring the technology-specific listing system to prioritize technological capabilities as a listing criterion rather than traditional financial performance metrics. Additionally, the group aims to activate secondary fund markets and expand stake-trading mechanisms, reducing friction in capital recovery processes and accelerating fund recycling.
These proposals reflect broader strategic alignment with the government's stated objective of positioning South Korea among the world's top four venture powerhouses. However, the venture industry's formal pushback suggests that current policy approaches—particularly the tiered KOSDAQ system—are viewed as potentially counterproductive to this goal. By conditioning institutional participation and targeted regulatory relief on comprehensive exit market revitalization, the association is attempting to shift policy focus from market segmentation toward structural deepening of venture capital liquidity channels.
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