South Korean VC Leaders Criticize Venture Capital Ecosystem for Being Trapped in a 'Banking Structure', Call for Governance Responsibility and Term Flexibility Reforms
On October 27, 2026, the Korea Science and Technology Policy Institute (STEPI) and the Korean Economic Association co-hosted a policy research event. Park Hee-deok of Translink Investment criticized South Korean VCs for still being trapped in a banking structure focused on capital recovery, while Kim Hong-il pointed out the mismatch between corporate and capital timelines and suggested transforming 'third capital' into quality resources. Lee Yong-kwan focused on regulatory constraints and recommended benchmarking the U.S. SBIR program. During the discussion, Choi Cheol proposed replacing joint liability with governance responsibility, and Gu Jung-hoe called for extending fund investment terms.
The South Korean venture capital industry has long faced a paradox: while fund sizes are growing, deep-tech startups that truly require long-term patience struggle to secure matching funding. On October 27, 2026, the Korea Science and Technology Policy Institute (STEPI) and the Korean Economic Association co-hosted a policy research event titled 'Innovative Capital Transformation Toward Becoming One of the Top Three Global Economies' at Front One in Mapo-gu, Seoul. Three managing general partners of venture capital firms diagnosed this structural ailment from different perspectives.
Park Hee-deok (박희덕), Representative Director of Translink Investment, offered the most direct assessment: the South Korean VC ecosystem remains a 'gravel field,' where quantitative expansion is pursued without qualitative transformation due to incomplete institutional frameworks. He highlighted a deeper issue—that South Korean VCs have not shed their banking structure, continuing to center decisions on the probability of capital recovery rather than the potential for future value creation. His logic posits that the focus of technology finance is shifting from past recovery probabilities to future value creation potentials; to keep pace with this shift, structures must be established where investors and entrepreneurs share risks and rights.
Kim Hong-il (김홍일), Representative Director of KU Unicorn Investment, approached the issue from a temporal dimension. He argued that the mismatch between corporate and capital timelines is a reality in South Korea, primarily caused by the gap between 'what one wants to do' and 'what one can do.' His proposed solution involves transforming 'third capital'—funds that do not need to be returned to their original source—into quality resources to help startups align with their own development timelines. He emphasized that finding such capital is a market design problem requiring intervention from the economics community.
Lee Yong-kwan (이용관), Representative Director of Bluepoint Partners, focused on regulatory constraints. He noted that policies prohibiting additional contributions in investment sectors and limiting investment obligation ratios are tying investors' hands. He argued that even improvements to regulations, legislation, and enforcement decrees cannot achieve perfect operation, recommending a benchmark against the U.S. Small Business Innovation Research (SBIR) program, which deploys federal budgets through various agencies. His judgment was that rather than implementing pinprick-style regulation, it is smarter to acknowledge some flexibility to improve overall efficiency.
During the designated discussion segment, Choi Cheol (최철), Professor at Korea University of Foreign Studies, advanced the discussion to the governance level. Agreeing with Park’s assessment, he believed the core role in shifting from joint liability to governance responsibility should lie with the board of directors. He recommended developing standard board operation guidelines for unlisted innovative enterprises, allowing board composition and information disclosure to be selected and supplemented as the enterprise grows, and linking these guidelines to investment contracts so that Limited Partner (LP) and General Partner (GP) evaluation systems support such operations. Gu Jung-hoe (구중회), Managing Director at LB Investment, called for changing VC fund investment terms, suggesting that roles be distributed based on the fund's fundamental nature, viewing the point of success as a single cycle, and establishing a system to wait for technological commercialization results and share them.
These arguments collectively outline a mechanism chain: the joint liability system leads VCs to demand collateral and short-term recovery, forming a bank-like risk control logic; this logic fundamentally conflicts with the long-term uncertainty tolerance required by deep-tech startups; rigid regulation further limits funds' ability to adjust terms and make additional investments; the result is that while capital exists, it cannot be effectively allocated to the innovation segments that need it most. The proposed alternatives—governance responsibility, term flexibility, and third capital—target different links in this chain.
It should be noted that the above are attributions made at a policy forum, not independently verified empirical analyses. Whether the 'banking structure' analogy applies to all South Korean VCs, the specific scale and sources of 'third capital,' and the transplantability of the SBIR model within South Korea's institutional environment are issues not elaborated upon in the original material. For readers, the value of these diagnoses lies in providing a testable mechanistic hypothesis: if joint liability is indeed the primary constraint, observing actual changes in deep-tech financing after the replacement with governance responsibility will verify or refute this judgment.