IBK Policy Funds Expand Reach to 'New VC Firms,' Unlocking KRW 35 Billion in Matching Capital [fn Market Watch]

[Financial News] Policy capital from Industrial Bank of Korea is expanding its reach into the fundraising market for newly established and small venture capital firms. The bank has increased its allocation from last year and created a KRW 2 billion small-fund track, opening policy-fund matching opportunities to managers with limited track records. The move is drawing attention as a potential final piece in fund formation at a time when VC firms are struggling to secure private limited partners.
According to investment banking industry sources on the 19th, Korea Growth Investment Corporation (K-Growth) will commit a total of KRW 35 billion through the general matching program under IBK Productive Finance Fund No. 1. The capital comes from Industrial Bank of Korea's IBK Productive Finance Fund.
The program will select five fund managers each for the small- and mid-sized tracks. Each manager in the small-fund track will receive KRW 2 billion, while those in the mid-sized track will receive KRW 5 billion.
Last year, IBK Innovative Growth Fund No. 3 allocated KRW 28.5 billion to six fund managers. This year, the allocation has increased to KRW 35 billion, while the number of managers has expanded to 10. The creation of a separate KRW 2 billion small-fund track is seen as giving newly established and small VC firms greater room to enter the market.
Selected managers must form their funds within three months. The proposed fund sizes range from KRW 10 billion to KRW 90 billion. They must invest at least the amount of the growth-finance commitment in small and medium-sized enterprises. They may also propose investing at least 30% of their committed capital in companies incubated by or graduated from IBK Changgong.
The investment banking industry sees the program's practical impact in its matching capital. There have been numerous cases recently in which VC firms, despite being selected as general partners for policy investment programs such as the Korea Fund of Funds, have been unable to secure private limited partners, delaying fund formation.
A VC industry source said, "Recently, there have even been cases in which securing private matching capital after being selected for a policy investment program has proved more difficult. With the launch of a small-fund track, newly established and small-to-medium-sized managers that are relatively disadvantaged in fundraising are likely to show strong interest."
The provision of Industrial Bank of Korea funds, which support small and medium-sized enterprise financing, as follow-on matching capital for venture funds is also seen as strengthening the link that carries policy capital through to actual fund formation.
Proposals will be accepted on October 8, and the final fund managers are expected to be selected in November.
[email protected] Kim Kyung-ah Reporter