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Spread the wings of local investment

‘Local Fund’ for local expansion

Kyung-ho Lee, Team Leader(moderator)

With the announcement of the new strong small business development policy, the paradigm for nurturing local creators and small business owners has shifted to ‘nurturing’ and ‘growth’, and advancement to a larger stage is necessary. The reality is that it is difficult to cover the funds needed to move to the next stage through loans and support alone. Therefore, the need for a fund specifically for local startups is emerging. We have prepared this event to hear various opinions regarding the creation of a local-only fund.

Eun-san Go, Managing Director

Although the areas of activity of the people here are slightly different, we have all been talking about startups and the local scene for a long time and are thinking a lot about it.

As of now, I don't think there is a clear answer yet. Especially in the local field. With the launch of ‘LIPS’, Y&Archer is also participating as a lead organization, but now that it has started, there are things that need to be improved in the current structure. Since there are various methods such as project funds or investment forms, local funds require different investment methods.

Sang-min Oh, Vice President

It would be great if there was a good plan that small business owners, the market, and government agencies could all agree on, but it would not be easy. Even projects created under the Ministry of SMEs and Startups in 2019 are very difficult to apply to local and regional areas. Looking at it from a different perspective, local startups may not have a relatively solid financial structure, but if they are supported by revitalizing the areas they want, such as tourism or local products, or if they are able to create a project-based fund and enable reinvestment, they will be able to run well. see. Similar funds, such as home shopping or marketing-only funds, have been implemented under the Ministry of SMEs and Startups, so I think this method would be appropriate for local startups in Jeju.

Sangmin Oh, Vice President of Logan Ventures

Eun-san Ko, managing director of Y&ARCHER

Eun-san Ko, managing director

I think project investment is a very good method. When we invest about 200 to 300 million won in project funds, it would be nice to get a return of about 500 to 1 billion won, but that won't be the case in the local scene. Local creators in Jeju are really good at creating services and products, but since the market demand is not as large as expected, it is enough to invest only about 100 million won to maximize product production. So the payback is not that big. From a VC (venture capital) perspective, it is necessary to increase the number of investments to increase profitability, but this is realistically difficult. Therefore, if local investments in various fields are combined into one, the investment amount will increase and profitability will be supported.

Jae-man Cho, Investment Manager

In fact, such a fund was operated. People involved, including manufacturers, manufacturers, distributors, and advertising and marketing agencies, were able to benefit. So, if the Local Fund is a fund for local creators and small business owners in Jeju Island, there will be no problem in getting started.

Yong-deok Jeon, CEO

Ultimately, the goal is to expand the scale of the local industry. We have that dream, and dreams can come true. However, if the necessary funds are supported. In order to grow a brand called LICORN, you need a lot of capital, and you have to have a method of how to pour the money. Just as the ‘Venture Act (Act on the Promotion of Venture Investment)’ was created to foster venture companies, I believe that a ‘Small Business Promotion Act’ should be created to allow autonomy in fund management. Venture investment and local investment are clearly different markets.

Expanding a market not only requires capital, but also requires talent training and improvements in the legal system. Otherwise, I don't think there's anything we can do dramatically in the current situation.

Hyun-song Lee, CEO

It is unfortunate that it takes a considerable amount of time to actually improve the legal system. I think there is only one thing that is important. For now, increasing the investment ratio is the way to create a good reference. It feels like local investment is only done by people who have a passion for the industry or who think it is absolutely necessary. There are investors who feel affection for us, so if we can increase the investment ratio, they will think it is worth running a local fund.

Yong-deok Jeon, CEO of KOC Partners

Na-ri Shin, managing director of Vine Ventures

‘Investment’ and ‘education’ are two essential elements

Na-ri Shin, managing director

I think now is a good time to invite VCs to local areas. The investment market atmosphere is not good, and the same goes for VCs. In the metropolitan area, it is already difficult to conduct LP (fund management company) sales and selection unless it is a large management company. Even fund announcements that are difficult to operate have high competition rates. That’s why many VCs are turning to local regions. In addition, education about the investment market must follow. Whether it is a project fund or a blind fund that has not confirmed the investment destination, the method will need to be discussed further in the future, but local creators and small business owners need to be familiar with the overall investment system. Otherwise, VCs have a lot to worry about from the beginning. AC (Accelerator) education is important, but from the perspective of local creators, it is better to have the necessary knowledge for the company rather than just receiving investment funds, so I think it would be a good idea to include education and development programs in the main investment field or fund structure.

Ja-young Lee, director

When it comes to creating a local fund in Jeju, success is more important than anything else, and for that to happen, you need the ‘education’ condition that Managing Director Shin Na-ri mentioned. Jeju’s local creators and small business owners have really good business models and product planning skills. However, there is a bit of a lack of know-how on how to make this successful. Therefore, various financial resources for business expansion or overseas expansion must be included in the fund.

Yong-deok Jeon, CEO

Of course, there may be shortcomings in Jeju's local ecosystem, but I am very encouraged by the Jeju Local Fund. Although everyone talks about the importance of the 6th industry, most regions have yet to even think about creating a related fund. However, Jeju Island has many VCs who know the startup ecosystem well and are working hard, so I am excited about the future.

Gyeong-ho Lee, team leader

I am always grateful for that too. As for what you mentioned earlier about the need for education, I think that is the role of an institution like our JCCEI. If it is linked to what is happening in the private sector, a synergy effect will occur. We could discuss it together at the preliminary stage of raising a fund to divide roles and connect our programs or government-supported projects. More than anything, it is more important and grateful that everyone here is positive about local investment in Jeju.

Na-ri Shin, managing director

Other local governments may also have concerns about local investment, but Jeju Island is a little different. I think the image of an independent island is still strong. The time to go from Seoul to Jeonnam, Gyeongnam, or Jeju Island is all similar. However, when people say they are going to Jeju Island, most people react by saying, ‘That far away?’ due to the psychological distance. So, it's still a bonanza. There's a lot to discover. In addition to the areas of institutions such as the Creative Economy Innovation Center or Techno Park, there are areas in the education program that AC should be responsible for, and VC support should be provided in a variety of ways and in stages.

Yong-deok Jeon, CEO

When accelerating multiple companies, I feel that training tailored to the characteristics and level of each company is needed. For example, if you train a company that is familiar with document writing or administrative processing, you will see immediate results. However, for companies that do not do this, they have to teach from the basics, so the speed of learning information is slow. Because asymmetry exists, there must be education tailored to each person. Of course, the education currently being provided by institutions such as the Creative Economy Innovation Center and Techno Park should remain the same, and it would not be excessive to expand it further. Here, more training is needed for each step.

Eun-san Ko, managing director

I think it is the role of the JCCEI to convey and persuade provincial councils, etc., of the need for local funds. Since the structure is such that it is difficult for investment companies to step forward, it would be good if institutions could solve this problem.

Cheol-woo Kim, CEO of RTBP Alliance

Wook-jo Min, managing director of Wellcome Ventures

Creating a local fund tailored to the characteristics of the region

Gyeong-ho Lee, team leader

By nature, tech startups start their business with investment in mind and even prepare for IPO or M&A, but most local creators and small business owners do not do this. As a result, the timing at which investment is needed seems to be a bit different. What do local creator Kim Cheol-woo, CEO of RTBP Alliance, think?

Cheol-woo Kim, CEO

Most local creators started their businesses from something they wanted to do or something they liked, so they may not have a specific plan on how to proceed in the future. It was the same for me too. We also thought it would be difficult to attract investment, but the keyword ‘urban regeneration’ helped attract investment. But I think it’s not enough to grow to the next level. We are also in a situation where we need to expand our business through distribution, manufacturing, or content IP (intellectual property rights). There were situations where a large investment could have been made, but in reality it did not happen. We did not start out by making a product that would be popular with the general public, but we were a team that took advantage of the region and our own unique characteristics to run a business, which seemed different from the general investment market. It is difficult to produce results that will satisfy investors. In this regard, we are also thinking about how to take the next step. Other local creators will be no different. In that respect, the project investment method is also good.

Gyeong-ho Lee, team leader

I think the process of discovering and nurturing a startup is like raising a child. It’s not something that can be achieved through the power of just one VC. Support and investment from multiple sources is needed, and it must be done evenly and at the right time. Also, if a child wants to pursue their dreams, they should be sent to a good academy or school. It also requires a lot of capital. So, in order for a local fund to be created well and run successfully, a financial support environment must first be established in Jeju Island. If this goes well, other regions may be able to benchmark Jeju’s local funds.

Wook-jo Min, managing director

To give an example of one organization, when we started an investment project about 10 years ago, we created a budget by reducing travel expenses. That's how we raised money, and now we're running a fund that has grown more than 50 times in size. We are also investing directly. This is a good example created by an organization. And it is also important to think 10 or 20 years from now. We have to design it step by step.

Na-ri Shin, managing director

If the investment ratio is high and the fund size is large, it seems really attractive to VCs. Another thing is that although it is clear that Jeju Island is a good island in many aspects, it seems to lack a clear identity in terms of industry, except for tourism and food and beverage. Therefore, the direction of nurturing local creators and small business owners is also important.

Ja-young Lee, director

I mainly live in Jeju Island, and other people who come here come from different places. At first, I thought, ‘What kind of story will come out of this place?’ and ‘Will we be able to speak with one voice?’ Fortunately, after talking about it, I am confident that we can all move forward together, looking in the same direction.

Jae-man Cho, Investment Manager

I think I'm talking too much from the VC's perspective, but since it's still in the preparation stage, I think it was a good opportunity to hear various opinions. If we talk about it and think about it, there is definitely a better way. How you start is important. And if there is the money needed to create a local fund, I will raise it (laughter).

Hyun-song Lee, CEO of Smart Study Ventures

Jae-man Cho, BNK Venture Investment Manager

Sang-min Oh, vice-president

First, there will be a need to discuss how to invest, and there will definitely be a burden as it is a local-only fund. Now that the target of investment is local craters, it is natural that it should be used only in that field, but it is questionable whether it will be possible to generate sufficient returns. It may be complicated, but in order to increase profitability, a certain percentage of small and medium-sized companies that collaborate with local creators should be included. There will be a desire for collaboration anyway, and it is a problem that must be solved in order to advance into a larger market, right? The number of cases of collaboration will also increase.

Eun-san Ko, managing director

The goal is to split investment assets in 2024 and create a local-only fund. Preliminary work necessary to create a fund must be carried out from the first half of 2024. Otherwise, we have to look to next year. It is important to make as much as possible within the given conditions.

Yong-deok Jeon, CEO

I think about creating a local fund, and I feel grateful for JCCEI's efforts to actually make it happen. Today we talked about ‘How to create a local fund,’ but next time, I hope we can meet again on the topic of ‘What exit strategy should we establish after investment?’ Ultimately, won't the speed and direction of growth become clear only when you have a clear idea of what your exit strategy is? For example, if it is difficult to create a local startup worth 100 billion won, you can create 10 local startups worth 10 billion won.

Deok-hoon Ko, Assistant Manager

At first, I had doubts about creating a local-only punt. After receiving investment, there must be an exit strategy, but wouldn't it be difficult to produce results that satisfy investors in the local field? Also, from the perspective of a public institution, I wondered whether it would be possible to continue this on a sustainable basis due to the nature of the institution. However, the industrial structure is growing little by little, and after listening to today's story, I thought that it would be successful.

Gyeong-ho Lee, team leader of JCCEI

Gyeong-ho Lee, team leader

I would like to thank everyone who took the time to be here with us. I look forward to the day when the things we talked about today are materialized one by one, and a local fund is created in Jeju to create a more robust ecosystem. thank you

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