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VI Astana Economic Forum. Korea’s Start-up Promotion Policy - Young Entrepreneurs Start-up Academy -. May 23, 2013 . Contents . I. Korea’s Economic Growth and Role of SMEs. II. Importance of Youth Start-ups. III. Korea’s Youth Start-up Promotion Policy. IV.

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slide1

VI Astana Economic Forum

Korea’s Start-up Promotion Policy

- Young Entrepreneurs Start-up Academy -

May 23, 2013

slide2

Contents

I

Korea’s Economic Growth and Role of SMEs

II

Importance of Youth Start-ups

III

Korea’s YouthStart-up Promotion Policy

IV

Young Entrepreneurs Start-up Academy

slide3

Ⅰ.

Korea’s Economic Growth and Role of SMEs

1

Development of the Korean Economy

Korea has transformed from one of the poorest countries into one of the tenth largest economies in just about 50 years of economic development.

Mature Stage

(2000s~)

- GNI(Gross National Income): (1953) $67 → (2012) $22,720

The economy has grown 300 times in 60 years since the establishment of Korean government.

’07

($21,632)

Transition

(1990s)

Rapid Growth →

Economic Stability

(1970s~1980s)

Industrialization

(1960s)

’96

($12,518)

’48

’55

’65

’75

’85

’95

’05

’12

- 1/18 -

slide4

Ⅰ. Korea’s Economic Growth and Role of SMEs

Growing Status of SMEs

2

■ SMEs: (1980) 29,779(96.6%)

→ (2010) 112,897(99.5%)

■ SMEs: (1980) 1,000,000 (49.6%)

→ (2010) 2,289,000(77.1%)

■SMEs: (1980)KRW 4.2 trillion(35.2%)

→ (2010)KRW 215.7 trillion47.4%)

* Large Companies:(1980) 1,044(3.4%)

→ (2010) 618(0.5%)

* Large Companies:(1980) 1,015,000(50.4%)

→ (2010) 679,000(22.9%)

* Large Companies:(1980)KRW7.7 trillion(64.8%)

→ (2010) KRW 239 trillion(52.6%)

- 2/18 -

slide5

Ⅰ. Korea’s Economic Growth and Role of SMEs

Role of SMEs

3

No. of Employees (with 5 or more employees)

Added Value(with 5 or more employees)

Growth Rate of R&D Budgets

(Unit: KRW 100bn)

(Unit: thousands)

(2005~2010Annual Average)

18.6%

2,150

17.5%

104.1%

1,982

87.4%↑

1,945

1,830

4.5%↓

10.5%

678

9.6%

1,038

971

648

`99

`09

`99

`09

Medium Companies

Large Companies

`99

`09

`99

`09

SMEs

SMEs

Large Companies

Large Companies

SMEs

SMEs created 320,000 new jobs

in a decade (1999~2009) .

R&D budgets of SMEs have grown to a 18.6% of annual average since the year of 2005.

Added value from SMEs has continually increased in a decade (1999~2009), making bigger contributions than large companies.

* Large companies saw a decrease of 30,000 jobs

* Much higher compared with large companies (10.5%) and medium companies (9.6%)

* Added value contribution rate (2009)

- SMEs:50.5%,

- Large Companies:49.5%

- 3/18 -

slide6

II .

Importance of Youth Start-ups

Breakthrough in Current

Economic Difficulties

1

(3th)

No. of start-ups (thousands)

(8.5)

(6th)

(8.1)

(65)

Start-up CEOs under 30s (%)

  • No. of start-ups
  • CEOs under 30s

Unemployment rate (%)

(13th)

(53)

(11th)

(7.7)

(7.6)

(47.6%)

(16th)

(19th)

(4.2)

(3.6)

(3.2)

(18.3%)

`00 `09

`00 `09

`00 `09

  • Unemployment
  • (Total)
  • Unemployment
  • (Youth)

(Source: Donga Ilbo Entrepreneurship Center-Deloitte Consulting)

(Source: Statistics Korea)

(Source: SMBA)

The number of new businesses is on the rise in recent years, but youth start-ups have been slowing down.

Korea’s entrepreneurship index has been on a declining trend.

Youth joblessness, being twice higher than national unemployment, has become a social issue.

  • Downward in innovative start-ups, but upward in self-employed for a living
  • Young people afraid of failure and
  • taking chances
  • Preference for government jobs and
  • large companies

Increasing jobs and encouraging entrepreneurship through youth start-ups

- 4/18 -

slide7

II. Importance of Youth Start-ups

Driving force of Income and Job Generation

2

Successful start-up businesses

< Employment/Start-up Ratio and Lifetime Income >

Annual Income

(Job creation)

Employment

Start-up

KRW 100m

Failure

Employment= Start-up

Employment

Retirement

Lay-Off

Start-up

Failure

30

35

40

45

50

55

60

Age

  • Annual salary of college-grad-entry-level jobs: Large firms (KRW 3.5m), Medium firms (KRW 3m)
  • Small firms (KRW 2.25m), Government firms (KRW 2.8m)

- 5/18 -

slide8

II. Importance of Youth Start-ups

Advancing Challenger Entrepreneurship

3

Nurturing innovative entrepreneurs by promoting youth start-ups

- Innovative young entrepreneurs: leaders of job creation and creative destruction

High

Inventor

Entrepreneur

Creativity

Promoter

Manager

Low

A thrust of knowledge/creative economy (New Korean Government Policy) based on scientific and technological advancement

Low

High

Managerial skills and networks

Creative start-ups exploring the blue ocean

- 6/18 -

slide9

III. Korea’s Youth Start-up Promotion Policy

Policy Direction and Programs

1

Policy Direction

Building infrastructure that harnesses any entrepreneurs with ambition and marketable technology

Creating an environment for advancing entrepreneurship and giving second chances

Programs

- 7/18 -

slide10

Ⅲ. Korea’s Youth Start-up Promotion Policy

Grants

2

Start-up Training

(KRW 11.5bn)

  • Teenager Biz School: from elementary to high school students
  • Start-up School: prospective entrepreneurs and businesses less
  • than 1 year old
  • Biz Incubation College: prospective entrepreneurs &
  • businesses less than 1 year old
  • Young Entrepreneurs Start-up Academy: entrepreneurs under 39
  • Start-up Tailored Program: prospective entrepreneurs and
  • businesses less than 1 year old
  • Research Start-ups: scientist-turned entrepreneur(s)
  • Leading Venture Start-ups: prospective entrepreneurs and
  • businesses less than 1 year old
  • Global Youth Start-up : prospective entrepreneurs and
  • businesses less than 6years old

Realization ofStart-up

(KRW 129bn )

Start-up

  • 16 programs
  • KRW 187bn

Senior Start-up

(KRW 1.5bn)

  • Start-up Capability Building Training: prospective entrepreneurs
  • over the age of 40
  • Senior Biz Plaza: prospective entrepreneurs over the age of 40
  • Start-up Infrastructure: members of business incubators
  • Commercialization: one-person business
  • App Factory: prospective entrepreneurs and businesses less than 1 yr old

Others

(KRW 45bn)

- 8/18 -

slide11

Ⅲ. Korea’s Youth Start-up Promotion Policy

Major Start-up Grants(Realization of Start-up)

(KRW billion)

- 9/18 -

slide12

Ⅲ. Korea’s Start-up Promotion Policy

Loans

3

  • Venture Start-up (KRW 1.27 trillion): SMEs less than 5 years old
  • Young Entrepreneurs (KRW 160bn): Entrepreneurs under the age of 39;
  • SMEs less than 3 years old

Loans for start-ups

(KRW 1.43 trillion)

(KRW billion)

- 10/18 -

slide13

Ⅲ. Korea’s Youth Start-up Promotion Policy

Mechanism of Young Entrepreneurs Loan

Fixed annual interest rate of 2.7%

Up to 100% of the principal may

be relieved.

Repayment obligation (past-due interest)

Young Entrepreneurs Loan → Minimizing the fear of failure

- 11/18 -

slide14

Ⅲ. Korea’s Youth Start-up Promotion Policy

Investments

4

Young Entrepreneurs Investment Fund(Korea Venture Investment Corp)

FundSize: KRW 120bn

Eligibility: young entrepreneurs under 39

Fund Management Mechanism

Investment up to KRW 0.5~1.5bn per business

Public org./College/

Research institutes

Fund of funds

Angel Investment Matching Fund (KVIC)

Invest

Fund size: KRW 350bn

Angel investors

Angel Investment Matching Fund

Eligibility: prospective entrepreneurs,

businesses less than 3 years old

Matching /Investment & returns

Services

Investment and returns

Investment up to KRW 300m per business

Start-ups

Angel Investment Support Center

Hybrid Financing (SBC)

Follow-upsupport

Growth-sharing : KRW 40bn (CB purchase)

Profit-sharing : KRW 110bn

(Super-low interest rate loans under the condition of

sharing in a slice of operating performance)

- 12/18 -

slide15

Ⅳ . Young Entrepreneurs Start-up Academy

Background

1

Youth and high-tech start-ups have declined sharply despite steadfast increases in start-ups.

* Fear of failure decrease in youth start-upsaging CEOs of SMEs economicgrowth potential

threatened

No. of start-ups

in high-tech manufacturing

Venture CEOs

in their 20s & 30s

No. of start-up SMEs

Comprehensive package of finance, training, coaching, office space, product development equipment, and follow-up services (marketing and loans) is necessary to overcome uncertainties at the beginning of business start-up.

Promoting youth high-tech start-ups + Generating jobs for youth+ Addressing aging SME CEOs

Young Entrepreneurs Start-up Academy opened in March, 2011.

- 13/18 -

slide16

Ⅳ. Young EntrepreneursStart-up Academy

SBC’s 33 years of expertise in SME support Zero in on young entrepreneurs start-ups

  • Providing loans to SMEs
  • - Business start-ups (prospective start-ups, SMEs, venture businesses), new growth,
  • commercialization of R&D results and business conversion loans
  • - Emergency business stabilization, small merchants and hybrid financing

Loans

(policy fund)

  • Developing HR for SMEs and promote start-ups by young entrepreneurs
  • - Enhancing management skills of CEOs (CEO course) and capabilities of employees
  • - Running the young entrepreneurs start-up academy

HR

(HR development)

  • Supporting early stages marketing and global cooperation
  • -Bolsteringlocal and overseas marketing of SMEs’ products: (domestic) HIT500,
  • (overseas) trade delegations, etc.
  • - Korea Desks(Malaysia, Indonesia), SME Support Center (Qingdao),
  • Industrial Coordinators (U.S., Japan, Germany and Dubai)

Marketing

  • Resolving problems through company diagnosis and mismatch of jobs for SMEs
  • - Providing tailored support through company diagnosis
  • (consulting, foreign employment support, etc.)
  • - Addressing job mismatch by improving likability of SMEs to young job seekers
  • (Smile Story)

Technology

(consultancy, etc.)

- 14/18 -

slide17

Ⅳ. Young EntrepreneursStart-up Academy

Role of Young Entrepreneurs

Start-up Academy

2

Helping start-ups head off Death Valley

Easy

  • < Young Entrepreneurs
  • Start-up Academy >
  • Technology development & loans
  • Specialized training & 1:1 coaching
  • One-stop services for
  • Marketing & HR management

Research projects

  • Government fund
  • -Loan: KRW 3.8trillion -Guarantee: KRW 57.2trillion
  • Investment
  • Private funds

Financing

Overcome

Death

Valley

  • Government
  • R&D
  • (KRW 16 trillion)
  • Personal Investment
  • (KRW30-100m)

Establishment

Difficult

Basic research

Commercialization

Development/prototype

- 15/18 -

Success rate of R&D commercialization in Korea:

10-40% (past 2 years: 37.7%)

(UK:70%, USA:69.3%, Japan:54.1%)

slide18

Ⅳ. Young EntrepreneursStart-up Academy

Operation and Process

3

Budget

KRW 25.4bn for 2013 (KRW 20bn in 2012)

Eligibility

  • Ages under 39; CEOs whose startups are 3 yrs or less

* Technology - intensive SMEs that strengthen job and value creation

(manufacturing and knowledge services)

Support

R&D

Grants

Links

Space

Entrepreneurship+ practical skills

70% of the total expenses up to KRW 100 mil

24 Experts

1:1 coaching

Loans, investment, marketing, etc

Office, R&D rooms, etc.

System

Education

Coaching

- 16/18 -

slide19

Ⅳ. Young EntrepreneursStart-up Academy

Differentiated Features

4

  • Korea’s an unparalleled one-stop(one-roof) start-up support package
  • for young entrepreneurs
  • Providing comprehensive supporting tools to increase high-tech start-up and
  • improve the success rate

Boosting success rates

  • Focus on fostering qualified (future-oriented) young CEOs
  • Zooming in enhancing CEOs’ attitude and abilities as well as their success in new
  • product development
  • A dropout system(two mid-term tests, bottom 10% of trainees departed)
  • Guaranteeing the full independence to trainees but ruling out undevotedtrainees by
  • interim evaluation
  • evaluations
  • Follow up Services
  • Continuing post-graduate supports Tracing business records in a span of 5
  • years after graduation
  • * Rewarding distinguished graduates with an additional loans up to KRW100 mil for one year

- 17/18 -

slide20

Ⅳ. Young EntrepreneursStart-up Academy

Major Achievements

5

Major achievements forthe pasttwo years

-Regional expansion: (’11) Ansanacademy(’12) Gwangu, Kyeongsan, Changwon

  • All graduates have started up their businesses, posting strong revenues
  • and creating new jobs.

- 18/18 -