1995-1997, Coming of Age, Part 2

05. Venture Startup Roadshow and Entrepreneurial Fever

1) Gather round, Korea's Bill Gates!

In the second half of 1996, an event that changed the history of Korean venture companies appeared. It was the 'Venture Startup Roadshow' that traveled around the country to promote startups. The roadshow was the most active project among the concrete measures to fulfill the Venture Business Vision 2005. In fact, at a time when the term "venture business" was unfamiliar, the event sparked a venture boom in university towns.

The event, which was designed to spread the spirit of venture and promote venture creation, began with Seoul National University. More than 500 people, including students from Seoul National University's College of Engineering, attended the event and showed their interest in venture companies. The catchphrase of the event, which was organized by the Venture Business Association as part of its first anniversary project, was "Gather the Bill Gates of Korea!" The students' eyes lit up with excitement, indicating the potential enthusiasm for venture startups in Korea at the time.

At the event, Lee Chan-jin, president of Hangeul Science and Computer, who had started a successful venture, presented his own success story, and the enthusiasm that rose above the seriousness of the students is still deeply etched in many people's minds. Despite the professors' recommendations, the students did not leave until the end of the event, and the number of students increased as time went on. The lecturers explained the government's startup support system and ways to raise funds, and the Q&A period was filled with questions. In short, it was a great success (Song Byung-joon, the president of the Seoul National University Entrepreneurship Club, who organized the event, is now the president of Gameville and an example of a successful venture).

The first roadshow was a success. In the second half of 1996, the company traveled to major universities across the country, including POSTECH, Inha University, and KAIST, and organized a road show that attracted more than 2,000 people. In 1997, the entrepreneurship roadshow continued for science and engineering students, researchers, and professors. From April to June, it was held at Pusan National University, Yonsei University, Hannam University, KAIST, Dong-A University, Nam Seoul National University, Kyungpook National University, and others. In the second half of the year, the enthusiasm for startups spread to Busan National University, Kookmin University, and Chung-Ang University.

Students and researchers who were stimulated by the roadshow began to create startup clubs. As of 1999, there were 126 university student startup clubs funded by the Small and Medium Business Administration, but the number of unregistered "startup teams" was probably much higher. There were 12 regional associations of entrepreneurship clubs, and more than 300 clubs. At the time, there were more than 8,000 active students. As such, the number of students planning or starting a business has increased. In particular, professors have been directly or indirectly involved in the creation of companies while guiding students. The venture startup roadshow was called the "Venture New Village Movement" in the 1990s, and the vice presidents of the association traveled around the country, taking time out of their busy schedules.

The Daily Economic Times reported on the entrepreneurial fever at the time:

• Let's Go, From School to Society - The Case of Seoul National University's Entrepreneurship Club (Dec. 1996)
• "Venture Wind" in Sinchon University District (May 3, 1997)
• Venture Startup Roadshow attended by a large number of students (1997. 5. 9.)
• Venture startup fever at KIST (1997. 5. 17.)
• University startup fever spreads rapidly to rural areas (1997. 5. 23.)
• University student entrepreneurship spreads across the country... Venture startup roadshows are popular (1997. 6. 5.)

At that time, broadcasters and newspapers broadcast the venture startup roadshows live in real time. This soon impressed policy makers. In addition, the Nasdaq of the United States added to the venture fever atmosphere. This hope led to the adoption of a venture promotion plan as a campaign promise during the 1997 presidential election, and the president-elect also recognized the importance of ventures. It was also at this time that the Korean media began to use the term venture, especially the Daily Economic Times, which co-hosted a startup roadshow with the Venture Business Association to introduce the term venture to the public. During this process, many people were curious about the term 'venture company' that appeared in the media every day, and the media organization was inundated with phone calls inquiring about it. As the government and political circles became more interested in ventures, other media outlets began to take an interest in them, and eventually, the public began to take an interest in ventures, leading to a national boom.

2) After the Startup Roadshow, entrepreneurial fever spreads

After the venture startup roadshow was held and successful ventures were launched one after another, interest in ventures spread to university campuses. Many people from various fields, including students, researchers, and corporate employees, planned new businesses with new technologies and ideas. In response to this social trend, various events related to startups were held.

The enthusiasm for venture startups among university students led to the formation of venture clubs, and in 1997, university student venture clubs were formed at 10 universities nationwide, including KAIST, Seoul National University, and POSTECH. The Busan area was particularly active. In 1997, there were six venture clubs in the Busan area, including ING at Dongseo University, IBM at Dong-A University, Venture Enterprise Research Association at Busan National University, New Vision at Korea University of Broadcasting and Telecommunications, and Good Friends at Pukyong National University. Of these, ING at Dongseo University and IBM at Dong-A University were among 26 universities nationwide selected by the Small and Medium Business Administration to support startup clubs. They received KRW 8 million worth of support for their activities. The Korea University Student Venture Startup Research Association (KVC) was established as a corporation under the leadership of Chairman Kim Young-min.

Research institutes such as KIST have also introduced the researcher startup system in earnest. The enthusiasm for entrepreneurship among researchers has never been higher than in the past, as universities have implemented the "Venture Startup Professors' Leave System" to support professors in the sciences and engineering. Large companies such as LG and Samsung have also begun to introduce in-house venture programs. Since then, there have been many cases of supporting employees to start their own ventures. There have also been a number of events organized by the Small and Medium Business Administration and the Small and Medium Business Promotion Agency to explain the procedures and methods of starting a business and how to manage a company. University and workplace startup schools, startup fairs, venture company national competitions, and university student startup contests organized by the Small and Medium Business Administration and the Small and Medium Business Promotion Corporation were held.

The Venture Business Association's nationwide startup roadshow has become a hot topic in university towns, surpassing the current youth concerts. Later, through the laboratory startup movement, venture startups became the dream of science and engineering students, and venturers finally emerged as the number one groom.

06. Venture is a study

1) Summer School

In 1997, 'Summer School' emerged as an opportunity for venture capitalists to spend their summer vacations with their families and recharge their batteries. This event was proposed by Professor Lee Jang-woo of Kyungpook National University, and was created to provide a place for management education suitable for venture capitalists. The first event was held at the Hyatt Hotel in Jeju Island from August 4 to 7, 1997. More than 30 companies, including Medison and Handysoft, participated in the event, which served as a venture management seminar and a place to exchange information on startup management and share opinions on difficulties in business management. At the first event, more than 110 people, including families, gathered to make presentations on new venture management, discuss management difficulties through the Venture Doctor system, and receive medical treatment.

This event was an expression of the desire of busy venture owners to serve their families. This was because it was difficult for venture capitalists, most of whom were in their 30s and 40s, to spend time with their families. The problem was that the seminar was held until dawn, which amplified the resentment of the families who participated. In fact, according to a survey of its members by the Venture Business Association, venture capitalists work an average of 100 hours per week, or 17 hours per day, excluding Sundays. This was also reflected at the Summer School event. At that time, venture management could not be learned anywhere else, and discussions often went past midnight.

In particular, the enthusiasm shown by the late Dr. Lee Jin-ju, who served as the director of the Institute of Production Technology, greatly inspired the young people who attended the event. The Venture Summer School has been held regularly every year since then and has become an event that seeks to unite venture capitalists.

2) Venture Clinic

The most popular part of the Summer School was the Venture Clinic. Participants were divided into teams to present their business situation and diagnose management problems together. They also discussed with venture doctors to come up with prescriptions and treatments for the companies. Thanks to this, it became the most popular course of the Summer School, and it was rumored to be a course that compared and analyzed the business operation cases of venture companies and provided countermeasures and prescriptions for their difficulties.

Once the 'patient company' is selected, the venture doctors consisting of company representatives are assigned, while the professors serve as advisors. They jointly diagnosed the 'patient company' and prescribed and treated it. The clinic's areas of expertise ranged from corporate organization, marketing, and capital raising, and the companies diagnosed through the Venture Clinic, which was first introduced in 1997, were said to have survived the 1998 IMF crisis. The Venture Clinic is still a useful tool for venture support. It's practical guidance. Based on this experience, an entrepreneurship course was established at KAIST.

A representative case that benefited from the Venture Clinic is Sarom Technology. The company was founded in 1993 by four researchers from KAIST with a capital of 100 million won, specializing in communication software. The company's first product, "Fax Man," a program that allows users to send and receive faxes through a PC, was localized, followed by "Voice Man," which allows users to record phone calls on a PC. The company's sales soared from 400 million won in 1994 to 2 billion won in 1995 and 5 billion won in 1996.

However, the company's rapid growth exposed many internal and external problems. As the pace of development accelerated and the organization grew larger, the family-like organization needed hierarchy and more thorough financial management. The company needed an organizational system and management strategy that could support its growth. To continue to grow, the company had to reorganize its marketing strategy and explore overseas markets.

Venture Clinic offered a variety of solutions to SaRom Technology. First of all, to ensure smooth communication among employees who had been neglected due to rapid growth, the clinic held quarterly all-employee meetings and internal trainings to enhance a sense of belonging and share information. At the same time, it established a systematic quality, work, and personnel management system to clearly identify responsibilities, and recommended that the company receive separate accounting and financial help from specialized consultants in time for its registration on the KOSDAQ market in 1998. We also suggested a marketing strategy to strengthen after-sales service and focus on one region.

With the help of the Venture Clinic, SaeRom Technology has since risen to prominence and become known as 'KOSDAQ Emperor Zhu', attracting attention as a representative venture company in the Tehran Valley and contributing to the establishment of the early Venture Business Association.

07. Enactment of the Venture Company Special Act

The two most important events in the history of Korea's venture industry are 'KOSDAQ' and the 'Venture Company Special Measures Act'. While KOSDAQ quenched the thirst for funding for leading venture firms, the Venture Business Special Measures Act paved the way for the development of startup ventures. This law is almost a Korean invention. No other country in the world has this type of law, and it took only four months from the time it was proposed to the time it was enacted. It was the first time a law had ever been enacted so quickly.

It was in early 1997 when the venture industry said, "The only way to dramatically foster venture companies is to enact a special law." At that time, the financial market was unstable, with large companies such as Hanbo going bankrupt and a chain of companies failing. "Only by enacting a special law can we promote the creation of venture companies and support the revitalization of venture companies," Lee Min-hwa said in an interview with the Korea Economic Daily. On March 27 of that year, the association formally proposed the enactment of the Venture Company Development Act at a meeting with the Minister of Trade, Industry and Energy. In May of that year, the 'Special Measures for Venture Business Development Act' was announced.

Kim Il-seop, chairman of the Venture Committee of the Globalization Promotion Council, played a major role in this process, studying ways to revitalize venture companies and fostering venture companies. The special law was finally enacted in late July. The Globalization Promotion Council, a think tank of the Kim Young-sam government, faithfully backed up the claims of the Venture Business Association. Under the law, all companies that meet certain conditions are recognized as venture companies and receive various supports.

A system for defining and designating venture companies is naturally required for the smooth operation of the Venture Company Special Measures Act. In the United States, there is no term "venture". They just refer to them as start-ups. But a definition was needed to support it. The definition of venture was a difficult part of the process of enacting the Venture Business Special Measures Act. In the end, it was set as "small and medium-sized enterprises centered on research and development." However, the Venture Business Association did not limit itself to small and medium-sized enterprises regardless of the legal definition. A '100 billion venture' with sales of more than 100 billion won is also a venture.

The selection of a venture certification organization has been fiercely contested. If the Venture Business Association became the certification body, the association would become a powerful organization. For this reason, it was agreed not to have a separate certification body. Since then, the Venture Business Special Measures Act has been revised several times and continues to play a central role in Korea's venture support policy.

The Act established a systematic support infrastructure for venture startups in terms of funding, location, and manpower. This systematic support has been exported to many developing countries, including China. The Venture Business Special Measures Act was Korea's 'Venture Saemaul Movement'. Guro Digital Valley, Bundang Valley, etc. are representative examples of the Venture Saemaul Movement, which was accomplished through the venture building system of the Venture Enterprise Special Measures Act without special government support.

Main contents of the Venture Enterprise Special Measures Act (Aug. 13, 1997)

1. Allowing pension funds to invest in venture companies

Various pension funds, which are expected to be worth 59 trillion won in 1997 alone, will be allowed to invest in venture companies. Until now, pension funds had to obtain the approval of the Minister of Finance and Economy to acquire shares in unlisted companies, or were not allowed to do so at all. Under the decree, 76 pension funds, including the Public Employees' Pension Fund, Military Pension Fund, National Pension Fund, and Private School Pension Fund, are eligible to invest under the Fund Management Basic Act. In the U.S., more than 50% of venture capital investment funds are pension funds, so it is expected that investment resources for venture capital will increase.

2. Angel Investor Tax Breaks

Individuals who invest in venture capital, such as angels or investment funds composed of individuals, can receive tax breaks. To be eligible for tax benefits, an individual must have invested in a venture company that has been established for three years or less, or a company that has been converted into a venture company for three years or less, for five years or more. In particular, the investment limit per individual is set at KRW 300 million or less to minimize side effects such as tax evasion and money laundering. However, whether the source of the investment funds is investigated and the specific targets of the tax reduction are covered in the Tax Reduction Regulation Act. The Enforcement Decree alone does not finalize the tax reduction for angel investors.

3. Support for Venture Building Construction

A venture building is a venture concentration facility that concentrates technology and production facilities in one place to promote mutual synergy. State-owned land required for the creation of venture complexes and the construction of venture buildings is sold as public land. Tenant companies can pay the purchase price in installments within 20 years. In addition, when leasing state-owned land, the annual rental rate is set at 0.5% of the property value according to the published land price. The lease period is limited to 20 years, but can be renewed. Companies in the venture building do not need to obtain a rezoning permit to move into the building.

4. Support for technology development

Government departments and government investment institutions can provide funding for technology development to SMEs, including venture companies. There are 10 government ministries, including the Ministry of National Defense, the Ministry of Information and Communication, and the Ministry of Science and ICT, and 8 agencies, including the Korea Electric Power Corporation and Korea Telecommunications Corporation. These organizations can support projects that are developed by SMEs alone or jointly, or by SMEs in collaboration with domestic and foreign universities or research institutes. In particular, they can also support SMEs that are starting up.

5. Formation of the Venture Business Revitalization Committee

This committee is responsible for making decisions on whether or not to include a company as a venture company and the sale of state-owned property. The committee is composed of the heads of 16 government ministries, including the ministers of finance, telecommunications, and defense, as well as private members. The head of the Small and Medium Business Administration is in charge of verifying and notifying venture companies. The head of the Korea Venture Capital Association is in charge of verifying the investment in venture companies by individuals or private investment associations that are eligible for tax reductions. Meanwhile, the Korea Research Institute of Production Technology and the Technology Credit Guarantee Fund have been designated as technology evaluation organizations to evaluate the business feasibility of technologies and facilitate technology investment.

6. Definition of Venture Companies

Venture companies that are subject to the special application are defined as companies that have received more than 10% of their capital from venture capital firms and new technology business finance companies. Venture companies are also recognized as companies whose R&D expenditures accounted for 3% or more of their sales for three consecutive years (later increased to 5%). In addition, companies that are engaged in industrial-based technology development projects under the Industrial Development Act, excellent new technology use projects under the Basic Act on Promotion of Information and Communication, new technology use projects under the Promotion of Technology Development Act, and video production new technology use projects under the Basic Act on Video Promotion are also subject to the special law.