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May 23, 2013 VI Astana Economic Forum Koreas Start-up Promotion Policy - Young Entrepreneurs Start-up Academy -

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Presentation on theme: "May 23, 2013 VI Astana Economic Forum Koreas Start-up Promotion Policy - Young Entrepreneurs Start-up Academy -"— Presentation transcript:

1 May 23, 2013 VI Astana Economic Forum Koreas Start-up Promotion Policy - Young Entrepreneurs Start-up Academy -

2 I Koreas Economic Growth and Role of SMEs II Importance of Youth Start-ups III Koreas Youth Start-up Promotion Policy Young Entrepreneurs Start-up Academy IV Contents Contents

3 - GNI (Gross National Income): (1953) $67 (2012) $22,720 Korea has transformed from one of the poorest countries into one of the tenth largest economies in just about 50 years of economic development. The economy has grown 300 times in 60 years since the establishment of Korean government. 96 ($12,518) 07 ($21,632) Asian Economic Crisis ($7,607) 1 st ( ` 73) & 2 nd ( ` 79) Oil Shocks Olympic Games (1988) 5-Year Plan for Economic Development (1962 ~ 1981) Korean War (1950 ~ 1953) Financial Crisis ($17,041) Rapid Growth Economic Stability (1970s~1980s) Transition (1990s) Mature Stage (2000s~) Industrialization (1960s) 4855657585950512 Fiscal Crisis (2012) ($22,720) Korea s Economic Growth and Role of SMEs. Development of the Korean Economy 1 - 1/18 - Gov. Establishment (1948)

4 No. of Businesses No. of Employees Added Value SMEs: (1980) 29,779 (96.6%) (2010) 112,897 (99.5%) * Large Companies: (1980) 1,044 (3.4%) (2010) 618 (0.5%) SMEs: (1980) 1,000,000 (49.6%) (2010) 2,289,000 (77.1%) * Large Companies: (1980) 1,015,000 (50.4%) (2010) 679,000 (22.9%) SMEs: (1980)KRW 4.2 trillion(35.2%) (2010)KRW 215.7 trillion47.4%) * Large Companies: (1980)KRW7.7 trillion (64.8%) (2010) KRW 239 trillion (52.6%). Korea s Economic Growth and Role of SMEs - 2/18 - Growing Status of SMEs 2

5 Source of Technological Innovation - 3/18 - Key to National Economic Growth R&D budgets of SMEs have grown to a 18.6% of annual average since the year of 2005. * Much higher compared with large companies (10.5%) and medium companies (9.6%) Job Creation SMEs created 320,000 new jobs in a decade (1999~2009). (Unit: thousands) Growth Rate of R&D Budgets No. of Employees (with 5 or more employees) (Unit: KRW 100bn) Added Value (with 5 or more employees) Added value from SMEs has continually increased in a decade (1999~2009), making bigger contributions than large companies. * Added value contribution rate (2009) - SMEs: 50.5%, - Large Companies: 49.5% Role of SMEs 3. Korea s Economic Growth and Role of SMEs `99`09 `99`09 678 648 1,830 2,150 4.5% Large Companies Medium Companies SMEs 10.5% 9.6% 18.6 % 1,038 1,945 971 1,982 87.4% 104.1 % `99`09 `99`09 17.5 % (2005~2010 Annual Average) Large Companies SMEs Large Companies SMEs * Large companies saw a decrease of 30,000 jobs

6 The number of new businesses is on the rise in recent years, but youth start-ups have been slowing down. Koreas entrepreneurship index has been on a declining trend. Youth joblessness, being twice higher than national unemployment, has become a social issue. Importance of Youth Start-ups II. Youth Unemployment - 4/18 - Entrepreneurship Index CEOs in their 20s and 30s Start-up CEOs under 30s (%) (Source: SMBA) (47.6%) (18.3%) (53) (65) - Young people afraid of failure and taking chances `00 `09 (11th) (16th) (19th) (13th) (6th) (3th) (Source: Donga Ilbo Entrepreneurship Center-Deloitte Consulting) - Downward in innovative start-ups, but upward in self-employed for a living Unemployment rate (%) (7.6) (8.1) (3.6) (4.2) (Source: Statistics Korea) - Preference for government jobs and large companies (7.7) (3.2) (8.5) Increasing jobs and encouraging entrepreneurship through youth start-ups No. of start-ups (thousands) Breakthrough in Current Economic Difficulties 1 Unemployment ( Total) Unemployment (Youth) No. of start-upsCEOs under 30s

7 - 5/18 - 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) (Job creation) II. Importance of Youth Start-ups Driving force of Income and Job Generation 2 Annual Income KRW 100m 30354045505560 Age Successful start-up businesses Employment Start-up Employment = Start-up Employment Start-up Retirement Failure Lay-Off Failure

8 - 6/18 - Nurturing innovative entrepreneurs by promoting youth start-ups - Innovative young entrepreneurs: leaders of job creation and creative destruction Inventor Promoter Entrepreneur Manager Creativity High Low Managerial skills and networks Low High A thrust of knowledge/creative economy (New Korean Government Policy) based on scientific and technological advancement Creative start-ups exploring the blue ocean Advancing Challenger Entrepreneurship 3 II. Importance of Youth Start-ups

9 - 7/18 - III. Korea s Youth Start-up Promotion PolicyGrantsLoansInvestments Type Grants for opening a business and developing technology Loans for particular policy (e.g. start-up promotion) Investments for expected returns Repayment responsibility Low (none) High (principal and interest) Medium Period 1 ~ 2 years3 ~ 10 years5 ~ 10 years Key components - Young Entrepreneurs Start-up Academy - Business Incubation College - Start-up Tailored Program - Young Entrepreneurs Loan - Venture Start-up Loan - Small Merchant Loan - Young Entrepreneurs Investment - Start-up Angel Investment - Hybrid Financing Policy Direction Building infrastructure that harnesses any entrepreneurs with ambition and marketable technology Creating an environment for advancing entrepreneurship and giving second chances Programs Policy Direction and Programs 1

10 Realization of Start-up (KRW 129bn ) - 8/18 - Start-up 16 programs KRW 187bn 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 Start-up Capability Building Training: prospective entrepreneurs over the age of 40 Senior Biz Plaza: prospective entrepreneurs over the age of 40 Senior Start-up (KRW 1.5bn) 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) Grants 2. Korea s Youth Start-up Promotion Policy

11 - 9/18 - Major Start-up Grants(Realization of Start-up) PurposeEligibility Total Budget (2013) Implementing authorities Business Incubation College Overview: 18 colleges providing entrepreneurs with packaged services for each preparation phase to start up a business Service: business launch; training; mentoring; office space, etc. * Grants: within 70% of individual project costs, up to KRW 50m Prospective entrepreneurs ; businesses less than 1 year old 40.218 colleges Young Entrepreneurs Start-up Academy Overview: a one-stop shop for entrepreneurs under the age of 39 with high technology; and businesses less than 3 years old Service: business launch; training and coaching; office space; equipment for product development, etc. * Grants: within 70% of individual project costs, up to KRW 100m Prospective entrepreneurs under the age of 39; businesses less than 3 years old 25.4 SBC Start-up Tailored Program Overview: supporting product/technology commercialization via colleges and other relevant organizations Service: prototype production; marketing activities, etc. * Grants: within 70% of individual project costs, up to KRW 50m Prospective entrepreneurs; businesses less than 1 year old 50 Colleges and private institutions (KRW billion). Korea s Youth Start-up Promotion Policy

12 - 10/18 - Loans for start-ups (KRW 1.43 trillion) 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 PurposeEligibility Interest rate Total budget Loan Limit Venture Start-up Loan Facilities, Equipment and working capital Businesses less than 5 years old 3. 29%1,270 KRW 3bn Young Entrepren eurs Loans Flexible repayment Working capital (manufacturing, knowledge-based services, and cultural contents industries) Entrepreneurs under 39; businesses less than 3 years old 2. 70%80 KRW 100m Matching with private lenders Working capital (manufacturing, knowledge-based services, and cultural contents industries) Entrepreneurs under 39; businesses less than 3 years old 2. 70%80 KRW 100m. Korea s Start-up Promotion Policy Loans 3 (KRW billion)

13 - 11/18 - Mechanism of Young Entrepreneurs Loan Lending up to KRW 100m for start-ups Failure in business Bona Fide (Debt relief) Moral hazard (Credit delinquents) Success in business Regular repayment (5-year installment plan) Start-up consultancy Due diligence for debt relief Debt-equity swap (if the business is most likely to turn around) Up to 100% of the principal may be relieved. Young Entrepreneurs Loan Minimizing the fear of failure Fixed annual interest rate of 2.7% Repayment obligation (past-due interest). Korea s Youth Start-up Promotion Policy

14 - 12/18 - Fund Management Mechanism Fund of funds Public org./College/ Research institutes Angel Investment Matching Fund Start-ups Angel investors Angel Investment Support Center Invest Matching /Investment & returns Investment and returns Follow-up support Services Investments 4. Korea s Youth Start-up Promotion Policy Young Entrepreneurs Investment Fund(Korea Venture Investment Corp) Fund Size : KRW 120bn Eligibility: young entrepreneurs under 39 Investment up to KRW 0.5~1.5bn per business Angel Investment Matching Fund (KVIC) Fund size: KRW 350bn Eligibility: prospective entrepreneurs, businesses less than 3 years old Investment up to KRW 300m per business Hybrid Financing (SBC) 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)

15 - 13/18 - Youth and high-tech start-ups have declined sharply despite steadfast increases in start-ups. No. of start-up SMEs Venture CEOs in their 20s & 30s No. of start-ups in high-tech manufacturing 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.. Young Entrepreneurs Start-up Academy Background 1 * Fear of failure decrease in youth start-ups aging CEOs of SMEs economic growth potential threatened

16 - 14/18 - Loans (policy fund) Loans (policy fund) 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 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 Marketing HR (HR development) HR (HR development) Supporting early stages marketing and global cooperation - Bolstering local 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) Technology (consultancy, etc.) Technology (consultancy, etc.) 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) SBC s 33 years of expertise in SME support Zero in on young entrepreneurs start-ups. Young Entrepreneurs Start-up Academy

17 - 15/18 - Establishment Research projects Helping start-ups head off Death Valley Success rate of R&D commercialization in Korea: 10-40% (past 2 years: 37.7%) (UK: 70%, USA: 69.3%, Japan: 54.1%) OvercomeDeathValley < Young Entrepreneurs Start-up Academy > Technology development & loans Specialized training & 1:1 coaching One-stop services for Marketing & HR management Government fund -Loan: KRW 3.8trillion -Guarantee: KRW 57.2trillion Investment Private funds Government R&D (KRW 16 trillion) Personal Investment (KRW 30-100m) Financing Easy Difficult Development/prototype Commercialization Basic research Role of Young Entrepreneurs Start-up Academy 2. Young Entrepreneurs Start-up Academy

18 - 16/18 - Budget Eligibility KRW 25.4bn KRW 25.4bn for 2013 (KRW 20bn in 2012) Ages under 39CEOs whose startups are 3 yrs or less Ages under 39; CEOs whose startups are 3 yrs or less * Technology - intensive SMEs that strengthen job and value creation manufacturing and knowledge services (manufacturing and knowledge services) Support System Operation and Process 3. Young Entrepreneurs Start-up Academy 70% of the total expenses up to KRW 100 milR&DGrants Office, R&D rooms, etc. Space Entrepreneurship + practical skills 24 Experts 1:1 coaching Loans, investment, marketing, etc Links Education Coaching

19 - 17/18 - one-stopstart-up support package Koreas 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 qualified young CEOs Focus on fostering qualified (future-oriented) young CEOs - Zooming in enhancing CEOs attitude and abilities as well as their success in new product development dropout system A dropout system (two mid-term tests, bottom 10% of trainees departed) - Guaranteeing the full independence to trainees but ruling out undevoted trainees 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 Boosting success rates Differentiated Features 4. Young Entrepreneurs Start-up Academy

20 - 18/18 - - Regional expansion: ( 11) Ansan academy ( 12) Gwangu, Kyeongsan, Changwon Class 2011Class 2012 Ansan center 188167 Regional centers2446 Total 212213 Major achievements for the past two years No. of start-ups212213 RevenuesKRW 47bnKRW 14.1bn No. of new jobs757686 No. of new intellectual property rights 793584 - All graduates have started up their businesses, posting strong revenues and creating new jobs. Major Achievements 5. Young Entrepreneurs Start-up Academy

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