South Korean startups have had a very difficult time this year, with interest rates soaring amid the recession and the government’s startup budget shrinking. Their concerns continue to grow as the situation is unlikely to change next year.
According to the Small and Medium Enterprise Agency, quarterly venture investment fell from 2.2116 trillion won in the first quarter to 1.9111 trillion won in the second quarter and 1.2525 trillion won in the third quarter. Investments in the third quarter were 40.1% lower than last year. For reference, annual investment will hit a record high in 2021, at 7.6802 trillion won, and this year’s figure is likely to be lower.
The government’s startup investment fund has fallen 35 percent to 520 billion won this year. The decline has severely impacted domestic startups that rely heavily on government funding and bank loans. As of 2020, the two account for 64.1 percent and 28.2 percent of new investment, respectively.
The problem is that their environment is unlikely to improve next year. The Fed is likely to raise interest rates in 2023 as well, and the South Korean government recently cut its fund of funds to his 313.5 billion won. Experts say this budget cut is misguided in that startup growth is not possible without continued investment.