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"As the IPO (initial public offering) market slump continues to drag on, the government has pulled out the 'secondary market (pre-IPO trading) activation' card, including introducing a Continuation Fund and providing tax incentives for BDCs (Business Development Corporations). The aim is to help startups receive continuous investment by liquidating funds from venture funds that have reached maturity, rather than forcing IPOs. However, industry experts warn that activating M&A (mergers and acquisitions) is urgently needed to fundamentally improve the exit market's structure."
"According to the Ministry of SMEs and Startups on the 25th, the government has recently begun institutional improvements to introduce a 'Continuation Fund' into fund of funds (Korea Venture Fund). A Continuation Fund is a newly established fund where the operating company (GP) of a maturing fund takes over its portfolio. The Ministry of SMEs and Startups is currently pushing for amendments to regulations allowing fund of funds (Korea Venture Fund), as major limited partners (LPs), to choose reinvestment when the parent fund GP establishes such a fund."
"Park Seung-hwan, Director of the Startup Venture Innovation Office at the Ministry of SMEs and Startups, stated, 'With the exit market shrinking, we are exploring ways to sustain venture investment and liquidate funds. The Continuation Fund is also intended to activate the secondary market and provide more time for venture investments.'"
"The tax exemption special measure for BDCs, which had been stalled, will be re-launched. Although BDCs allow general investors to easily invest in unlisted ventures and startups, their product launches have been delayed due to lack of tax benefits. Consequently, the Ministry of Economy and Finance has decided to reintroduce incentives such as a separate taxation rate of 9.9% for BDC dividend income in next year's tax reform plan. Since BDCs primarily invest in later-stage startups with stable revenue to ensure safety, there is high expectation that they will contribute significantly to activating the secondary market."
"The industry unanimously agrees that activating M&A is the fundamental solution. Relying solely on IPOs and secondary markets has reached its limits in absorbing liquidity in the rapidly growing venture investment market."
"The proportion of exits through M&A in Korea is significantly lower compared to overseas markets. According to K-Venture Capital, in 2025, M&A accounted for only 2.3% by value among exit methods for the parent fund. The majority (90.6%) of exits rely on IPOs and over-the-counter sales. In contrast, the proportion of exits through M&A reaches 47.3% in the U.S. and 46.4% in Europe."
"Some analyses suggest that conservative decision-making by large corporations and stringent regulations are hindering M&A activity. A VC executive noted, 'After Kakao faced criticism for aggressive expansion through startup M&A in the past, corporate willingness to pursue M&A has sharply declined. Recently strengthened regulations on duplicate listings of subsidiaries also act as obstacles, lowering expectations for exits post-M&A.'"
"At the recently held 'Entrepreneurship Ecosystem Strengthening Grand Seminar' hosted by Han Seong-suk (Prime Minister), voices from the field continued. Lee Jung-rae, CEO of Stick Ventures, stated, 'With exits concentrated on IPOs, there is a focus on whether companies have the external appearance to go public rather than their intrinsic value or growth potential. Support for diverse exit methods like M&A is urgently needed.' Kim Young-sik, Director of the Industry-Academia Cooperation Division at UST, added, 'If exit opportunities such as M&A become more diverse, more people will be encouraged to start businesses.'"
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in FUTURE
