This article was published on April 29, 2013

Kakao partners with the Korean government to launch a joint $27 million startup fund


Kakao partners with the Korean government to launch a joint $27 million startup fund

Kakao, the developer of successful mobile messaging service Kakao Talk and social network Kakao Story, has linked up with the government in its home country of South Korea to help support startups through a joint $27 million investment fund.

Korean tech news site ET News reports that the Small & Medium Business Administration (SMBA) and Kakao signed an agreement to create the ‘Kakao Young Entrepreneur Fund’, which is worth an initial 30 billion won (around $27 million). This is notable as it is the first time that a successful tech firm has paired up with the government to create such a initiative.

The fund supports the rapidly increasing number of young companies that work with mobile technology, apps and, more broadly, ICT industry. Kakao and SMBA says that it will focus on investing in businesses that create jobs for the younger generation in Korea. Specifically, founders aged under 40 with less than three years of experience are the target, as are companies that more than half of their workforce aged under 30.

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The fund is scheduled to launch in May and it includes a 10 billion won ($9 million) contribution from Kakao. In follows on from Kakao founder and serial entrepreneur Brian Kim new startup-focused venture capital firm K Cube Ventures, which was established last year and has invested in 12 companies so far.

Some have gone so far as to say that this new fund may open the road for a “Paypal Mafia” type effect on Korea’s venture ecosystem. That’s because, previously, reinvestment in new companies and serial entrepreneurship hardly happened in Korea due to capital loans, takeovers and inadequate recovery on the finance markets.

Kakao has plenty of income at its disposal. Among its many products, the Kakao Talk mobile chat service is used by approaching 100 million smartphone owners worldwide and it recorded revenue of $42 million last year, thanks to the launch of its in-app games center in the final part of the year. Given its momentum, revenue for 2013 is likely to be higher still.

The SMBA has plans to take on other successful venture companies and increase the Young Entrepreneur Fund kitty to between 40 billion and 100 billion won ($36 million-$90 million). The planning is long-term and extend to 2017, by which time it is hoped that the fund will have invested some 260 billion won ($235 million) in Korean startups.

Kakao president Seok-woo Lee said that the new venture is “different to existing funds which only invest, our investors will also share entrepreneur experience and know-how.”

Director of the SMBA Jeon-hwa Han stressed the potential to help youth and committed to two more funds:

“We plan to make this year one in which we create a Korean venture and entrepreneur ecosystem where our youth can really put in all they want. In the future we will create second and third versions of the Kakao fund with leading ventures, and focus on revitalizing M&A between companies and the KOSAQ market, as well as policy to increase angel investment finance.”

Related: Korean chat app-maker Kakao launches ‘Pages’, a mobile marketplace for content creators

Headline image via Park Ji-Hwan/Getty Images

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