Low Returns on $190M Startup Fund Expose Korea’s Policy Inefficiency in Innovation Finance

Korea’s innovation economy depends not only on ambitious startup programs but also on how effectively public capital is managed. A recent audit has revealed government startup funds have been earning below-market returns, exposing a deeper inefficiency in the country’s financial framework—and raising fresh questions about how well policy mechanisms are fueling real innovation growth. A Policy Gap in Korea’s Innovation Finance System A recent audit has revealed that South Korea’s startup promotion fund—worth approximately KRW 260 billion (USD 190 million)—has been generating below-market returns for years. The revelation underscores persistent inefficiencies in how government-backed capital is managed, raising broader concerns about whether Korea’s public financial mechanisms are effectively supporting innovation-driven growth. According to the National Assembly Budget Office (NABO), the Korea Institute of Startup & Entrepreneurship Development (KISED) has been depositing large volumes of government startup funds into Shinhan Bank since 2019 under an agreement that delivers interest rates 0.82 percentage points below the Bank of Korea’s base rate. The deal, still in effect, covers a total deposit averaging KRW 2.628 billion per year as of 2024. Startup Fund Earned…