The South Korean government, led by the Ministry of SMEs and Startups (MSS), has introduced a comprehensive 2026 venture investment reform aimed at transforming the nation’s startup ecosystem from policy-led capital into a private-sector driven investment engine as part of its “Four Venture Powerhouses” strategy - an ambitious agenda to position Korea among the top four global venture economies by strengthening capital flow, regulatory flexibility and investor incentives. Under the reform, mandatory investment obligations for venture firms have been eased extending fulfilment periods from three to five years and removing strict annual deployment requirements while archaic divestment limits for portfolio firms acquired by conglomerates have been abolished to improve liquidity conditions for investors. Corporate Venture Capital (CVC) entities now get a nine-month grace period to exit when portfolio firms are reclassified within the same corporate group, and administrative sanction transfer windows in mergers and acquisitions have been capped at two years, reducing operational risks for future investors. Regulatory shifts also expand the permissible scope of venture investments to include unlisted equity and fractional investment trading platforms, broadening backing for fintech innovation, and remove restrictive general partner (GP) investment quotas in venture associations in favour of overall fund-level requirements granting fund managers more strategic flexibility. To attract global capital, non-Korean investors are now permitted to contribute directly using US dollars without currency conversion delays. The reform reduces thresholds for private fund-of-fund formations and boosts accelerator-led investment eligibility, enabling early-stage firms even without prior funding to access capital, and raises corporate contribution caps for regional startup funds- key to nurturing ecosystems outside metropolitan hubs. Tax incentives have also been amplified: additional corporate tax deductions for contributions to private venture funds have increased and special purpose company (SPC) investments now qualify for the same tax advantages as direct funding efforts designed to mobilise broader institutional participation. The scope of eligible statutory funds under the National Finance Act has expanded to include pension and public funds, and the Fund of Funds (Mother Fund) will be able to extend its lifespan in 10-year increments beyond 2035, securing long-term strategic investment continuity especially in priority sectors such as AI, deep tech and export-oriented innovation. #KoreaVentureReform #PrivateCapital #StartupPolicy #InnovationEconomy #FourVenturePowerhouses #VentureInvestment #RegulatoryReform #TechStartups #InvestmentEcosystem #GlobalVC #KoreanStartups #DeepTech #AIStartups #FinTech #EconomicGrowth
