Mother Fund at 20: Patient Capital for Korea's Next Wave of AI, Bio, and Deep Tech

Mother Fund at 20: From Startup Counts to Sustainable Capital Cycles

Korea's venture policy is entering a new phase: less focus on starting more companies, more focus on building a capital engine that can fund winners for a decade. Deep tech, AI, and bio are the priority - and they demand patient capital. The mandate is clear for the public sector: design the system, set the incentives, and keep the flywheel turning.

Why This Matters for Government

Short capital cycles don't work for deep tech. Founders need multi-stage funding, consistent follow-ons, and time to clear regulatory and commercialization hurdles. Government sets the rules of engagement, lowers financing friction, and attracts institutional money at scale.

Forum Snapshot: 20 Years of the Mother Fund

On November 27, the Ministry of SMEs and Startups (MSS) and Korea Venture Investment Corporation (KVIC) hosted the Mother Fund Future Strategy Forum at Sofitel Ambassador Seoul. Policymakers, research institutions, global fund managers, venture firms, and startups assessed how the Fund should evolve for AI, bio, and deep tech.

Sessions covered global pension fund strategies and how to adapt them to Korea. The agenda advanced the Fund's role as a national platform - with regional funds in Busan, Chungnam, and Gangwon already anchoring local deal flow with MSS-KVIC coordination.

Patient Capital: What It Looks Like in Practice

• Extend fund lifecycles and lock in follow-on reserves for Series B-D.
• Use recycled capital from exits to back scale-up rounds, not just new seeds.
• Create specialized sub-funds for AI, bio, and frontier engineering with clear technical diligence standards.
• Blend public guarantees with private LP capital to increase risk tolerance where science risk is high.

Regional Investment as a Platform, Not a Patchwork

Regional Mother Funds reduce concentration in Seoul and accelerate local commercialization. The policy goal is balanced growth with real capital depth, not just grant activity.

• Standardize matching ratios with local governments and publish annual target allocations by stage.
• Incubate regional GPs and co-lead syndicates with national funds to raise round sizes.
• Incentivize tech transfer deals with local universities and national labs through sidecar vehicles.

Mobilizing Institutional Capital the Right Way

AI and deep tech require large, stable LPs. Pension funds and insurers bring scale, but they need clear risk-sharing and exit paths.

• Adopt tiered first-loss structures for deep tech sub-funds to crowd in private LPs.
• Develop a domestic secondaries market to improve DPI and shorten liquidity timelines.
• Run competitive co-investment programs with top global managers to transfer know-how and widen deal access.

For reference on long-term investment principles, see the OECD's work on long-term investment. MSS resources are available via the Ministry of SMEs and Startups.

Metrics That Actually Drive Outcomes

• Shift from startup counts to outcomes: DPI, time-to-exit, and scale-up survival rates.
• Track deep tech-specific KPIs: regulatory approvals, pilot deployments, and corporate procurement wins.
• Publish fund recycling rates annually: investment, exit, reinvestment - make the cycle visible.

Operational Next Steps for MSS and KVIC

• Issue a 10-year fund-of-funds roadmap with stage and sector allocations.
• Guarantee follow-on capacity for top quartile portfolio companies to remove financing cliffs.
• Stand up AI, bio, and advanced manufacturing sub-funds with technical advisory panels.
• Expand regional Mother Funds and set co-investment quotas with national vehicles.
• Launch a deep tech scale-up facility for growth equity and asset-heavy capex.
• Standardize data rooms and diligence templates to reduce transaction costs for founders.
• Create an IPO and M&A policy bundle to improve exits, including incentives for strategic acquisitions.
• Build a domestic secondaries platform with regular auctions to return capital faster.

Capital Recycling as the Core Mechanism

The system works when exits recycle back into new funds and follow-ons - repeatedly. That is how Korea moves from sporadic wins to a reliable engine for AI and deep tech growth.

Leadership Commitment

"We will redefine the Fund's role and develop more detailed strategies centered on innovative ventures and startups to help achieve the national goal of building a 40-trillion-won annual venture investment market." - Lee Dae-hee, CEO of Korea Venture Investment Corporation

Ambition: From Momentum to Endurance

The target is bold: place Korea among the world's top four venture hubs. The third venture boom will be judged by the depth of innovation financed, not the number of incorporations filed.

If the Mother Fund doubles down on patient capital, regional capacity, and measurable recycling, Korea can build a self-sustaining system that compounds every year. That is how public capital accelerates private markets without crowding them out.

Optional Resource for Policy Teams

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