Korea Fund of Funds (KFoF)

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The Korea Fund of Funds is a long-term, government-led fund-of-funds policy launched to boost venture capital investment and grow innovative startups and SMEs in South Korea.
What are the main aims and objectives?

The Korea Fund of Funds aims to address structural inefficiencies and capital gaps in Korea’s venture capital market by providing stable and large-scale investment to startups and SMEs. The program seeks to drive technology commercialization, support industrial transformation, create jobs, and attract further private and foreign investment into Korea’s entrepreneurial ecosystem. Created in response to a contraction in private venture capital, its objectives closely align with national priorities such as boosting competitiveness in future industries, promoting economic resilience, and scaling global “unicorns”—high-growth, billion-dollar companies.

How does the program work?

The Korea Fund of Funds operates as a government-backed fund-of-funds structure. Thirteen ministries and agencies, including the Ministry of SMEs and Startups and the Ministry of Economy and Finance, contribute capital as limited partners (LPs). The Korea Venture Investment Corporation (KVIC) manages the fund by investing indirectly into venture capital and private equity vehicles managed by private-sector general partners (GPs). Each year, KVIC releases public calls for new sub-funds, selecting GPs through competitive tendering based on sector focus, innovation potential, and capacity. KFoF typically commits up to 40% of each sub-fund’s capital, encouraging the private market to invest alongside the fund and leveraging its commitments to create a multiplier effect—often forming funds three to four times larger than the public investment.

The fund prioritizes innovative and high-growth sectors, including AI, semiconductors, green energy, health, and companies aiming for stock market listing on KOSDAQ. KFoF does not invest directly in startups; it enables professional VC firms to identify, select, and support promising ventures. Fund managers are required to align with government goals, maintain robust reporting and compliance standards, and manage annual reviews. The fund supports a mix of blind funds, project-specific funds, co-investment arrangements, and secondary market engagement, responding flexibly to economic changes and crises.

Through annual capital calls and new sub-funds—on average, more than 100 per year—KFoF strengthens Korea’s venture ecosystem by providing consistent, scalable sources of investment. Government oversight ensures policy objectives are met, while KPIs and performance incentives encourage effective fund management and impactful investment choices.

What is the overall cost?

As of December 2022, the Korea Fund of Funds managed KRW6.8 trillion (about $5.1 billion USD). Funding is provided primarily by central government ministries and agencies, with annual allocations ranging from KRW500 billion to KRW1 trillion. In 2024, for example, KFoF invested an additional KRW150 billion ($115 million USD) towards global expansion, leveraging its structure to form new venture funds worth KRW1.2 trillion ($920 million USD).

How was it implemented?

The Korea Fund of Funds was created in 2005, following the enactment of the “Special Measures for the Promotion of Venture Businesses Act” during a period of contraction in private venture funding. The government pooled resources from multiple ministries to establish the fund, appointing the Korea Venture Investment Corporation (KVIC) as its dedicated manager. KVIC designed transparent solicitation processes for selecting private fund managers and set up performance tracking and reporting systems.

Implementation required hiring specialists in fund management and compliance. Training programs focused on global venture capital standards, risk assessment, and policy alignment. Advisors such as Dr. Sung Min Park (Korea Development Institute) and senior officials at KVIC played key roles in establishing operational frameworks and providing policy guidance. Each year since launch, the fund has introduced new sub-funds based on market needs and government priorities—such as rapid-response funds for COVID-19, sector-specific funds for green growth, and global initiative funds in 2024.

Key implementation milestones:

  • 2005: Policy enacted and KFoF launched
  • 2007: First wave of sub-funds created
  • 2014–2019: KFoF reaches 20% market share of Korean VC; sector-specific funds launched
  • 2020–2024: New funds for crisis response and global expansion; annual capital increased
What lessons can be learned?

According to recent data, Korean companies (2,978 firms) that received venture fund investment—including those supported by the Korea Fund of Funds—created, on average, 12 new jobs per company during a measured period.

Academic research found that the fund has supported approximately 20% of Korea’s venture capital fundraising since its inception, catalyzing private investment pools up to four times larger than its public commitment. More than 1,000 startups a year benefit from KFoF-backed funds, including several unicorns (Viva Republica, Woowa Brothers, Daangn Market). The policy created thousands of jobs, drove commercialization of high-tech innovations, and stabilized Korea’s venture market during periods of economic uncertainty.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom