At Creative Korea 2013, which for the first time is held under and attended by the Park Geun-hye, President of Korea, the highly discussed Crowd-funding is expected to contribute greatly to President Park’s creative economy.
Recently the President Park said that “Crowd-funding is the beginning of the creative economy,” showing that presently the mainstream form of financial support is shifting from bank loans to direct investments and loans from the public. The barrier between the financial world and middle and small ventures low on money turns out to be too high, and many ventures are looking to crowd-funding as an alternative.
The government is trying to emphasize the creative economy in order to vitalize, promote, and protect small and medium companies. However, one-hundred thousand companies are too many for the national budget and a single organization to supervise. Many companies with brilliant ideas and technologies are shutting down due to financial difficulty.
According to a recent report by the Korea Chamber of Commerce and Industry, 45% of medium and small companies have financial difficulties and require government aid, but, due to a limited budget, so does the government. The globally popular crowd-funding is a response for these companies.
In crowd-funding the public collects and invests money into companies, businesses, and individuals that require funding, dividing into quota investment and a bond loan investment type. The burden to investors is small as they had only invested a small sum but can expect a return of dividends, listing, interest, and rewards. The companies receiving the investment will have a special advantage whereby they settle their financial difficulties and at the same time advertise their company and products to the general public.
President Park quickly noticed the importance of crowd-funding, where the people can help create a healthy circulation of funds, and even trigger a second ``Saemaeul Movement’’ through social media, and assigned it as a priority task strongly pushing legislation towards crowd-funding.
There are practical examples of medium and small companies that have mended financial difficulties through crowd-funding. Company A, although exporting to the United States and increasing the number of clients in the domestic market, needs funding for R&D and production capital. Company A visits several financial institutions to secure capital, but becomes frustrated after realizing it is improbable for a venture to assume a loan. Within ten days Company A receives a three-for-one package; ₩100,000,000 from 85 investors, tailored consulting on fund attraction, and online and offline promotions.
Company A’s story is that of ‘Semi-Link’, an exporting company that sells smart phone peripherals based on Bluetooth 4.0. Currently many other projects are conducted at Opportune. In the case of Semi-Link, the one-hundred million won was secured with early closure and a second project is being conducted. Joon & Lin, a toddler bicycle company also has successfully finished its first project and is undertaking its second.
At Venture Korea 2013 President Park also emphasized that “Ventures will be the center of the creative economy’s core value with its convergence.” The President also has promised further support, saying that the “Creative Economy has bypassed the trillion won line and actual investments have increased by 20% in comparison with last year. Ventures will lead the way in the convergence, the core value of economy.” The most basic means to nurturing ventures and medium and small companies is to vitalize crowd-funding.