Is Equity-Financing Always Optimal for Innovative SMEs? --How ...

第 25 期back. Thus, equity financing enables them to have a second chance to do better with lessonslearnt from previous failure. The reasoning is very sound at a glimpse, but it is in fact from alimited perspective.2.The performance of Venture Capitals in KoreaHaving said that VC funding is an important source for financing SMEs with highgrowth potential especially at their early stage, it is worth looking at the performance dataregarding VCs in Korea.The idea that existing public institutions are mostly inefficient and lingering remnantsof the past period in which government could, but no longer, command and control theoverall industrial development was reinforced through myopic reliance on market.In this circumstance, some VCs in Korea raised their voice that KOTEC had beencrowding them out by dominating opportunities for financing innovative ventures. Thisvoice was heard by fiscal policymakers and resonated with their mission of reducinggovernment spending. As a result, fiscal policymakers, while being well aware of theimportance of cultivating competitive SMEs, began to seek cheaper market alternatives tofund critical strategic ventures from VCs.The VC funding had hit its peak in 2000 during the heyday of venture bubble reachingtotal supply of 2.2 trillion Korean Won. The size of newly established funds in the same yearwas 1.4 trillion Korean Won. The total size of newly established fund was dramaticallyreduced to 0.79 trillion Korean Won in 2001 after the bubble burst. This number has beencontinuously stagnant until 2008, and the number of VCs has also decreased from 170 in144