South Korean Government has established guidelines and general evaluation model for distinguishing social venture companies. It is going to give high points to social venture companies that are able to make impact investments and it has actively applied standards of private market experts.
South Korean Government is planning to clearly state the concept of social venture company, which has been vague, and utilize it to select social venture companies that will receive government support.
It is also expecting an increase in private investments by providing general evaluation model. Its ultimate plan is to extend social venture companies to entire social economy by systematically supporting social venture companies that emerge spontaneously.
According to industries, Ministry of SMEs and Startups (MSS) and Korea Technology Finance Corporation recently established guidelines and general evaluation model for distinguishing social venture companies and held a public hearing to gather different opinions. They are going to apply public opinions from the public hearing, go through improvement process and receive final approvals from private experts, and announce guidelines and evaluation model by end of this year.
Social Venture companies are companies that create economic and social values through innovative business models. They combine characteristics of social companies that focus on solving social issues and venture companies that focus on creating profit through innovative growth. As various social companies start to emerge with Sungsoo-dong at the center, social venture companies have been drawing attention as areas that are able to create jobs for young men and women and have high potential in growth.
MSS announced its ‘plan to create jobs by vitalizing social venture industry’ at the 6th Jobs Committee’, which was held in May, and its plan to establish Social Venture Valley in Sungsoo-dong and to build social impact investment fund worth $107 million (120 billion KRW) because it believed that there needed to be conditions for vitalizing social venture industry as it has high percentage of young employees and creates jobs depending on a type of a social venture company.
Afterwards, MSS has pushed for establishment of guidelines and evaluation model as main priority task to achieve its plans.
Guidelines were established by a task force that was composed of private experts, social venture entrepreneurs, impact investors, and public organizations. They are formed of 12 items for evaluating one’s sociality and 14 items for evaluation one’s innovative growth. These items are based on different points depending on their levels of importance. A company is categorized as a social venture company if it receives at least 70 points from each category. However, a company can also be categorized as a social venture company if it is acknowledged by an advisory committee that is composed of CEOs of social venture companies with more than 3 years of experiences.
A company that is able to attract investments of more than $44,600 (50 million KRW) from social impact field receives 100 points from both categories of sociality and innovative growth because it indicates that a company is already verified of its sociality and growth.
“We are basically acknowledging current markets experts that have been making investments in social venture field.” said a representative for MSS. “We have focused on preparing flexible standards rather than standardized standards to expand the base.”
Evaluation on a company’s innovative growth focuses on possession of legal certifications (100 points), sales and average annual increase rate of employees in the past 3 years (100 points), intellectual property (40 points), research and development fund (40 points), and awards from competitive exhibitions. Evaluation on sociality also gives the highest points on possession of legal certifications (100 points) and it also focuses on B-Corp certification (50 points), specification of social issues within articles of association (50 points), specification of principles on profit distribution (50 points), and awards from relevant competitions.
These guidelines will be first used to select candidates for Korea Technology Finance Corporation’s open voucher for social venture companies worth $8.92 million (10 billion KRW). They can also be used by impact investors, banks, and public organizations in the future by applying their own characteristics into these guidelines.
“We have prepared institutional social venture foundation to create more jobs.” said a representative for MSS. “We hope that other departments and private organizations to use these guidelines.”
Staff Reporter Park, Jungeun | jepark@etnews.com