Seoul selects KDB Capital, STIC for Nasdaq fund

Local players seek American private equity partner for groundbreaking tech fund.

The Korean Ministry of Information and Communication (MIC) has selected a consortium of two domestic venture capital firms as its partners in a $50 million offshore fund designed to list Korean high-tech companies on Nasdaq, or otherwise integrate them into the Silicon Valley landscape.

KDB Capital, the venture-capital arm of Korea Development Bank, and STIC Venture Capital, a specialist in information technology investing, beat rival domestic consortia and are now in talks with American private equity firms to complete the management team of the so-called Nasdaq Fund. MIC will provide $30 million in seed money and let the consortium manage the investments. The consortium must initially raise $20 million, although one executive involved says a second financing is likely, which would bring the tally to $100 million, making it Korea's largest VC fund.

Korean financiers and MIC officials engineered the idea based on the Israeli model. Thanks in part to a concerted effort between the public and private spheres, there are now 123 Israeli companies listed on Nasdaq, most of them high-tech oriented. There is only one Korean name on Nasdaq, the dotcom Thrunet.

Furthermore the government's previous efforts to place Korean companies in the thick of things in America's tech centres have failed. For example, MIC helped finance a science park in the Silicon Valley area for Korean companies to use รป missing the point that the market externalities of the Valley have little to do with 'hardware' or that governments can simply build a park and create economic magic.

STIC VC is majority owned by STIC Co, although its affiliate Digital Power Communication as well as SK Telecom and Japan's Mitsubishi Corporation are also shareholders. It has already spun off nine investments on Kosdaq, and plans 11 more for 2002.

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