A recent assessment reveals that while South Korea's university startups have seen quantitative growth, they have failed to generate stable profits and produce globally leading companies. The Bank of Korea has suggested the need to establish a "growth ladder" throughout the startup process to ensure that excellent university technologies contribute to economic growth.
In a report titled "Establishing a Growth Ladder for the Qualitative Transformation of University Startups: Diagnosis of Stage-Specific Constraints and Policy Tasks," released on June 4, the Bank of Korea outlined these findings.
According to the report, the domestic university startup ecosystem has steadily expanded. The number of university startups increased from 987 in 2011 to 2,887 in 2024, nearly tripling. The five-year survival rate for university startups stands at 74%, significantly higher than the general startup survival rate of 33.8% and the OECD average of 45.4%.
However, despite this quantitative growth, qualitative outcomes remain disappointing. None of the top 30 companies by market capitalization in South Korea originated from university startups. In contrast, five of the top 10 companies in the U.S., including Google, Apple, Microsoft, Broadcom, and Meta, have roots in university innovation.
University startups are considered a crucial pathway for converting high-risk, high-value technologies and skilled talent into economic value, and they are seen as a major alternative for enhancing long-term growth rates.
Nevertheless, the level of technology commercialization at South Korean universities lags behind that of major countries. The technology transfer rate at South Korean universities is approximately 26%, significantly lower than the U.S. rate of 40.9% and the U.K. rate of 61.0%. Although eight South Korean universities rank among the top 50 globally in terms of international patent applications, this technological competitiveness has not translated into successful commercialization.
The profitability of startup companies is also weak. University startups have faced rising costs that outpace revenue growth during their expansion phases, leading to a decline in operating profit margins to -3.3% by the fifth year. Additionally, their research and development (R&D) spending is only half that of the average for high-tech venture firms, indicating limitations in accumulating innovative capabilities.
The Bank of Korea analyzed that university startups are encountering what it calls "two valleys of death"—financial difficulties during both the initial startup phase and the business expansion phase. In the startup phase, entrepreneurial achievements are not adequately reflected in faculty evaluations, and there is a lack of safety nets to support recovery after failures. During the commercialization phase, a shortage of specialized personnel and practical infrastructure has hindered the connection of technology to the market.
Furthermore, during the scale-up phase, securing follow-up investments has been challenging, and in the follow-up investment and exit phase, the market for mergers and acquisitions (M&A) is limited, resulting in an inadequate investment cycle.
To address these issues, the Bank of Korea proposed three main policy pillars: reforming university governance, expanding the role of public sector demand, and encouraging private investment.
It suggested establishing a separate evaluation system that reflects technology transfer and startup achievements in faculty performance assessments to enhance entrepreneurial incentives. Additionally, it emphasized the need to implement a "Try-Buy" system, where public institutions present technology projects, and startups can secure initial sales by delivering prototypes that meet performance criteria.
Moreover, the report recommends expanding new funding mechanisms such as intellectual property (IP) collateral exceptions and revenue-based financing (RBF), as well as gradually relaxing regulations on corporate venture capital (CVC) to stimulate private investment. It also proposed the introduction of a dedicated trading market for university innovation startups within unlisted stock distribution platforms to broaden investment recovery pathways.
* This article has been translated by AI.
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