Hello, this is Hashscraper.
As the year-end approaches and government support programs are coming to a close, there is something essential that entrepreneurs must prepare for.
It's the 'Venture Enterprise Certification'.
In summary, it is a certification with the purpose of fostering companies with high technological capabilities to grow into globally leading first-class enterprises.
Currently, there are 37,000 venture enterprises, and the number is increasing by 5,000 each year.
Is it the same as a startup? No. Startups are a broader concept than venture enterprises. Many startups are not certified as venture enterprises.
Venture enterprises can become small and medium-sized enterprises, and companies with a long history can also be considered venture enterprises.
There are many benefits to being a venture enterprise. Especially for those starting a business, preparing for venture enterprise registration can be overwhelming.
1. Venture Enterprise Benefits: 50% Corporate Tax Reduction, 75% Acquisition Tax Reduction
There are many benefits. First and foremost, they provide a 50% reduction in corporate and income taxes.
If your revenue reaches 1 billion or 2 billion, how much tax do you have to pay? But with a 50% reduction in corporate tax and additional tax benefits, you almost pay no taxes.
After receiving venture certification, you can receive tax reductions for 4 years. You can renew it once and receive additional benefits for 3 years, allowing you to enjoy tax reductions for about 7 years while running your business (amazing!).
They also provide a 75% reduction in acquisition tax.
When you acquire facilities or purchase business vehicles, 75% of the acquisition tax is exempted (even registration license fees are exempt).
You also get a 50% reduction in property tax. With all these benefits related to funds, it seems like you receive benefits in all aspects.
If you need investment, support, or loans, being a venture enterprise is advantageous. When providing loan funds, they give preferential treatment to venture enterprises. Being a venture enterprise gives you an advantage.
It is also advantageous when applying for support programs. If your company is judged to have technological capabilities, you can receive additional points as a venture enterprise, and there are separate R&D support programs that only venture enterprises can apply for. If you don't register as a venture enterprise, you are more likely to be excluded from support programs.
When receiving angel investments, you can only get tax deductions if you are a venture enterprise. You can get a 100% deduction for amounts below 15 million won and a 50% deduction for amounts below 50 million won.
If you are not a venture enterprise, investors may hesitate to invest without risks.
To protect our valuable investors, we have decided to register as a venture enterprise in advance.
Once registered as a venture enterprise, you are designated as a company eligible for military service exemption, which means you can easily recruit high-level personnel with master's or doctoral degrees under military service exemption.
There are also benefits when applying for patents. Once you become a venture enterprise, you can prepare for patent registration as a priority.
It usually takes 1 to 2 years after patent application, but with venture enterprise status, it can be done in about 6 months.
For reference, we received patent registration just one month after application. There are more benefits.
You can upload and promote your products on the site called B2B, B2G Venture Country operated by the Small and Medium Business Administration.
Venture Country
If you want more detailed information, please refer to the table below! It provides detailed information when you enter the venture.
Source: 2019.11.08. Venture Company / Venture Enterprise Preferential System
2. Ways to Register as a Venture Enterprise: 4 Methods
There are 5 ways to register as a venture enterprise.
- Venture Investment Company: Companies that have received over 50 million won in investment from venture capital.
- Research and Development Company: Companies that own research institutes, have a research and development ratio higher than the industry average in terms of revenue, and had research and development expenses of over 50 million won in the previous 4 quarters.
- Technology Evaluation Guarantee Company: Companies that have received over 80 million won in technology guarantees from the Technology Guarantee Fund. However, companies less than 1 year old can guarantee over 40 million won.
- Technology Evaluation Loan Company: Companies that have borrowed over 80 million won from the Small and Medium Business Corporation. Companies less than 1 year old can borrow over 40 million won.
- Prospective Venture Company: Companies preparing for corporate establishment or business registration, and have received excellent technical evaluations from Kibo and Chungjin for the technology and business plans of venture investment companies.
You can register as a venture enterprise by choosing one of these 5 methods.
Among the 37,000 companies in Korea, 80% register as technology evaluation guarantee companies, which is the easiest way to get certified.
Source: 2019.11.08 Venture Company / Venture Statistics System
The ratio of companies registered as research and development companies is 7%. Why is it so low?
It's because the conditions for research and development companies are very strict. They do not recognize research and development departments well. You must have a research institute (a research institute is a broader concept than a research and development department).
Also, you need to maintain a research institute for over 2 years to calculate research expenses. It's difficult for startups or small and medium-sized enterprises to maintain a research institute due to difficulties in hiring people. That's why only 7% of companies are certified as research and development companies.
It's also somewhat difficult to register as a technology evaluation loan company. This is because the Small and Medium Business Corporation does not provide good support. The procedures for borrowing are cumbersome, and there are many things to prepare and it's complex. Therefore, I recommend registering as a technology evaluation guarantee company, which is the simplest way to get certified, unless you meet special conditions.
3. Key Factors in Evaluating Technological Competence of Venture Enterprises
What are the key factors to consider when evaluating the technological competence of venture enterprises?
The beginning and end of a startup are the founders. They look at the capabilities of the founders the most~
If the company is not in an ideal situation where revenue is generated, they look at how capable the founders are, whether they graduated from a science and engineering field, where they worked in the past, how much experience they have, and whether they have worked in tasks related to the actual business.
The best scenario is having a career that meets all the conditions mentioned above, such as being an 'ex-researcher at a large company'.
Founders with a background in business administration may find it difficult to register as a venture enterprise. But don't be discouraged. If you don't have those qualifications, you can hire executives who have the qualifications you lack. By hiring someone with the qualifications you don't have as an executive, you can make up for the deficiencies. If you hire a technical director at the executive level and receive additional points in the technological evaluation, you will be fine.
Register patents, obtain ISO certification, establish a research institute. If you can't establish a research institute, at least establish a company-affiliated research institute. Supplement your workforce. You need to do everything you can.
Even if ISO certification is not useful domestically, if you are considering exports, it is essential, so it's good to prepare for it in advance.
4. Tips for 100% Successful Registration as a Venture Enterprise
Now that you know the benefits and key factors in technological evaluation, let's see how to prepare for actual venture enterprise registration.
I mentioned earlier that 80% of domestic companies register as technology evaluation guarantee companies.
Even if it is the easiest way to register, I want to inform you of essential information that you must know and prepare for.
In the case of startups, when raising funds, they usually choose one of three options.
You must contact one of the Small and Medium Business Corporation, Technology Guarantee Fund, or Credit Guarantee Fund to raise funds. However, if you choose the Credit Guarantee Fund without knowing well, it may become difficult to register as a venture enterprise. This is because venture enterprise registration is under the jurisdiction of the Technology Guarantee Fund.
You can only use one of the Credit Guarantee Fund and Technology Guarantee Fund, so you must be careful when choosing your initial funding source. If you are receiving investments through the Credit Guarantee Fund, it doesn't matter, but when you receive your first loan, I recommend using the Technology Guarantee Fund. It's not that the Credit Guarantee Fund is bad. The Technology Guarantee Fund has a higher guarantee limit and they make an effort to review and approve your application as much as possible. However, if it is not a general investment but funds aimed at becoming a venture enterprise, I strongly recommend using the Technology Guarantee Fund.
You can also use funds from the Small and Medium Business Corporation. As mentioned earlier, Hashscraper became a venture enterprise registered as a technology evaluation loan company through the Small and Medium Business Corporation. As mentioned earlier, obtaining funds from the Small and Medium Business Corporation is a bit complex and requires a lot of preparation, and there is a possibility of rejection, so I recommend using the Technology Guarantee Fund.
You should raise funds in the order of Technology Guarantee Fund > Small and Medium Business Corporation > Credit Guarantee Fund to avoid any complications. It's nothing special, but they say that things don't go well if you don't follow this simple rule.
The government provides many free seminars and educational programs related to funds. I strongly recommend attending and studying at these events. They provide detailed guidance on the order of fund-raising, the amount, and how to strategize based on milestones.
When you look at the Venture Company site > Venture Confirmation Criteria 3,4 types, it is stated that the combined amount of Credit Guarantee Fund and Small and Medium Business Corporation loans can be 80 million won, but I recommend receiving loans from only one place. If you receive loans from both places, there is a combined limit, so the loan amount may not be maximized.
The timing of applying for funds is also important.
Although the Small and Medium Business Corporation states that applications are accepted until October, in reality, there is no funding available after May. After May, evaluations become stricter, making it difficult to receive funds from the Small and Medium Business Corporation. Therefore, it is recommended to apply for funds early in the year when funds are available.
Before going to receive technology guarantees, make sure to call ahead. Some people go without preparation because they are in a hurry, and many end up going twice. If you call, they will connect you with the regional manager of the company. After asking about your company's situation, they will tell you what documents are needed for the technology guarantee (business registration certificate, business registration certificate, CEO resume, business plan, etc.). Prepare these documents, schedule a meeting, and go.
So far, we have looked into venture enterprise certification. The speed at which funds accumulate before and after receiving venture enterprise certification differs. This is because the tax benefits are significant.
By saving on taxes, you can reinvest your capital as much as possible in your business or hire high-level personnel, increasing the chances of your company growing rapidly.
By starting off on the right foot with your startup, you can greatly reduce the difficulties in running your business, so I hope you will definitely consider it.
Finally, I will show you the venture enterprise confirmation certificate we received.
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