A group of lawmakers, professors and industry officials on Thursday urged the government to relax regulations that have prevented the marriage between industrial and financial capital, stressing that they hinder the growth of corporate venture capital.

The South Korean government has long prevented non-financial holding companies from wholly owning financial entities due to concerns about the excessive influence of business titans over both the industrial and financial segments.

Though their purpose is to promote fairness in the nation’s economy, by preventing deep-pocketed conglomerates from taking control of the industries and seizing technology from small startups, such regulations make it difficult for the startup market to advance to the next level.

“The nation is making some progress in fixing corruption and unfair business practices by conglomerates, and now it is time to consider a virtuous circle between conglomerates, venture capital and startups,” said Kim Byung-wook, a lawmaker from the ruling Democratic Party of Korea, at a meeting in Seoul to discuss how to take the local startup sector up a notch via corporate venture capitals.

“Corporate venture capitals, or CVCs, formed by conglomerates, could serve as sources for innovation for ventures and startups, and vitalize the overall startup market.”

Kim said the existing rule that bans conglomerates from owning financial firms should be altered to align with the global trend. Global tech giants, such as Google’s holding firm Alphabet and chipmaker Intel, for example, create CVCs to directly invest in startups. Nearly 30 percent of venture capital investments were made via CVCs in the global market, and some 300 CVCs are established every year, according to data presented by Kim Do-hyun, a Kookmin University professor who took part in the Thursday meeting.

Although there are some local startups that have become unicorns, meaning they are worth at least $1 billion, it is hard to find merger and acquisition deals between those companies and conglomerates because of the strict regulations.

“In order to beef up the startup industry’s competitiveness in the global market, the investment ecosystem should grow in size by allowing conglomerates to create CVCs and make direct investments in those unicorn startups,” said Choi Seong-jin, chief of the Korea Startup Forum, an organization representing domestic startups. “That way, unicorns could increase their global presence, and the digital industry could gain the upper hand in competition with global markets.”

Among participants at the meeting were lawmakers Lee Nak-yon and Lee Won-wook, as well as Yoo Woong-hwan, head of SK Group’s startup accelerator SV Innovation Center.

By Kim Young-won (wone0102@heraldcorp.com)