R&D Money That Arrives as Equity, Not Grants
Debates about Korea's government R&D budget usually focus on the headline total. This change is about something else: how the money is delivered. Until now, R&D support for SMEs has come only as grants or subsidies. The Ministry of SMEs and Startups now plans to add an equity investment option. The plan to introduce investment-type R&D was announced in April 2026. It became concrete when a new line item, the `Private-Cooperation Investment-Type R&D` program, appeared in the 2027 budget proposal.
Here is what the budget proposal includes:
How the Money Flows In and Out
A dedicated R&D fund will be set up at Korea Venture Investment Corp. (KVIC), and the fund will take equity stakes in the selected companies. The companies must spend all of the invested capital on R&D. If a company succeeds through an IPO or M&A, the fund sells its stake, recovers the principal plus any gains, and puts that money back into R&D. If the technology or its commercialization fails and the stake loses value, the government absorbs part of the loss.
Screening happens in three stages:
| Item | Grant-type R&D | Investment-type R&D |
|---|---|---|
| Nature | Project funding | Equity stake in the company |
| Funding type | Grant (non-repayable) | Paid-in capital |
| If successful | Technology fees owed | Fund exits by selling its stake |
| If unsuccessful | Limited liability if the project was performed in good faith | Government shares the equity loss |
| Dilution | None | Yes |
The TIPS-style investment-linked programs work differently. There, private investors put money in first and the government follows with an R&D grant. In the new program, the government's own money goes in as equity.
Is It Right for Your Company? Four Tests
1. Prerequisites. Check whether you have at least KRW 1 billion in private investment, whether you fall within the seven SEED sectors, and whether one of your existing investors could realistically recommend you.
2. Dilution. Work out what share of the company KRW 1 billion buys at your current valuation. Check how it affects the structure of your next round, and review your existing investment agreements for shareholder consent rights or limits on issuing new shares. Note that, according to the budget explanatory materials, the combined private and government stake is to be capped below 15% to protect founder control.
3. Balance sheet effects. Depending on the accounting standard and when the funds are used, a grant is recorded either as a liability (deferred income) or as a cost offset or income. Equity goes straight into capital, which raises equity and lowers your debt ratio. That difference can matter in bank credit reviews and in the financial evaluations used for procurement bids.
4. When it's a poor fit. The existing grant track may be the better choice for:
Still a Budget Proposal: Plan Accordingly
This program is still a line item in the 2027 budget proposal. The National Assembly's review and the detailed implementation plan may change the timing of the call and the eligibility rules. Running an equity-based program also requires updates to related rules, such as the legal categories of national R&D support and the rules for recovering funds.
You can prepare now in three ways:
The KITIM View: Plan Both Funding Paths Together
Investment-type R&D doesn't replace grants. It adds another option. Whether you belong on a grant track, such as the Technology Innovation Development or Startup Growth programs, or on the investment track depends on your funding stage, your exit plan, and your cap table. The investment track asks for technical merit and an investment case (valuation and exit scenarios) in a single document, so your business plan needs to cover both from the start.
KITIM designs funding strategies that consider grant-type and investment-type R&D side by side. Start with our free company diagnosis and AI program matching to see which R&D tracks you can apply for today. If you want to prepare for investment-type R&D, contact the KITIM consulting team.