Doomed Ventures Waiting For Brand-New Chances

How Do They Conduct Evaluations?-

The morality of venture enterprises is a key determinant in the first round of evaluation that is conducted by the Korea Venture Business Association (KOVA).

The components of the evaluation are as follows: the reputation of companies (such as management norms, technological advancement and marketability, and efforts to increase the profit of shareholders); the morality of the enterprisers (such as personal integrity and responsibility for the restoration of crippled operation); the transparency of fiscal conditions (such as companies’ history of window dressing and insider trading); and the legal soundness of companies (such as criminal records due to deception or embezzlement, workman’s accidents, and violation of consumer’s right).

The qualification for being designated as objects of the evaluation is very strict.

The qualification is only given to those who have operated companies at least one year after they were designated as venture companies and can prove their complete restoration from financial delinquency.

The applicants’ debts also have to be less than three billion won, and a promise on the redemption of a half is a must.

If applicants have civil and criminal records, they can’t apply for either—bankrupt companies often violate the Illegal Check Control Act, and labor laws mainly fail to qualify due to overdue wages.

By June 15, applications will be available through e-mail or to visitors. For detailed information, the interested can refer to the homepage of the association (www.kova.or.kr), call 02-6009-4100 or send e-mail to briankim@kova.or.kr.

Those who pass the first round will face a test on technical know-how and business possibilities in the second round of the evaluation.

Who Is the Most Probably Winner of an Evaluation?-

The number of companies designated as venture companies by the Small and Medium Business Administration is roughly 20,000 as of now. Of them, 12,000 gave up their rights to be venture companies, and the number of those which can meet the qualifications suggested above seems to be lower than 1,000.

The KOVA ran simulations on seven companies whose debts are about two to three billion won on the basis of self-made standards.

“Park Seung-chang, the president of Business Clinic, a venture consulting company (which takes part in the school-business alliance program) is the most qualified candidate,” said a source from the KOVA, adding, “Park also has an experience of using personal workouts.”

The source, however, refuted a critical view that this initiative aims to give a second chance to losers who failed in previous venture development projects by saying that since we permit qualification to those with debt under three billion won, they can’t take advantage of this opportunity.

Everything Is Fine, Isn’t It?-

The KOVA’s charge on the evaluation of companies’ morality is causing skepticism on the adequacy of the evaluation due to its close relation with venture companies.

Being aware of this view, the KOVA is particularly stressing its fairness and transparency.

For example, the association outsourced lawyers and accountants belonging to five accounting corporation and five law firms to set up the standards of the evaluation.

The Committee for Morality Evaluation, (tentatively termed), which is in charge of the evaluation, will be composed of less than 10 members; experts who are involved in the same field of applicant’s business for more than five years will take more than three seats. One lawyer and one accountant will be assigned to the committee. For the enhancement of the evaluation’s fairness, members of the Venture Ethics Committee, civic groups and journalists will join the committee.

Suk-Min Hong smhong@donga.com