Gov't to launch W50b 'Korean In-Q-Tel' to back new-security startups

The government plans to identify small and medium-sized enterprises and venture companies with technologies directly tied to future national security — including AI, unmanned systems, robotics and semiconductors — and provide intensive support across the entire business cycle, from investment and R&D to field testing, procurement and market entry. The initiative aims to draw private advanced-technology firms into the defense and security market, going beyond the existing framework centered on traditional defense contractors.

According to the Ministry of SMEs and Startups, the government held the second meeting of the "New-Security Innovative Companies Promotion Working Group" on Thursday, bringing together relevant ministries to discuss how to identify and support new-security innovative companies. Participants included the Ministry of SMEs and Startups, the Ministry of Economy and Finance, the Ministry of National Defense, the Defense Acquisition Program Administration (DAPA) and the Korea AeroSpace Administration (KASA).

The working group meeting was convened to flesh out follow-up tasks from a strategy session on fostering future new-security innovative companies held at Cheong Wa Dae in June. At that session, the government decided to pursue amendments to the National Contracts Act to speed up the adoption of products and technologies from new-security innovative companies, as well as the enactment of a Defense Advanced Forces Development Act and a special act on fostering new-security innovative companies. Thursday's meeting also reviewed each ministry's progress and areas for interagency collaboration.

The government will first designate 10 strategic fields of high security importance — including unmanned systems, robotics, AI, semiconductors, sensors and advanced materials — and build a pool of small and medium-sized enterprises and venture companies operating in those areas. Candidates will include firms selected under the Ministry of SMEs and Startups' "Everyone's Challenge Defense Industry" program, DAPA-designated defense innovation companies, firms holding publicly certified technologies or products in relevant fields, and companies participating in government projects related to security and defense. The government is also considering allowing companies to apply directly, in addition to recommendations from relevant ministries and industry associations. Detailed criteria under discussion include the share of security-related sales, patent holdings and R&D track records in relevant technologies.

From that pool, companies with strong technological capability, innovation and growth potential will be selected and designated as "new-security innovative companies." The government plans to first assemble the company pool and a list of candidates, then launch the formal designation system once the legal framework is in place.

"We will first designate 10 fields of security importance that will be the focus of policy, then build a pool of companies in those fields," Park Yong-sun, director general for SME policy at the Ministry of SMEs and Startups, said at a briefing on Wednesday. "Large-scale support will be concentrated on truly outstanding companies selected from within that pool, centered on the designated innovative companies."

To provide institutional backing, the government will pursue the enactment of a special act on fostering new-security innovative companies. The legislation will cover the framework for promoting innovative companies, procedures for designating and revoking such status, and support measures and special provisions. The Ministry of SMEs and Startups is considering having the bill introduced as a lawmaker-sponsored measure in September.

Given the preparation time required, the ministry expects formal designation and support of innovative companies to begin at the earliest in the second half of next year. Preliminary work — including assembling the company pool and identifying candidates — is set to proceed beforehand.

For financial support, the government will introduce a "Korean In-Q-Tel" modeled on In-Q-Tel, the investment vehicle used by the US Central Intelligence Agency. The fund will operate as a subsidiary of Korea Venture Investment Corp. (KVIC), directly identifying and investing in early-stage new-security companies. The government's budget proposal for next year allocates 25 billion won each from the Ministry of SMEs and Startups and DAPA, for a combined total of 50 billion won ($36.4 million).

The Korean In-Q-Tel will be fully funded by the government. As companies grow, venture capital investment drawing on public-private funds — including defense industry funds and the Korea Fund of Funds — will follow. Companies requiring larger capital can be connected to the strategic technology investment framework being developed by the Financial Services Commission.

The military procurement system will also be overhauled. In the current defense acquisition process, it often takes years from identifying a requirement for a weapons system to developing, verifying and actually procuring it. The reform responds to criticism that the existing acquisition framework is ill-suited to fast-moving advanced technologies such as drones and AI.

The government plans to amend the National Contracts Act to introduce a fast-track procurement system that allows R&D agreements and purchase contracts to be pursued simultaneously. The Ministry of National Defense and DAPA will also introduce new acquisition approaches through the Defense Advanced Forces Development Act, including mission-driven requirements, competitive acquisition and agile development methods.

"The core of the US Other Transaction Authority is that it lets the government contract simultaneously for both purchase and technology development with companies that have the needed technology, then buy quickly as it is developed," Park said. "The Ministry of SMEs and Startups' purchase-linked R&D program is the closest domestic equivalent, so we plan to expand purchase-linked R&D as well."

Military data and testing environments will also be opened to the private sector. Through the Ministry of National Defense's military-industry-academia cooperation centers and defense data safe zones, companies will be given access to key military data, and the range of data available to the public will be continuously expanded. Dedicated field-testing units and innovation labs will be used to verify civilian innovative technologies in actual military environments, and support will also be provided for companies to use military test ranges through DAPA's field-testing programs.

The way new-security companies use intellectual property developed through government R&D will also change. The government plans to pursue joint ownership of IP between the government and the companies. The aim is to allow companies to commercialize technologies they developed with their own investment in civilian markets or overseas. However, the government intends to establish a legal basis allowing the use of core technologies critical to national security to be restricted through committee review.

The government's choice to use the term "new security" rather than the conventional "defense industry" also reflects consideration of civilian applications. In recent conflicts, the boundary between civilian advanced technology and military technology has been rapidly eroding, with satellites detecting battlefields, AI supporting decision-making and drones carrying out strikes.

"When people hear 'defense industry,' they mostly think of weapons acquisition, but recent security technology must be viewed as serving not only military but also public and civilian markets," Park said. "New security represents a far broader institutional shift than the traditional defense industry."

The Ministry of SMEs and Startups plans to work with relevant ministries to finalize a full-cycle support system linking company identification, investment, R&D, field testing, procurement and entry into domestic and overseas markets. "To secure future new-security competitiveness, it is crucial to quickly identify innovative technologies held by the private sector and connect them so they can be used in actual defense and security settings," Park said. "We will build an ecosystem where innovative small and medium-sized enterprises and venture companies can overcome the barriers of investment, R&D, field testing and procurement, and grow into the core companies leading the future new-security sector."