[Edaily Marketin Soyoung Park Reporter Won Jae-yeon] While the Agricultural Policy Insurance and Finance Institute (APIFI) is striving to establish regional funds to foster local agri-food companies, some point out that relying solely on capital injection has its limitations. This has led to advice that the institute should first focus on scaling up and organizing the industry, drawing on examples from Japan and France.

Japan is a prime example of a successful overseas case. Japan restructured its agricultural sector to expand opportunities for private-sector participation. For example, as its agricultural budget was being reduced, Japan eliminated unnecessary government programs. Through this process, agricultural innovation was driven by expanding the role of the private sector. According to data from Japan’s Ministry of Agriculture, Forestry and Fisheries, the Japanese government has broadened the foundation for private-sector participation through farmland consolidation, agricultural cooperative reform, and the relaxation of regulations on corporate entry into agriculture. Since the enactment of the Act on the Promotion of the Utilization of Smart Agriculture Technologies, the government has included technology development and supply companies in its planning approval and support programs, thereby enhancing the role of private-sector technology firms.

According to experts, Japan has also strengthened its organizational foundation by carrying out large-scale consolidations of local agricultural cooperatives. The number of local agricultural cooperatives, which once stood at around 4,000, has been reduced to approximately 560. In contrast, South Korea still has about 1,110 local agricultural cooperatives, even though the scale of its agriculture is only one-third that of Japan’s. Critics point out that the pace of scaling up and organization has been slow. Experts believe that in South Korea, scaling up and organization have been delayed due to the continued existence of laws, systems, and governance structures centered on protecting small-scale farmers.

France also leveraged the private-sector innovation ecosystem as a driving force for agricultural transformation. Rather than relying on government subsidies, France linked agricultural innovation to the cultivation of agritech and foodtech startups. As a result, there have been a series of cases where private venture capital (VC) firms and impact investors have made follow-on investments in agri-food technology companies. In April of this year, Agriodor, a French agritech company developing natural fragrance-based crop protection technology, secured a Series A investment of 15 million euros (approximately 25.3 billion won).

In South Korea, however, there is a view that agri-food companies have not grown sufficiently to attract private investment. This is why an “investment mismatch” occurs: even though policy funds aim to help regional agri-food companies scale up, there is a shortage of companies actually ready to scale up on the ground.

A source in the venture capital industry pointed out, “Although government funds are being injected into the market, even if a firm is selected as a general partner (GP) for the Korea Agro-Fisheries Trade Corporation (KAFTC) fund, it is unlikely to be easy to find regional agri-food companies worth investing in,” adding, “This is because many food companies rely on regional specialty products.”

Industry insiders point out that the domestic market is relatively small and believe that investment targets have a better chance of success if their business models are geared toward overseas markets. The Korea Agro-Fisheries Trade Corporation (KAFTC) is, of course, aware of this issue. This is why it is collaborating with the Korea Trade-Investment Promotion Agency (KOTRA) to support the overseas expansion and export growth of domestic agri-food companies and is organizing financial investment roadshows to connect them with global venture capital firms, accelerators (ACs), and global distribution networks.

However, some point out that the challenge lies in moving beyond one-time sales channel support to create a structure where technology companies are consistently produced at the regional level. Even overseas, the focus of fostering regional agri-food companies is on building ecosystems rather than merely providing sales channel support. For example, the Dutch agri-food cluster Food Valley and Wageningen University support agri-food startups so they can progress from the laboratory stage to market entry and scaling up. Last year, Dutch agri-food startups and scale-up companies successfully raised more than 6 billion euros (approximately 10.1309 trillion won). In addition, they achieved milestones such as new product launches, strategic partnerships, the establishment of pilot facilities, and sustainable performance.

The CEO of a South Korean food tech startup said, “Since typical financial investors (FIs) are often primarily interested in deep-tech companies, we didn’t have many options during funding rounds other than GPs backed by the National Agricultural Cooperative Federation (Nonghyup) or the Korea Agricultural Finance Corporation (KAFC).” He added, “Looking at examples around me of startups operating in marine-based food tech, the pool of potential investors is even more limited.” He continued, “As a result, there are quite a few cases where companies are independently breaking into overseas markets to establish connections with strategic investors (SIs) abroad.”