Venture capital’s role in corporate financing structure for direct air capture (DAC) technology-based firms in Korea, based on in-depth surveys and interviews

Direct air capture (DAC) technologies are gaining increasing attention due to their mitigation potential as a carbon dioxide removal approach. DAC technology-based firms are emerging worldwide, and Korea has also witnessed an increase in the number of firms developing DAC technologies. As these firms progress along the technology cycle-spanning research and development (R&D) and laboratory-scale demonstration to large-scale demonstration and commercial deployment-they face significant financial challenges. Against this backdrop, this paper examines the financial structure of DAC technology-based firms in Korea. Drawing on prior studies of general technology-based small firms (TBSF) and on DAC firms, this paper develops ten hypotheses concerning access to private venture capital (VC), focusing on financial structure formation and constraints in obtaining VC funding. Three representative DAC technology-based firms in Korea are selected for analysis, and in-depth surveys and follow-up interviews are conducted. The results reveal divergent views among DAC firms in Korea with respect to the five general hypotheses related to funding access, preferences, and investment conditions. In contrast, the other five hypotheses formulated to reflect the technological specificity of DAC-were broadly supported. These findings suggest that, while Korean DAC firms generally regard private VC funding as an attractive financial resource, their access remains limited. Such constraints stem from private VC investors’ short investment horizons and rapid exit strategies, insufficient understanding of DAC technologies, perceived high risks associated with DAC-based removal projects, and the relatively small scale of investments available for medium- and large-scale DAC deployment. The paper concludes by discussing policy implications, emphasizing the need for hybrid public-private-infrastructure financing, stronger market demand for DAC technology-based project output, and an enhanced understanding of DAC projects to support the demonstration and deployment of DAC technology.