Investor responses to government startup support: an experimental auction study of stage-specific policy effects on venture capital investment in South Korea

This study examines how venture capitalists respond to different types of government startup support policies across developmental stages, using experimental auction methodology with 268 venture capitalists in South Korea. As Asian economies increasingly rely on entrepreneurship for economic transformation, understanding which policy interventions effectively attract private investment becomes crucial for policy design. We examine three types of government support – mentoring/education programmes, networking initiatives, and direct funding – across pre-seed, early-stage, and scale-up ventures in the technology sector. Our findings reveal significant stage-specific effects: mentoring programmes generate the highest investment premiums at the pre-seed stage, while direct funding dominates during early-stage and scale-up phases. The experimental approach addresses endogeneity concerns inherent in observational studies while providing monetary valuations of how policy types influence investor behaviour. As an exploratory finding, we also observe that Monthly Active Users (MAU) growth rates are associated with stronger investor responses than traditional financial metrics, though this pattern warrants further theoretical development. These results challenge the current concentration of Korean startup budgets on early-stage ventures and suggest that stage-appropriate policy portfolios could better optimize public resources. The findings offer insights for other Asian economies developing entrepreneurship policies, demonstrating how experimental methods can inform evidence-based policy design.