Growing Ventures
Young venture firms are emerging as a future growth driver of the Korean economy. It has been found that companies classified as venture firms last year had been in business for an average of 3.8 years, 0.4 years shorter than a year ago. This means that startups turned themselves into venture firms at a faster pace.
According to the Small & Medium Business Administration and the Korea Venture Business Association, Korean venture firms in business for three years or less recorded a sales growth rate of 49.9 percent, whereas the rate stood at 14.9 percent for those in business for four to 10 years, 6.3 percent for those in business for 11 to 20 years, and 3.9 percent for older ones. The youngest group posted much higher operating and net profit ratios than the others.
Software developers showed particularly significant qualitative growth. As of the end of last year, venture firms’ sales increased from a year earlier across all industries, while software developers recorded a sales growth rate of 39.2 percent to be second to none. In addition, their operating profit-to-sales and net profit-to-sales ratios amounted to 15 percent and 11.1 percent, respectively.
Furthermore, venture firms’ R&D investment with respect to sales was much higher than the R&D investment ratios of small and medium enterprises (SMEs) and large corporations. 70.6 percent of those firms were running their own research institutes or divisions, whereas the ratio was merely 10.8 percent for SMEs in the manufacturing sector.
Last year, the number of venture firms with more than 100 billion won in sales increased from 453 to 460, and six of them posted at least 1 trillion won in annual sales. Moreover, 740 out of the 1,061 KOSDAQ-listed companies were or had been venture firms with the ratio reaching its highest level since 2009.