The size of funds created for investment in venture firms reached the record high in the first half of this year ever since the statistics collected. However, the practical venture investment size rather has shrunk.
According to the “2016 First-Half Venture Capital Fund Investment Trend” report unveiled on July 25 by Small and Medium Business Administration (SMBA), the accumulated amount of committed capital on new funds in the first half of this year is 1.6682 trillion won, a 169.9% increase compared to last year (618.1 billion won). This amount of committed capital is the largest for a first-half record reported since 1998 when the venture investment fund performance statistics were first recorded. The number of funds increased 78.1%, from 32 in last year to 57 this year.
The SMBA found that the private investment increase resulted mainly from the improvement of systems such as the extension of tax benefits related to venture capital investment, along with the continuous investment by major organizations including the Korea Development Bank (176 billion won) and the Korea IT Fund Investment Association (80.5 billion won). The amount of private investment increased to 1.0792 trillion won in the first half from 369.8 billion won in the same period of last year.
The venture investment committed capital has increased, but the performance of actual investment in companies decreased. The amount of invested capital in the first-half of this year decreased by 4.5% to 948.8 billion won from 993.9 billion won in the same period of last year. The situation, where the committed capital increased but the actual invested capital decreased, means that the liquid money flew to venture investments, but there were not so many attractive firms enough to draw the attention of the investors.
Meanwhile, it is a positive signal that the weight of investment in early-stage firms with less than 7 years of operation increased to 39.6% this year from 27% last year. Surely, the actual venture investment amount could be larger than the committed funds since the venture investment is made using the accumulated venture funds.
Park Yong-soon, director of Venture Investment Division at the SMBA, said, “The degree of our venture investment decline was not so bad when comparing those of China and the US. The China’s performance of venture investment was only half of that in the first half of last year, and the US’s investment in the second quarter decreased by 12% compared to the same period of last year.”