Centered on Bio and ICT Sectors
Fresh investment in venture companies continues to increase despite sluggish economic growth. This year, 1 trillion won (US$881.06 million) worth of fund of funds has been raised for the second consecutive year, invigorating the venture investment market. If the current trend continues, the size of new venture investment will surpass 3 trillion won (US$2.64 billion) by the end of this year. However, the amount of investment in startups in operation for less than three years since establishment decreased this year.
The Ministry of SMEs and Startups released on July 24 a report on the venture investment trend in the first half of 2018. According to the report, the amount of new venture investment came to 1.61 trillion won (US$1.42 billion) in the first half of this year, reaching a record high. The figure grew as much as 61.2 percent from 1 trillion won (US$882.47 million) a year earlier. Thanks to this, the number of venture companies that received investment increased 21 percent from 585 to 708 over the same period.
By industry, most investments went to the bio-healthcare and the information and communications technology (ICT) areas. In the first half of the year, 413.9 billion won (US$364.67 million) of investment was made in the biotechnology and healthcare sector, showing a whopping 169.3 percent growth from 153.7 billion won (US$135.42 million) from a year ago. The amount of investment in the ICT sector stood at 449.9 billion won (US$396.39 million), up 69.6 percent from 265.3 billion won (US$233.74 million) from the same period last year. The investment growth in the two sectors reflects a growing interest in future growth engines in the era of the Fourth Industrial Revolution.
By type of company, the amount of investment in startups with from three years to seven years in operation since founding came to 580.2 billion won (US$511.19 million), up 98.9 percent from 291.7 billion won (US$257 million) last year. On the other hand, the percentage of investment in startups established less than three years ago dropped 7 percent from a year earlier.
The increase in venture investment led to job creation by startups and venture firms. According to a survey of 2,649 companies that attracted venture investment from 2013 to 2017, 28,000 new jobs were created compared to the preceding year. In particular, 529 companies that received investment funds last year hired 3,191 new employees, showing a 21.8 percent increase in employment from the previous year.
Venture investment contributed to not only job creation but also sales growth. According to an analysis of 2,390 firms that attracted venture investment from 2013 to 2017, sales rose nearly 9.6 trillion won (US$8.46 billion) at the end of last year compared the year right before the investment. For 426 companies that received investment last year, sales grew 661.1 billion won (US$582.47 million). In addition, the amount of returns on investment by venture capital through initial public offerings (IPOs) or sales of stocks reached 1.25 trillion won (US$1.1 billion) in the first half of the year, up 126 percent from 553.9 billion won (US$488.02 million) a year ago. This shows that the venture capital exit market is operating.