Brisk Investment in Startups
Fresh investment in startups has reached an all-time high. The Ministry of SMEs and Startups said on Oct. 24 that the amount of new venture investment from January to September this year amounted to 2.55 trillion won (US$2.25 billion), surpassing the highest annual total of 2.38 trillion won recorded last year.
Total new venture investment is expected to be more than 3.3 trillion won (US$2.92 billion) by the end of the year.
The growth rate of new investment was 47.3 percent compared to the same period last year (1.73 trillion won), which is much higher than the average annual growth rate of 13.2 percent over the past four years.
The ministry attributed the surge in venture investment to a shift to private sector-led venture policies and the introduction and expansion of private sector-proposed funds. “It appears that funds formed by private investment companies have started to make full-scale investments in venture companies,” a ministry official said.
This year, 16 private-proposed funds have been created and the aggregate amount of funding reached 82.6 billion won (US$73 million).
During the first nine months of this year, investment in startups in the initial phase (within three years from foundation) totaled 757.1 billion won (US$669 million), up 29.6 percent from the same period last year. A total of 450 companies in this category received investment, an increase of seven firms from last year.
Investment in companies in their third to seventh year in business reached 859 billion won, an increase of 33.8 percent. The number of recipients in this category was 332, up 67 firms from last year.
Investment in all industrial sectors has increased compared to the same period last year. Investment in the bioengineering and information-communication sectors was 627.1 billion won and 696.9 billion won, respectively, up more than 50 percent year-on-year.
The ministry said investors’ high expectations for companies in new industries related to the Fourth Industrial Revolution affected venture investment markets.
In addition, the amount of venture investment recovered was 2.23 trillion won by September, up 81.8 percent from 1.23 trillion won at the same time last year. Investors’ profits were 2.4 times larger than their original investment.
Among the exit channels, selling stocks over the counter accounted for 1.85 trillion won or 47.4 percent of the total, followed by initial public offerings (IPOs) with 724.7 billion won (32.5 percent).
Of the 43 companies listed on KOSDAQ this year, those that received investment from venture capital accounted for 22, or 51.2% of the total. This means investment payback through IPOs will continue.
Meanwhile, 13 venture capital companies were established by September this year, boosting the total number of VC companies operating in Korea to 129.
The figure more than tripled from the registration of four companies in the same period last year, and is higher than the average number of newly registered companies in the past five years, which is eight.
The ministry attributed the increase in venture capital companies to the relaxation in capital requirements from 5 billion won to 2 billion won in October last year. It also said some of the new venture capital companies were set up by senior venture entrepreneurs who are running KOSDAQ-listed companies and former officials at venture capital companies.