The venture investment market delivered an “earnings surprise” last year as three indexes, including fresh venture investment, venture fund establishment and the amount of invesments recouped, all set a new record. The growth was led by 4.60 trillion won (US$4.07 billion) worth of new venture funds which were set up in 2017 based on the government’s provision of 800 billion won (US$707.96 million) to the fund of funds. These investment funds started to invest in promising venture companies last year.
The total amount of new venture investments came to 3.42 trillion won (US$3.03 billion) in 1,399 companies last year, up 43.9 percent from 2.38 trillion won (US$2.11 billion) in 1,266 firms a year earlier, according to the “2018 Venture Investment Trend” report released by the Ministry of SMEs and Startups (MSS) on Jan. 24.
This marks the sixth year in a row of venture investment growth since 2013. The amount of investment per company was 2.45 billion won (US$2.17 million) on average.
The main recipients of investment were startups between three to seven years of establishment that have overcome the “Death Valley” and entered a scale-up stage. Investments in these companies totaled 1.20 trillion won (US$1.06 billion), a whopping 79.7 percent increase from 664.10 billion won (US$587.70 million) a year ago.
By industry, the ICT sector had the highest share of the total investment with 26.1 percent but the figure fell by 2.1 percentage points from the previous year. Biotech and medical services came in second with 24.6 percent, followed by distribution service with 16.7 percent and video, performance and record with 9.7 percent.
The amount of investments in the key technologies of the Fourth Industrial Revolution, such as the Internet of Things (IoT), smart healthcare and artificial intelligence (AI), stood at 1.35 trillion won (US$1.19 billion), up as much as 71.1 percent from a year earlier.
Out of the total, the amount of investments in the 5G mobile telecom sector increased from 5.30 billion won (US$4.69 million) in 2017 to 25.60 billion won (US$22.65 million) last year, showing the biggest growth, big data from 25.60 billion won (US$22.65 million) to 104.80 billion won (US$92.74 million) and AI from 40.80 billion won (US$36.11 million) to 136.90 billion won (US$121.15 million).
In fact, seven out of the top 10 companies in terms of investment attraction were engaged in the Fourth Industrial Revolution sectors, including smart factory, AI and big data, and one company which produces industrial touch panels for smart factory attracted 47.50 billion won (US$42.04 million) of investments last year alone.
Companies which received venture investments also hired more employees. They had a 20 percent growth in employment, far surpassing the figure for ordinary small and mid-size companies. It showed that venture investment contributed to job creation.
In addition, the amount of funds newly set up last year came to 4.69 trillion won (US$4.15 billion), reaching an all-time high with a slight increase from 4.61 trillion won (US$4.08 billion) in 2017. The amount of assets per investment association stood at 32.10 billion won (US$28.41 million), up 4 billion won (US$3.54 million) from a year ago. Funds became bigger as shown by the emergence of 12 associations whose assets exceed 100 billion won (US$88.50 million).
The rate of return on venture investment was 2.1 times the principal, rising 44 percentage points from the 1.66-fold gains in 2017. Capital recovery took place actively in new industry sectors, such as biotech and ICT, while the gaming sector had a significant increase in over-the-counter transactions.
The number of new venture capital firms grew by 16 to 157 last year compared to a year earlier. The number of new startup investment companies was 20, which was the highest figure since 2000.