Startup Investment Plummets in July

Although the global investment market was frozen due to inflation concerns, interest rate hikes and the effects of the Ukraine war, many Korean startups successfully attracted investments in the first half of this year. But in July, startup investments plunged.

Investment in Korean startups totaled 836.8 billion won in July, according to the Startup Alliance, a public-private partnership network for Korean startups. The figure represented a drop of 72.7 percent from 3.65.9 trillion won in July 2021. Compared to the previous month of June (1.388 trillion won), the investment amount shrank by 38.9 percent.

In the first half of this year, Korean startups attracted more investment than a year ago. During the first half, investment in startups totaled 7,087.3 billion won in 977 investment cases. Comparable figures in the first half of 2021 were 4,354.9 billion won and 512 cases.

During this period, 16 startups received investments of 100 billion won or more, compared to seven in the first half of 2021. More exits were made. The number of IPOs increased from four to five. The number of M&A deals rose from 29 to 56.

As it usually takes about six months to finalize startup investment, indicators on the first half of this year were affected by a startup boom that lasted until the end of the first quarter of 2022, analysts say.

This trend can be found in startup investment trends in the first half of 2022, recently disclosed by the Ministry of SMEs and Startups. In the first quarter of 2022, startup investment amounted to 2.18 trillion won, breaking through the 2 trillion won mark for the first time.

As the amount of startup investment has decreased since the start of July, startups began to feel the heat in earnest. However, startups in the early stages of the seed to series A rounds will be able to draw investment relatively more easily than startups in the late series B group or higher.

In fact, investment amount indicators suffered steep drops, but the number of investment cases in July 2022 reached 135, a slight increase compared to July 2021 (116 cases). This means that although large-scale investments in late-stage startups decreased, small-scale investments increased.

As investor sentiment weakened and corporate values of startups ​contracted, startups put a halt to their IPO preparations. Market experts expect that more and more companies will give up or reconsidering having IPOs due to market conditions.