Investment in Korea’s venture ecosystem is booming

According to numbers released by the Ministry of SMEs and Startups and the Korean Venture Capital Association, new venture investment in Korea in the first three quarters of 2019 hit a record high of 2.8 trillion won (US$2.3 billion) – a 25.5% increase from the same period last year.

Korea’s Gangnam district / Photo credit: Coleong / 123RF Stock Photo.

Venture fund formation over the same period likewise reached an all-time high of about 2.2 trillion won (US$1.8 billion), a boost of 13.8% from the same period in 2018.

Over 70% of venture investment went to startups that were roughly seven years old, representing strong venture capital support for young companies.

Biotech startups garnered the most attention from investors, accounting for 30.2% of total investment. IT and distribution and services followed with 25.4% and 16.8%, respectively.

With monthly venture investment hovering around 40 billion won (US$33.5 million) between May and October, total annual venture investment in 2019 is expected to exceed last year’s total of 3.4 trillion won (over US$2.8 billion).

According to the organizations that released the figures, Korea’s venture ecosystem has also undergone two major transformations this year.

First, the growth in scale of local venture investments is making a significant impact on the growth of unicorn companies.

Korea now stands in fifth place globally in terms of the number of homegrown unicorns, having nine companies that possess a private market valuation of at least US$1 billion.

During August and September, six Korean startups raised more than 20 billion won in venture investment (US$16.8 million). Only one company raised funds in July.

Some of Korea’s top winners over the last few months include:

• Rainist, which is the startup behind popular personal finance app BankSalad, received 40.7 billion won in investment (over US$34.1 million). It plans to use the funds to develop new services and hire additional talent.
• Korean unicorn Viva Republica, the creator of mobile financial service platform Toss, secured US$64 million at a valuation of US$2.2 billion in a fundraising led by Hong Kong-based equity investment firm Aspex Management.
• Danggeun Market, an online secondhand marketplace, raised 40 billion won (US$33.5 million) in a fundraising led by Altos Ventures and Goodwater Capital.
• Code 42, an autonomous car technology startup, raised 30 billion won (US$25.1 million) in its pre-series A funding round from investors including Kia Motors, SK Group, LG Corp., and CJ Group.
• Carplat, which provides car rental services, raised 25 billion won (almost US$21 million) from investors including Humax and PEF Stick Investment.

Secondly, private investors are accounting for a growing share of venture fund investment.

In 2019, private investors such as individuals and C corporations accounted for 73.3% of the investment in venture funds, up 9% from the same period last year.

Faster growth encourages more investment