Han Kim, CEO of Altos Ventures, one of the most active Silicon-Valley-based venture capital firms investing in South Korea, shared stories and his philosophy behind Altos Ventures’ investment at the Startup Alliance’s Teheran-ro Funding Club event on Wednesday July 5th.
Altos has been heavily involved in early-stage investing, boasting a portfolio that includes Baedal Minjok (Woowa Brothers), Zig Zag(Croquis), Coupang, and Toss (Viva-republica).
Who are Altos Ventures
Altos Ventures has five key members, three based in the Seoul, Korea office and two in the United States. Oh Moon-Suk, who previously worked on the investment team at Goldman Sachs, met Han Kim when Goldman Sachs invested in Woowa Brothers along with Altos Ventures. Oh eventually joined Altos in 2016. Park Hee-eun, was the former CEO of IUM, a startup that Altos Ventures invested in three years ago. Park joined Altos after that. Nam Ho-Dong and Anthony Lee joined in 1999 and 2000, respectively.
Rather than any one of the key members being in charge of an individual deal, the group jointly makes decisions on each and every one. Thereby, equalizing both responsibility and incentives.
Core culture at Altos Ventures
Kim explained further that Altos Ventures’ culture is hinged upon engaging in a problem-solving process with all the startups in which they have invested. For example, when CEOs have concerns, they work with the team to derive a solution. However, at the same time, Altos Ventures makes sure that the CEOs have the final say in all matters.
Kim said that they believe that out of all the startups within their portfolio, at least one of them will grow into a unicorn each year.
Currently, in China and in the United States, top-ranked companies in terms of corporate value, were, by and large, IT companies that started off as small-sized startups twenty years ago. However, Korea’s list of companies with high corporate value has not changed much over the years. Korea is working hard to make their IT startups join the top list in ten years.
Altos Ventures has an even greater agenda. Many believe that Korea has little growth potential due to its small market size. Furthermore, there is a tendency to view Korean company management as negative. This is a mistake. In fact, the Korean market is quite large, and Altos is working hard get rid of the prejudice regarding management styles.
The depth of Altos Ventures’ investment
The investment size has rapidly grown since last year. Since their first investment case in 2006, they have invested nearly USD 132 million (150 billion won) in 41 companies. And, the last three years have been the most active seasons of their investments. Among the invested companies, they have one company listed in KOSDAQ and Konex respectively. However, four of them have closed down (Nimo Taxi, Bit-Packing Company, and two game companies). The total number of employees in all of the invested companies is estimated at 3,000, and the total annual sales are up to 750 billion won, (excluding Coupang). There are 11 companies that show annual sales of more than 10 billion won, 4 companies with over 100 billion won, and two companies with over 1 trillion won.
Although people think Altos Ventures invests only in mobile services, they are slowly expanding and diversifying. Their portfolio now includes startups that make the SW system, apparel, fresh meat, hardware and hand-made beer. Most recently, they have invested in two startups, one called Spoon and the other called Kmong.
They usually invest 2-4 billion won per startup. Initial investments usually start around 1 billion won, but when and if the startup needs more capital to grow rapidly, additional funds are provided.
Picking a startup
Altos Ventures faces many questions regarding their internal processes such as the teams they invest in, how they target the domestic market, how they support the startups after investing, and how they create exit opportunities. There’s no simple, straightforward answer; it’s all on a case by case basis.
The key factor that has helped Altos grow is that they keep studying in order to stay abreast of the newest IT trends and do extensive research on areas with which they are unfamiliar. It is important to note that they do not necessarily invest in what is trendy. Instead, even if it is not trendy and seemingly unpromising, as long as the team is great and is a good fit for the Altos family, then there is no hesitation in supporting them.
Altos prefers teams who are honest; ones who acknowledge the reality and complexities of being a startup, and ones who, even when times are bad, strive to find a solution.
Accordingly, they prefer founders who have experienced failures. In the past, they have even invested in a company led by a founder who had stigmatized credit because they thought highly of his experience.
The key value in startups
It is widely known that the likelihood of failure for startups who entered the market too early is much higher than that of ones which entered a little later. Thus, it becomes imperative to figure out ‘why now’.
Growth indicators provide an interesting lens through which companies can measure how much customers adore their services and products. For example, for companies whose services may be growing very slowly, but still very nicely, it becomes clear that they require a deeper look. Revenue sales, then, become a secondary measurement. Also, when it comes to early-stage startups, whether or not they have a clear purpose of running their services becomes an essential question as well.
Ultimately, Altos Ventures pursues growth rather than profit size. There are many ways in which Altos exhibits patience until startups start showing profits. Until that time, Altos helps them to scale. Of course, they make sure that it is agreed upon by all their investors.
(Top photo from Baidu Images. )
This article, entitled “Meet Altos Ventures, Silicon-Valley VC aiming to breed unicorn startups in South Korea”, was written in Korean by Hye-in Seo of Platum, edited by AllTechAsia editors.