Report: Investment trends for the first half of 2017 in South Korea

Photo from Platum.

On August 2nd, South Korea’s Ministry of Small and Medium-Sized Venture Business published a report titled, ‘Venture Investment Trends for the First Half of 2017.’ According to the report, in the first half of this year, the amount of investment increased by 1.8% to KRW 992.6 billion (USD 897 million).

77.3% of total venture investment went to startups with less than seven years of business–a 4.3% increase from the same period last year. Among the companies that attracted investment, nearly half (49.4%) were early stage startups with less than three years of business. This is probably due to the 13 investment funds that collectively added up to KRW 293.4 billion exclusively for early stage startups established after 2013.

Investments into startups that are less than three years old and those between three and seven years old totaled KRW 369.8 billion (37.3%) and KRW 292.8 billion (29.5%) respectively, which was similar to last year.

Looking from an industry perspective at startups that attracted investment, we can say that the proportion of startups in ICT manufacturing (4.4%), ICT services (21%), and electric/ mechanic/infrastructure (12%) increased by 0.6%, 2.1%, and 2.2% respectively; while videos/entertainment/music (13.3%) and retail and services (15.7%) also increased by 1.2% and 2.9%, respectively. On the other hand, the proportion of chemical/materials (6%), biotechnology/medical services (15.5%), and games (6.3%) decreased 3.3%, 6%, and 1.8%, respectively.

Investment into technologies related to the 4th Industrial Revolution, including Big Data, Internet of Things, and Fintech, has increased. However, investment in the biotechnology sector was negatively affected by some of listed companies’ sluggish performance after the Hanmi Pharmaceutical incident.

However, the amount of newly formed venture funds has been decreasing. It decreased by 19.2% (KRW 336.7 billion) compared to the same period in the previous year (KRW 1,753 billion) to KRW 1,416.3 billion. This is likely due to the delay of the formation of funds upon revision of the supplementary budget. In the coming months, with an additional budget of KRW 800 billion from a pension fund, the formation of another venture fund with capital amounting to 1.3 trillion won is expected.

Looking at the composition of investors in the venture fund, the total investment amount coming from private investors decreased slightly compared to the same period last year. However, the number of private investors continued to increase dramatically from 210 to 253 (20.5% ↑). This is a positive sign that the industry is vibrant.

In the meantime, the most active venture capital firm in the first half of 2017 was Smilegate Investment. Their total investment into startups during that period amounted to KRW 53 billion. On the other hand, the venture capital firm that formed the biggest fund was Softbank Ventures, which formed a fund with capital amounting to KRW 121 billion.

Park Yong Soon, manager of the venture investment division at the Ministry of SMEs and Startups, said, “The venture investment scale will definitely increase rapidly in the second half of the year with a formation of additional funds. It is expected that this year’s output will exceed last year’s. We will enact a corporate investment promotion law (tentative) to ease regulations on fund management which facilitates private investments.”

In the meantime, South Korea’s Ministry of SMEs and Startups provided startups with opportunities to have more IR meetings. As a result of ten IR meetings held in the first half of this year, three startups raised investment amounting to KRW 3.3 billion and 34 investment deals are currently under review.

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This article, entitled “Report: Investment trends for the first half of 2017 in South Korea”, was written in Korean by  Platum, edited by AllTechAsia.

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