A New Driving Force in the Venture Investment Market: Angel Investments Exceed KRW 200 Billion
- Division
- 국제협력과
- Date
- 2017.08.09
- Writer
- 박강범
- File
- Headline
According to the Ministry of SMEs and Startups (the “MSS”), the total volume of angel investments made until the end of 2016 reached KRW 212.6 billion (KRW 174.7 billion invested by private investors and KRW 37.9 billion from investments through private investment associations), setting a new record since 2004.
Angel investments have become one of the major sectors of the venture investment market, largely owing to the government’s efforts to promote venture investments by expanding income deductions for angel investments.
(Private investments) In 2016, a total of 3,984 private investors* invested KRW 174.7 billion (based on tax returns for income deduction), setting a new record in terms of both the number of investors and the amount of investments since 2004, the year when investments precipitated after the disappearance of the “venture bubble.”
Private investments have been on the rise since 2010. The pace of growth quickened over the last three years (2014-2016), with the annual growth rate reaching 41.2%.
In addition, considering that investors can apply for income deductions on investments in 2016 until 2019,* the actual amount of investments is likely to exceed KRW 200 billion by far.
(Private investment associations) According to the ministry, the size of “private investment associations” continued to grow. The cooperatives hold superiority over private investors in terms of expertise, economy of scale, investment risk control, and portfolio building.
The number of new cooperatives began to increase at a fast pace starting in 2013. As of June 2017, the number of private investment associations is 273, and their total value is KRW 137.8 billion.
From the end of 2015, the number of cooperatives increased by 206.7%, and the total value increased by 209.0% (89 cooperatives, KRW 44.6 billion).
The amount invested by private investment associations reached an unprecedented KRW 37.9 billion in 2016 alone. A total of KRW 86.7 billion has been invested so far (aggregate).
The growth of angel investments seems to have been motivated by the revitalization of the start-up ecosystem and the government’s policies to reduce the risks of angel investments.
(Income deduction) It has been confirmed that expanding income deduction on angel investments led to a spike in the amount of angel investments, which shows that income deduction on private investments is one of the most effective means of attracting investments.
(Angel Investment Matching Fund) The Angel Investment Matching Fund was also found to have significantly contributed to the growth of angel investments. In the Angel Investment Matching Fund, the fund of funds matches the investments made by angel investors (1?2.5 times the amounts of angel investments).
The total value of the Angel Investment Matching Fund formed between 2012 and June 2017 stands at KRW 192 billion, from which 382 companies were invested KRW 61.6 billion.
23.9% of the companies invested by matching funds (91 of 381 companies) received subsequent investments worth KRW 147.8 billion from venture capitals.
These records show that businesses can secure additional funds required for their growth from a series of investments, ranging from angel investments, investments from the Angel Investment Matching Fund, to subsequent investments by venture capitals.
A breakdown of angel investments shows a rapid increase of investments in early-stage start-ups and a number of small-time angel investors.
① (Breakdown by the number of years in business) The number of investments in early-stage start-ups (three years old or younger) increased by 178.0% from the previous year, and the total amount increased by 30.4%.
② (Breakdown by size of investments) A rapid increase was observed in the number of investors investing KRW 15 million or less. A large number of investors tend to invest in small amounts.
Ms. Kim Ju-hwa, the head of the Investment Management Division of the Ministry of SMEs and Startups: observed that “the overall venture investment ecosystem is coming alive, with the amount of venture investments in 2017 1H exceeding the record-setting performance of the previous year. In particular, the growth of angel investments from individuals and investments in early-stage start-ups signal a qualitative improvement of venture investments”; and
added, “the MSS will continue to expand income deductions and the Angel Investment Matching Fund through its policies so that more people can join the angel investment market and match angel investors with early-stage start-ups to expand on investment opportunities.
Angel investments have become one of the major sectors of the venture investment market, largely owing to the government’s efforts to promote venture investments by expanding income deductions for angel investments.
(Private investments) In 2016, a total of 3,984 private investors* invested KRW 174.7 billion (based on tax returns for income deduction), setting a new record in terms of both the number of investors and the amount of investments since 2004, the year when investments precipitated after the disappearance of the “venture bubble.”
Private investments have been on the rise since 2010. The pace of growth quickened over the last three years (2014-2016), with the annual growth rate reaching 41.2%.
In addition, considering that investors can apply for income deductions on investments in 2016 until 2019,* the actual amount of investments is likely to exceed KRW 200 billion by far.
(Private investment associations) According to the ministry, the size of “private investment associations” continued to grow. The cooperatives hold superiority over private investors in terms of expertise, economy of scale, investment risk control, and portfolio building.
The number of new cooperatives began to increase at a fast pace starting in 2013. As of June 2017, the number of private investment associations is 273, and their total value is KRW 137.8 billion.
From the end of 2015, the number of cooperatives increased by 206.7%, and the total value increased by 209.0% (89 cooperatives, KRW 44.6 billion).
The amount invested by private investment associations reached an unprecedented KRW 37.9 billion in 2016 alone. A total of KRW 86.7 billion has been invested so far (aggregate).
The growth of angel investments seems to have been motivated by the revitalization of the start-up ecosystem and the government’s policies to reduce the risks of angel investments.
(Income deduction) It has been confirmed that expanding income deduction on angel investments led to a spike in the amount of angel investments, which shows that income deduction on private investments is one of the most effective means of attracting investments.
(Angel Investment Matching Fund) The Angel Investment Matching Fund was also found to have significantly contributed to the growth of angel investments. In the Angel Investment Matching Fund, the fund of funds matches the investments made by angel investors (1?2.5 times the amounts of angel investments).
The total value of the Angel Investment Matching Fund formed between 2012 and June 2017 stands at KRW 192 billion, from which 382 companies were invested KRW 61.6 billion.
23.9% of the companies invested by matching funds (91 of 381 companies) received subsequent investments worth KRW 147.8 billion from venture capitals.
These records show that businesses can secure additional funds required for their growth from a series of investments, ranging from angel investments, investments from the Angel Investment Matching Fund, to subsequent investments by venture capitals.
A breakdown of angel investments shows a rapid increase of investments in early-stage start-ups and a number of small-time angel investors.
① (Breakdown by the number of years in business) The number of investments in early-stage start-ups (three years old or younger) increased by 178.0% from the previous year, and the total amount increased by 30.4%.
② (Breakdown by size of investments) A rapid increase was observed in the number of investors investing KRW 15 million or less. A large number of investors tend to invest in small amounts.
Ms. Kim Ju-hwa, the head of the Investment Management Division of the Ministry of SMEs and Startups: observed that “the overall venture investment ecosystem is coming alive, with the amount of venture investments in 2017 1H exceeding the record-setting performance of the previous year. In particular, the growth of angel investments from individuals and investments in early-stage start-ups signal a qualitative improvement of venture investments”; and
added, “the MSS will continue to expand income deductions and the Angel Investment Matching Fund through its policies so that more people can join the angel investment market and match angel investors with early-stage start-ups to expand on investment opportunities.