Venture Investment Reaches a Record-High of KRW 745.3 Billion in the First Quarter of 2019
- Division
- International Cooperation Division
- Date
- 2019.05.01
- Writer
- 국제협력담당관
- Headline
- Venture investment reached its highest level in history in the first quarter of 2019, following the record-high investments made in the previous year.
The Ministry of SMEs and Startups (Minister Park Young-Sun, hereafter “MSS”) and Korean Venture Capital Association (Chairman Chung Sung In) announced that venture investment reached KRW 745.3 billion in the first quarter of this year in the “2019 1Q Venture Investment Trend” released on April 29.
It is a 16.9% increase compared to the KRW 637.7 billion of venture investment made in the first quarter of last year, maintaining an upward trajectory for four consecutive years*. The average amount of investment made by each company stood at KRW 1.81 billion, showing a slight increase compared to the KRW 1.79 billion of investment made in the first quarter of the previous year.
* Venture Investments in the First Quarters of Each Year (KRW 100 million): (2017) 4,054; (2018) 6,377; (2019) 7,453
Reflecting upon the recent cases in which active investments started to be made from the second quarter*, it is projected that venture investment for this year may go beyond the previous year’s annual high of KRW 3.4 trillion and reach KRW 4 trillion.
* The share of the first quarter in the total amount of venture investment made over the past three years is around 17%–18%.
It is analyzed that such growth in venture investment is attributable to the investments made by venture funds worth KRW 4.7 trillion throughout the past two years (2017–2018), which were driven by the active venture promotion policy of the government.
In particular, investments in the ICT and bioengineering (bio/medicine) industries related to the Fourth Industrial Revolution accounted for the largest share of 25.2% and 22.1% of the total as in the previous year.
Moreover, investments in the distribution and service industries reached KRW 152.9 billion, posting an 84% increase compared to the investment of KRW 83 billion made in the first quarter of the previous year.
It is analyzed that investments in relevant areas have increased with the rapid emergence of various start-ups using platforms and the growth of the sharing economy market.
Looking into the invested companies by their history of business, it was found that investments in start-ups and venture companies with a history of three to seven years, which are accelerating growth after overcoming the “valley of death“ since foundation, grew from 34% of the previous year to 40% this year, showing an increase of 6 percentage point. Meanwhile, the size of the venture fund in the first quarter of this year stood at KRW 619.8 billion, posting a 41.0% decrease compared to KRW 1 trillion and 51.2 billion of last year.
Such a result is because of the unusually large investment made to the fund in the first quarter of 2018. The amount was higher than that of the average year since nearly KRW 300 billion was executed for the fund in the first quarter of 2018 among the supplementary budget for fund of funds established in 2017.
In general, the fund starts to be set up in the second quarter after announcing its investment in the first quarter. The selection process on the first fund of funds investment project, which amounts to KRW 1.3 trillion (KRW 619 billion to be invested), was completed on April 24, and thus, the size of the fund is expected to be recovered starting from the second quarter of this year.
Looking at the investments made by each investing party, investments from individuals and general corporations grew significantly by 632% and 128%, respectively, compared to their amounts in the previous year.
In the case of venture capital firms, a total of five firms have been newly registered, leading to a total of 137 firms currently operating in the market.
The MSS stated that “the continuous increase of venture investment, as well as capital investment by individuals and general corporations, demonstrates that the venture ecosystem is becoming more oriented toward the private sector.” It added that “the MSS would make an investment of KRW 1 trillion in the fund of funds and provide a special guarantee of KRW 100 billion for promising unicorn companies while continuously enhancing laws and regulations to lay the ground for scaling up start-ups and venture companies into unicorn companies.”
It is a 16.9% increase compared to the KRW 637.7 billion of venture investment made in the first quarter of last year, maintaining an upward trajectory for four consecutive years*. The average amount of investment made by each company stood at KRW 1.81 billion, showing a slight increase compared to the KRW 1.79 billion of investment made in the first quarter of the previous year.
* Venture Investments in the First Quarters of Each Year (KRW 100 million): (2017) 4,054; (2018) 6,377; (2019) 7,453
Reflecting upon the recent cases in which active investments started to be made from the second quarter*, it is projected that venture investment for this year may go beyond the previous year’s annual high of KRW 3.4 trillion and reach KRW 4 trillion.
* The share of the first quarter in the total amount of venture investment made over the past three years is around 17%–18%.
It is analyzed that such growth in venture investment is attributable to the investments made by venture funds worth KRW 4.7 trillion throughout the past two years (2017–2018), which were driven by the active venture promotion policy of the government.
In particular, investments in the ICT and bioengineering (bio/medicine) industries related to the Fourth Industrial Revolution accounted for the largest share of 25.2% and 22.1% of the total as in the previous year.
Moreover, investments in the distribution and service industries reached KRW 152.9 billion, posting an 84% increase compared to the investment of KRW 83 billion made in the first quarter of the previous year.
It is analyzed that investments in relevant areas have increased with the rapid emergence of various start-ups using platforms and the growth of the sharing economy market.
Looking into the invested companies by their history of business, it was found that investments in start-ups and venture companies with a history of three to seven years, which are accelerating growth after overcoming the “valley of death“ since foundation, grew from 34% of the previous year to 40% this year, showing an increase of 6 percentage point. Meanwhile, the size of the venture fund in the first quarter of this year stood at KRW 619.8 billion, posting a 41.0% decrease compared to KRW 1 trillion and 51.2 billion of last year.
Such a result is because of the unusually large investment made to the fund in the first quarter of 2018. The amount was higher than that of the average year since nearly KRW 300 billion was executed for the fund in the first quarter of 2018 among the supplementary budget for fund of funds established in 2017.
In general, the fund starts to be set up in the second quarter after announcing its investment in the first quarter. The selection process on the first fund of funds investment project, which amounts to KRW 1.3 trillion (KRW 619 billion to be invested), was completed on April 24, and thus, the size of the fund is expected to be recovered starting from the second quarter of this year.
Looking at the investments made by each investing party, investments from individuals and general corporations grew significantly by 632% and 128%, respectively, compared to their amounts in the previous year.
In the case of venture capital firms, a total of five firms have been newly registered, leading to a total of 137 firms currently operating in the market.
The MSS stated that “the continuous increase of venture investment, as well as capital investment by individuals and general corporations, demonstrates that the venture ecosystem is becoming more oriented toward the private sector.” It added that “the MSS would make an investment of KRW 1 trillion in the fund of funds and provide a special guarantee of KRW 100 billion for promising unicorn companies while continuously enhancing laws and regulations to lay the ground for scaling up start-ups and venture companies into unicorn companies.”