Trends of Venture Investment and Venture Funds Raised in Q1, 2023
- Division
- Spokesperson's Office
- Date
- 2023.04.21
- Writer
- Yeji KIM
- Headline
- Trends of Venture Investment and Venture Funds Raised in Q1, 2023
| □ KRW 0.9 trillion in venture investments and KRW 0.6 trillion in venture funds formed in Q1, 2023. □ Total investments in Q1 2023 decreased by 60% compared to the previous year, but increased by approximately 14% compared to the same period in both 2019 and 2020. |
The Ministry of SMEs and Startups (Minister LEE Young, hereinafter referred to as “MSS”) released a report on the trends of venture investments and venture funds raised in Q1, 2023 on April 17 (Mon).
The total venture investments during Q1 of 2023 were KRW 0.9 trillion, a year-on-year decline of 60.3%. Factors affecting the decline include a slowdown in the real economy that has lasted since last year, increased funding costs due to high interest rates, growing uncertainty in the financial market, and the sluggish market with low return on investments.
However, compared to periods before the years 2021-2022 that saw the unprecedented annual rise of around 70% in venture investments, the total investments in Q1 2023 saw a 13.2% increase over the same period in 2019 and a 14.0% increase over the same period in 2020.
< Venture Investments in Q1 for the Last 5 years (2019-2023)
(Unit: KRW 100 million, %, Number of investments, Investee venture) >
Regarding global venture investments during the same period, the US and Israel saw an year-on-year decrease of 55.1% and 73.6%, respectively. If the two largest investments*, including OpenAI's mega-deal worth KRW 13 trillion for developing the ChatGPT service, are excluded, total investments in the US saw a decline of 75.1%.
* ▲OpenAI raised USD 10 billion and ▲Stripe (fintech startup) raised USD 6.5 billion in investments.
The decrease in global venture investments is assumed to have been caused by a combination of reduced liquidity and expected sluggishness in the real economy resulting from rapid interest rate hikes*, announced by the monetary authority of each country.
* US benchmark interest rate (%): 0.00~0.25 (~’22. Mar) → 4.75~5.00 (’23. Mar)
Israel benchmark interest rate (%): 0.1 (’22. Feb) → 4.5 (’23. Apr)
The venture investments in Q1 of the last 5 years by industry is as follows.
< Venture Investments in Q1 Over the Last 5 Years by Industry (2019-2023)
(Unit: KRW 100 million, %, Number of investments, Investee ventures) >
The video/performance/record industry is the only industry that raised more investments in Q1 of this year than in the same period of the previous year. The Korean entertainment industry seems to be maintaining a bullish investor sentiment due to the growing demand for K-content.
There was a considerable decrease in investments in such industries as ICT service, distribution/service, computer games and bio/medicine industries. Analysis suggests that the growth of these industries has slowed due to reduced demand following the easing of COVID-19 preventive measures, or because companies with weak short-term financial performance struggled to attract investments.
The venture investments in Q1 of the last 5 years according to the venture’s years of life are as follows.
< Venture Investments in Q1 Over the Last 5 Years
Categorized by the Age of the Venture (2019~2023) (Unit : KRW 100 million, %, %p) >
Mid-stage ventures (more than 3~7 years) experienced the largest decrease in investments. As it was difficult for ventures to keep attracting investments and the market saw low returns on investments, the investor preference for mid-stage ventures is assumed to have been lower than the preference for early-stage ventures (3 years or less) that are undervalued, and late-stage ventures (more than 7 years) that offer a higher potential for earning returns on investments in a short period of time.
The total venture funds formed in the first quarter of 2023 were KRW 0.6 trillion, which is a 78.6% decrease compared to the same period of the previous year; a 13.8% decrease compared to the same period of 2019; and a 12.2% increase compared to the same period of 2020.
< Status of Venture Funds Formed in Q1 Over the Last 5 Years (’19~’23)
(Unit : KRW 100 million, %, Number of funds) >
* During the same period, venture funds formed in the US decreased by 84.1% year on year.
The percentage of the funds of funds invested in ventures and the amount of funds formed by fund type in Q1 over the last 5 years are as follows.
< Details of Funds of Funds and Non-funds of Funds Formed in Q1
Over the Last 5 Years (Unit : KRW 100 million, %) >
< Types of Funds Formed in Q1 Over the Last 5 Years and their Percentages
(Unit : KRW 100 million, %)>
There is a year-on-year decrease in the amount of the non-funds of funds and funds from the private sector only that were formed in Q1 this year because the high interest rates made it more difficult to obtain financing and gain returns on investments in a short time and therefore, private investors had a conservative attitude towards investing in venture funds.
Regarding the composition of investors of venture funds, there was a decrease in the amount of investments from both policy financing and the private sector, with the private sector showing a larger decrease.
The status of the investors of venture funds formed in Q1 over the last five years is as follows.
< Status of Investors of Venture Funds Formed in Q1 Over the Last 5 Years (2019-2023)
(Unit: KRW 100 million, %)>
“As venture investments are shrinking worldwide due to combined crises such as high interest rates, high prices and the global risk of financial institutions, it will be necessary to keep an eye on the market,” stated Minister LEE Young. “The government deems it necessary to take various policy measures in order to overcome this situation.”
The Minister further stated, “Although there was a significant decrease in venture investments in the first quarter, the government expects more funds to flow from the private sector to the venture investment market through strategic corporate venture capital (CVC) investments, etc.,” adding that “the MSS is planning to announce measures to support and enhance the overall related ecosystems, such as plans to provide financial support for ventures and startups and strengthen their competitiveness.”
The total venture investments during Q1 of 2023 were KRW 0.9 trillion, a year-on-year decline of 60.3%. Factors affecting the decline include a slowdown in the real economy that has lasted since last year, increased funding costs due to high interest rates, growing uncertainty in the financial market, and the sluggish market with low return on investments.
However, compared to periods before the years 2021-2022 that saw the unprecedented annual rise of around 70% in venture investments, the total investments in Q1 2023 saw a 13.2% increase over the same period in 2019 and a 14.0% increase over the same period in 2020.
< Venture Investments in Q1 for the Last 5 years (2019-2023)
(Unit: KRW 100 million, %, Number of investments, Investee venture) >
| Classification | ’19.Q1 | ’20.Q1 | ’21.Q1 | ’22.Q1 | ’23.Q1 | ||
| Investments | 7,789 | 7,732 | 13,187 | 22,214 | 8,815 | ||
| Year-on-year | Increase or decrease | +1,412 | △56 | +5,454 | +9,027 | △13,399 | |
| Increase or decrease difference | +22.1 | △0.7 | +70.5 | +68.5 | △60.3 | ||
| Number of investments made | 774 | 719 | 1,054 | 1,520 | 885 | ||
| Number of investee ventures | 418 | 405 | 604 | 757 | 532 | ||
Regarding global venture investments during the same period, the US and Israel saw an year-on-year decrease of 55.1% and 73.6%, respectively. If the two largest investments*, including OpenAI's mega-deal worth KRW 13 trillion for developing the ChatGPT service, are excluded, total investments in the US saw a decline of 75.1%.
* ▲OpenAI raised USD 10 billion and ▲Stripe (fintech startup) raised USD 6.5 billion in investments.
The decrease in global venture investments is assumed to have been caused by a combination of reduced liquidity and expected sluggishness in the real economy resulting from rapid interest rate hikes*, announced by the monetary authority of each country.
* US benchmark interest rate (%): 0.00~0.25 (~’22. Mar) → 4.75~5.00 (’23. Mar)
Israel benchmark interest rate (%): 0.1 (’22. Feb) → 4.5 (’23. Apr)
The venture investments in Q1 of the last 5 years by industry is as follows.
< Venture Investments in Q1 Over the Last 5 Years by Industry (2019-2023)
(Unit: KRW 100 million, %, Number of investments, Investee ventures) >
| Classification | ‘19.Q1 | ’20.Q1 | ‘21.Q1 | ‘22.Q1 | ‘23.Q1 | |||
| Year-on-year | ||||||||
| Increase or decrease | Increase or decrease difference | |||||||
| ICT service | Amount | 1,686 | 2,193 | 3,648 | 7,688 | 1,986 | △5,701 | △74.2 |
| Percentage | 21.6 | 28.4 | 27.7 | 34.6 | 22.5 | △12.1 | - | |
| Bio/medicine | Amount | 1,700 | 2,464 | 3,648 | 4,137 | 1,520 | △2,617 | △63.3 |
| Percentage | 21.8 | 31.9 | 27.7 | 18.6 | 17.2 | △1.4 | - | |
| Video/ performance/ record |
Amount | 880 | 372 | 567 | 1,016 | 1,102 | +86 | +8.5 |
| Percentage | 11.3 | 4.8 | 4.3 | 4.6 | 12.5 | +7.9 | - | |
| Distribution/ service |
Amount | 1,634 | 1,004 | 2,585 | 4,570 | 1,028 | △3,542 | △77.5 |
| Percentage | 21.0 | 13.0 | 19.6 | 20.6 | 11.7 | △8.9 | - | |
| Electrical/ machinery/ devices |
Amount | 447 | 311 | 793 | 1,260 | 832 | △428 | △34.0 |
| Percentage | 5.7 | 4.0 | 6.0 | 5.7 | 9.4 | +3.7 | - | |
| Other | Amount | 721 | 532 | 749 | 1,141 | 808 | △333 | △29.2 |
| Percentage | 9.3 | 6.9 | 5.7 | 5.1 | 9.2 | +4.1 | - | |
| ICT manufacturing | Amount | 290 | 303 | 416 | 934 | 707 | △227 | △24.3 |
| Percentage | 3.7 | 3.9 | 3.2 | 4.2 | 8.0 | +3.8 | - | |
| Chemical/ material |
Amount | 226 | 344 | 413 | 722 | 634 | △88 | △12.1 |
| Percentage | 2.9 | 4.4 | 3.1 | 3.3 | 7.2 | +3.9 | - | |
| Computer games | Amount | 204 | 209 | 368 | 746 | 196 | △549 | △73.7 |
| Percentage | 2.6 | 2.7 | 2.8 | 3.4 | 2.2 | △1.2 | - | |
| Total | Amount | 7,789 | 7,732 | 13,187 | 22,214 | 8,815 | △13,399 | △60.3 |
The video/performance/record industry is the only industry that raised more investments in Q1 of this year than in the same period of the previous year. The Korean entertainment industry seems to be maintaining a bullish investor sentiment due to the growing demand for K-content.
There was a considerable decrease in investments in such industries as ICT service, distribution/service, computer games and bio/medicine industries. Analysis suggests that the growth of these industries has slowed due to reduced demand following the easing of COVID-19 preventive measures, or because companies with weak short-term financial performance struggled to attract investments.
The venture investments in Q1 of the last 5 years according to the venture’s years of life are as follows.
< Venture Investments in Q1 Over the Last 5 Years
Categorized by the Age of the Venture (2019~2023) (Unit : KRW 100 million, %, %p) >
| Classification | ’19.Q1 | ’20.Q1 | ’21.Q1 | ’22.Q1 | ’23.Q1 | |||
| Year-on-year | ||||||||
| Increase or decrease | Increase or decrease difference | |||||||
| Early-stage (3 years or less) | Amount | 2,548 | 2,943 | 3,721 | 6,104 | 2,525 | △3,579 | △58.6 |
| Percentage | 32.7 | 38.1 | 28.2 | 27.5 | 28.6 | +1.1 | - | |
| Mid-stage (More than 3~7 years) | Amount | 3,097 | 2,700 | 6,281 | 10,205 | 2,948 | △7,257 | △71.1 |
| Percentage | 39.8 | 34.9 | 47.6 | 45.9 | 33.4 | △12.5 | - | |
| Lats-stage (More than 7 year) | Amount | 2,144 | 2,089 | 3,184 | 5,905 | 3,342 | △2,563 | △43.4 |
| Percentage | 27.5 | 27.0 | 24.1 | 26.6 | 37.9 | +11.3 | - | |
| Total | 7,789 | 7,732 | 13,187 | 22,214 | 8,815 | △13,399 | △60.3 | |
Mid-stage ventures (more than 3~7 years) experienced the largest decrease in investments. As it was difficult for ventures to keep attracting investments and the market saw low returns on investments, the investor preference for mid-stage ventures is assumed to have been lower than the preference for early-stage ventures (3 years or less) that are undervalued, and late-stage ventures (more than 7 years) that offer a higher potential for earning returns on investments in a short period of time.
The total venture funds formed in the first quarter of 2023 were KRW 0.6 trillion, which is a 78.6% decrease compared to the same period of the previous year; a 13.8% decrease compared to the same period of 2019; and a 12.2% increase compared to the same period of 2020.
< Status of Venture Funds Formed in Q1 Over the Last 5 Years (’19~’23)
(Unit : KRW 100 million, %, Number of funds) >
| Classification | ’19.Q1 | ’20.Q1 | ’21.Q1 | ’22.Q1 | ’23.Q1 | ||
| Funds formed | 6,606 | 5,078 | 15,865 | 26,668 | 5,696 | ||
| Year-on- year |
Increase or decrease | △3,883 | △1,528 | +10,787 | +10,803 | △20,972 | |
| Increase or decrease difference | △37.0 | △23.1 | +212.5 | +68.1 | △78.6 | ||
| Number of funds formed | 34 | 20 | 53 | 93 | 43 | ||
* During the same period, venture funds formed in the US decreased by 84.1% year on year.
The percentage of the funds of funds invested in ventures and the amount of funds formed by fund type in Q1 over the last 5 years are as follows.
< Details of Funds of Funds and Non-funds of Funds Formed in Q1
Over the Last 5 Years (Unit : KRW 100 million, %) >
| Classification | ‘19.Q1 | ‘20.Q1 | ‘21.Q1 | ‘22.Q1 | ‘23.Q1 | |||
| Year-on-year | ||||||||
| Increase or decrease | Increase or decrease difference | |||||||
| Funds of funds | Amount | 3,015 | 2,327 | 8,894 | 4,676 | 2,097 | △2,579 | △55.2 |
| Percentage | 45.6 | 45.8 | 56.1 | 17.5 | 36.8 | +19.3 | - | |
| Non-funds of funds | Amount | 3,591 | 2,751 | 6,971 | 21,992 | 3,599 | △18,393 | △83.6 |
| Percentage | 54.4 | 54.2 | 43.9 | 82.5 | 63.2 | △19.3 | - | |
| Total | 6,606 | 5,078 | 15,865 | 26,668 | 5,696 | △20,972 | △78.6 | |
< Types of Funds Formed in Q1 Over the Last 5 Years and their Percentages
(Unit : KRW 100 million, %)>
| Classification | ‘19.Q1 | ‘20.Q1 | ‘21.Q1 | ‘22.Q1 | ‘23.Q1 | ||
| Total funds formed (A) | 6,606 | 5,078 | 15,865 | 26,668 | 5,696 | ||
| Funds of funds formed (C) | 3,015 | 2,327 | 8,894 | 4,676 | 2,097 | ||
| Percentage of the funds of funds (=C/A×100) | 45.6 | 45.8 | 56.1 | 17.5 | 36.8 | ||
| Non-funds of funds formed (B) | 3,591 | 2,751 | 6,971 | 21,992 | 3,599 | ||
| Percentage of the non-funds of funds (=B/A×100) | 54.4 | 54.2 | 43.9 | 82.5 | 63.2 | ||
| Funds from the private sector only (C) | 3,251 | 1,699 | 3,880 | 14,265 | 2,443 | ||
| Percentage of the funds from the private sector (=C/Ax100) | 49.2 | 33.5 | 24.5 | 53.5 | 42.9 | ||
There is a year-on-year decrease in the amount of the non-funds of funds and funds from the private sector only that were formed in Q1 this year because the high interest rates made it more difficult to obtain financing and gain returns on investments in a short time and therefore, private investors had a conservative attitude towards investing in venture funds.
Regarding the composition of investors of venture funds, there was a decrease in the amount of investments from both policy financing and the private sector, with the private sector showing a larger decrease.
The status of the investors of venture funds formed in Q1 over the last five years is as follows.
< Status of Investors of Venture Funds Formed in Q1 Over the Last 5 Years (2019-2023)
(Unit: KRW 100 million, %)>
| Classification | ‘19.1Q | ‘20.1Q | ‘21.1Q | ‘22.1Q | ‘23.1Q | ||||
| Year-on-year | |||||||||
| Increase or decrease | Increase or decrease difference | ||||||||
| Funds of funds | Amount | 1,730 | 900 | 2,639 | 1,280 | 786 | △494 | △38.6 | |
| Percentage | 26.2 | 17.7 | 16.6 | 4.8 | 13.8 | +9.0 | - | ||
| Growth financing | Amount | 175 | 315 | 1,450 | 2,551 | 639 | △1,912 | △75.0 | |
| Percentage | 2.7 | 6.2 | 9.1 | 9.6 | 11.2 | +1.6 | - | ||
| Other policy institutes | Amount | 85 | 190 | 1,011 | 1,310 | 652 | △658 | △50.2 | |
| Percentage | 1.3 | 3.7 | 6.4 | 4.9 | 11.4 | +6.5 | - | ||
| Policy financing | Amount | 1,990 | 1,405 | 5,100 | 5,141 | 2,077 | △3,064 | △59.6 | |
| Percentage | 30.1 | 27.7 | 32.1 | 19.3 | 36.5 | +17.2 | - | ||
| Individuals | Amount | 1,611 | 450 | 1,406 | 5,536 | 454 | △5,082 | △91.8 | |
| Percentage | 24.4 | 8.9 | 8.9 | 20.8 | 8.0 | △12.8 | - | ||
| General corporations | Amount | 1,705 | 810 | 2,322 | 3,687 | 1,357 | △2,330 | △63.2 | |
| Percentage | 25.8 | 16.0 | 14.6 | 13.8 | 23.8 | +10.0 | - | ||
| Financial institutions (excluding KDB Bank) |
Amount | 628 | 410 | 2,242 | 7,894 | 911 | △6,983 | △88.5 | |
| Percentage | 9.5 | 8.1 | 14.1 | 29.6 | 16.0 | △13.6 | - | ||
| Pension and mutual aid associations | Amount | 50 | 1,150 | 2,715 | 1,275 | 50 | △1,225 | △96.1 | |
| Percentage | 0.8 | 22.7 | 17.1 | 4.8 | 0.9 | △3.9 | - | ||
| VC | Amount | 587 | 637 | 1,849 | 2,752 | 590 | △2,162 | △78.6 | |
| Percentage | 8.9 | 12.5 | 11.7 | 10.3 | 10.4 | +0.1 | - | ||
| Other organisations, foreingers | Amount | 35 | 216 | 231 | 383 | 258 | △125 | △32.6 | |
| Percentage | 0.5 | 4.3 | 1.5 | 1.4 | 4.5 | +3.1 | - | ||
| Private sector | Amount | 4,616 | 3,673 | 10,765 | 21,527 | 3,619 | △17,908 | △83.2 | |
| Percentage | 69.9 | 72.3 | 67.9 | 80.7 | 63.5 | △17.2 | - | ||
| Total | Amount | 6,606 | 5,078 | 15,865 | 26,668 | 5,696 | △20,972 | - | |
“As venture investments are shrinking worldwide due to combined crises such as high interest rates, high prices and the global risk of financial institutions, it will be necessary to keep an eye on the market,” stated Minister LEE Young. “The government deems it necessary to take various policy measures in order to overcome this situation.”
The Minister further stated, “Although there was a significant decrease in venture investments in the first quarter, the government expects more funds to flow from the private sector to the venture investment market through strategic corporate venture capital (CVC) investments, etc.,” adding that “the MSS is planning to announce measures to support and enhance the overall related ecosystems, such as plans to provide financial support for ventures and startups and strengthen their competitiveness.”