Discover Korea’s Startup Investment Trends: Venture Capital Investment

 

This is the first post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, Exit, and crowdfunding. Stay tuned over the coming month as we present following 3 series.

 

New venture capital investment reaches record high

 

According to the Korea Venture Capital Association (KVCA), new venture capital (VC) investments made by Korean VC firms reached USD 2.6 billion in 2015, exceeding the previous record of USD 2.01 billion in 2000. This new record represents a 27.2 percent increase from the level of investment (USD 1.49 billion) made in 2014.

 

This trend continued into 2016. The KVCA reported that, as of November 2016, new VC investment in Korea had reached USD 1.68 billion, up 0.9 percent from the level of investment (USD 1.67 billion) recorded in the same period the previous year. This is an even larger increase than the record increase from the previous year. The number of companies receiving investment has grown significantly as well. By the end of November 2016, the number of new venture-backed companies was 1,057, up 13.0 percent from the 935 companies recorded in the same period the previous year.

 

Rapid Increase in Investment in the Bioindustry

 


 

While the ICT services and distribution sectors led new VC investment in 2015, the bioindustry took a significant lead in 2016, seemingly due to a bandwagon effect.

 

According to the KVCA, a total of USD 361.18 million was invested in the bioindustry and medical sectors by the end of November 2016, exceeding the annual investment of USD 288.18 million recorded in the previous year. Investment in the bioindustry sector has increased fourfold since 2012, with the bioindustry’s proportion of total investment having grown significantly as well. In 2012, investment in the bioindustry accounted for only 8.5 percent of total new VC investment. However, it rose continuously every year, reaching 10.5 percent in 2013, 17.8 percent in 2014, and 15.2 percent in 2015, hitting a record high of 21.4 percent in 2016 and rising above the 20 percent range for the first time. By 2016, two out of every 10 investments being made were in the bioindustry or medical sector.

 

Although investment in the electrical manufacturing, machinery, and equipment industries rose by a small margin, and the chemical and materials industries saw a steady flow of investment, the growth of investment in these industries was not nearly enough to have an effect on the general trend. New investment in the electrical manufacturing, machinery, and equipment industries rose from USD 141.82 million in 2014 to USD 147.27 million in 2015. As of November 2016, it had reached USD 177.64 million, showing an increase of over 20 percent from the previous year.

 

Slight decline in investment in ICT services

Sharp drop in investment in the distribution and game industries

 

VC investment in the IT services industry showed remarkable growth in 2015, but remained sluggish throughout 2016. Also, investment in the distribution industry, which had risen sharply in recent years, also slowed down, while investment in the game industry has been falling for the past two years.

 

According to the KVCA, new investment in the game industry in 2016 reached USD 117.82 million by the end of November 2016, falling far below the USD 153 million recorded in 2015. This means that new investment in this industry has declined consistently over the past two years since 2014. Investment in the distribution industry, which had soared over the past three years, also retracted, recording USD 193.97 million in 2016 (as of the end of November), down from USD 276.64 million in 2015, which was nearly a 50 percent increase compared to the previous year (USD 186 million in 2014).

 

Investment in the ICT services industry, which had grown steadily over the previous five years, also shrank in 2016, recording USD 317.64 million as of November, which is below the USD 365.36 million seen in 2015. Although new investment in December still needs to be included in the total for the aggregate annual record, if the current trend continues, the total amount of new investment in the ICT services industry in 2016 is expected to fall below that of 2015.

 

Significant increase in the proportion of investment in early-stage companies 

 

 

The proportion of investment in early-stage companies that have been active for less than three years has been increasing gradually since 2009. Accounting for 28.5 percent of total VC investment in 2009, investment in such companies rose to 29.2 percent in 2010, 29.9 percent in 2012, 30.7 percent in 2014, and 31.3 percent in 2015. In 2016, the proportion of investment grew to 36.7 percent, exceeding investment in late-stage companies for the first time since 2009.

 

Investment in early-stage, venture-backed companies under three years old had accounted for more than 60 percent of total VC investment in the early 2000s, but then declined sharply to the upper-20 percent range, and remained there until 2010. Since the onset of the mobile era in the 2010s, the amount and proportion of investment in such companies have been growing simultaneously. The reason for this is that initial expenses for startups have decreased, while the number of support programs for them has increased, which in turn has led to a surge in the number of venture-backed companies. As a result, more such early-stage companies are receiving initial investments.

 

The proportion of investment in late-stage startups has been declining for the past three years. After jumping from 44.1 percent in 2010 to 49.7 percent in 2013, the proportion of investment in late-stage startups (more than seven years old) fell to 44.4 percent in 2014 and 41.2 percent in 2015, before dropping rapidly to 5.5 percent in 2016.

The proportion of investment in mid-stage startups (between three and seven years old), which are at a point in their development where they are said to be entering the so-called “Valley of Death,” has remained in the mid-20 percent range of total investment. Recording USD 264 million in mid-2010, investment in mid-stage startups accounted for 26.6 percent of total investment (USD 1.74 billion) in startups. This figure, however, fell to 26.1 percent in 2011 and 24.8 percent in 2014. It then jumped to 27.4 percent in 2015 and reached 27.8 percent as of November 2016, showing a trend similar to that of the previous year.

 

This surge in the proportion of investment in early-stage startups, while the proportion of that in mid-stage startups remains steady, indicates that there is growing interest in new startups and an increasing lack of funding for growing and maturing companies. However, this could also mean that the relative number of mid-stage companies worth investing in has decreased.

 

Upward trend in the number of investment sources 

 


 

As of the end of November 2016, investment resources for venture-backed companies, including the number of VC funds and the amount of funds invested, have gradually increased, signifying an increase in the capacity for investment in startups and other venture-backed companies.

 

According to the KVCA, the total number of VC funds in Korea stands at 598, as of the end of November 2016, representing an 11.2 percent increase from the 538 funds recorded at the end of 2015. In the last five years, the number of VC funds has gradually increased, and the sizes of their investments have grown as well. The total amount of VC investments recorded USD 14.77 billion as of the end of November 2016, up 13.3 percent from USD 13.04 billion in 2015 and nearly double the amount (USD 8.42 billion) in 2012.

 

This consistent increase in the total number of VC funds means that investment sources, and investment opportunities, have been expanding, and also that efforts to find new investment opportunities are intensifying. There are some VC funds that invest in a broad range of companies, but most have been created to focus their investments on specific areas.

 

*Exchange rate: 1,100KRW/1USD 

 

 

 

 

Discover Korea’s Startup Investment Trends: Venture Capital Investment

 

This is the first post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, Exit, and crowdfunding. Stay tuned over the coming month as we present following 3 series.

 

New venture capital investment reaches record high

 

According to the Korea Venture Capital Association (KVCA), new venture capital (VC) investments made by Korean VC firms reached USD 2.6 billion in 2015, exceeding the previous record of USD 2.01 billion in 2000. This new record represents a 27.2 percent increase from the level of investment (USD 1.49 billion) made in 2014.

 

This trend continued into 2016. The KVCA reported that, as of November 2016, new VC investment in Korea had reached USD 1.68 billion, up 0.9 percent from the level of investment (USD 1.67 billion) recorded in the same period the previous year. This is an even larger increase than the record increase from the previous year. The number of companies receiving investment has grown significantly as well. By the end of November 2016, the number of new venture-backed companies was 1,057, up 13.0 percent from the 935 companies recorded in the same period the previous year.

 

Rapid Increase in Investment in the Bioindustry

 


 

While the ICT services and distribution sectors led new VC investment in 2015, the bioindustry took a significant lead in 2016, seemingly due to a bandwagon effect.

 

According to the KVCA, a total of USD 361.18 million was invested in the bioindustry and medical sectors by the end of November 2016, exceeding the annual investment of USD 288.18 million recorded in the previous year. Investment in the bioindustry sector has increased fourfold since 2012, with the bioindustry’s proportion of total investment having grown significantly as well. In 2012, investment in the bioindustry accounted for only 8.5 percent of total new VC investment. However, it rose continuously every year, reaching 10.5 percent in 2013, 17.8 percent in 2014, and 15.2 percent in 2015, hitting a record high of 21.4 percent in 2016 and rising above the 20 percent range for the first time. By 2016, two out of every 10 investments being made were in the bioindustry or medical sector.

 

Although investment in the electrical manufacturing, machinery, and equipment industries rose by a small margin, and the chemical and materials industries saw a steady flow of investment, the growth of investment in these industries was not nearly enough to have an effect on the general trend. New investment in the electrical manufacturing, machinery, and equipment industries rose from USD 141.82 million in 2014 to USD 147.27 million in 2015. As of November 2016, it had reached USD 177.64 million, showing an increase of over 20 percent from the previous year.

 

Slight decline in investment in ICT services

Sharp drop in investment in the distribution and game industries

 

VC investment in the IT services industry showed remarkable growth in 2015, but remained sluggish throughout 2016. Also, investment in the distribution industry, which had risen sharply in recent years, also slowed down, while investment in the game industry has been falling for the past two years.

 

According to the KVCA, new investment in the game industry in 2016 reached USD 117.82 million by the end of November 2016, falling far below the USD 153 million recorded in 2015. This means that new investment in this industry has declined consistently over the past two years since 2014. Investment in the distribution industry, which had soared over the past three years, also retracted, recording USD 193.97 million in 2016 (as of the end of November), down from USD 276.64 million in 2015, which was nearly a 50 percent increase compared to the previous year (USD 186 million in 2014).

 

Investment in the ICT services industry, which had grown steadily over the previous five years, also shrank in 2016, recording USD 317.64 million as of November, which is below the USD 365.36 million seen in 2015. Although new investment in December still needs to be included in the total for the aggregate annual record, if the current trend continues, the total amount of new investment in the ICT services industry in 2016 is expected to fall below that of 2015.

 

Significant increase in the proportion of investment in early-stage companies 

 

 

The proportion of investment in early-stage companies that have been active for less than three years has been increasing gradually since 2009. Accounting for 28.5 percent of total VC investment in 2009, investment in such companies rose to 29.2 percent in 2010, 29.9 percent in 2012, 30.7 percent in 2014, and 31.3 percent in 2015. In 2016, the proportion of investment grew to 36.7 percent, exceeding investment in late-stage companies for the first time since 2009.

 

Investment in early-stage, venture-backed companies under three years old had accounted for more than 60 percent of total VC investment in the early 2000s, but then declined sharply to the upper-20 percent range, and remained there until 2010. Since the onset of the mobile era in the 2010s, the amount and proportion of investment in such companies have been growing simultaneously. The reason for this is that initial expenses for startups have decreased, while the number of support programs for them has increased, which in turn has led to a surge in the number of venture-backed companies. As a result, more such early-stage companies are receiving initial investments.

 

The proportion of investment in late-stage startups has been declining for the past three years. After jumping from 44.1 percent in 2010 to 49.7 percent in 2013, the proportion of investment in late-stage startups (more than seven years old) fell to 44.4 percent in 2014 and 41.2 percent in 2015, before dropping rapidly to 5.5 percent in 2016.

The proportion of investment in mid-stage startups (between three and seven years old), which are at a point in their development where they are said to be entering the so-called “Valley of Death,” has remained in the mid-20 percent range of total investment. Recording USD 264 million in mid-2010, investment in mid-stage startups accounted for 26.6 percent of total investment (USD 1.74 billion) in startups. This figure, however, fell to 26.1 percent in 2011 and 24.8 percent in 2014. It then jumped to 27.4 percent in 2015 and reached 27.8 percent as of November 2016, showing a trend similar to that of the previous year.

 

This surge in the proportion of investment in early-stage startups, while the proportion of that in mid-stage startups remains steady, indicates that there is growing interest in new startups and an increasing lack of funding for growing and maturing companies. However, this could also mean that the relative number of mid-stage companies worth investing in has decreased.

 

Upward trend in the number of investment sources 

 


 

As of the end of November 2016, investment resources for venture-backed companies, including the number of VC funds and the amount of funds invested, have gradually increased, signifying an increase in the capacity for investment in startups and other venture-backed companies.

 

According to the KVCA, the total number of VC funds in Korea stands at 598, as of the end of November 2016, representing an 11.2 percent increase from the 538 funds recorded at the end of 2015. In the last five years, the number of VC funds has gradually increased, and the sizes of their investments have grown as well. The total amount of VC investments recorded USD 14.77 billion as of the end of November 2016, up 13.3 percent from USD 13.04 billion in 2015 and nearly double the amount (USD 8.42 billion) in 2012.

 

This consistent increase in the total number of VC funds means that investment sources, and investment opportunities, have been expanding, and also that efforts to find new investment opportunities are intensifying. There are some VC funds that invest in a broad range of companies, but most have been created to focus their investments on specific areas.

 

*Exchange rate: 1,100KRW/1USD 

 

 

 

 

Discover Korea’s Startup Investment Trends: Venture Capital Investment

 

This is the first post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, Exit, and crowdfunding. Stay tuned over the coming month as we present following 3 series.

 

New venture capital investment reaches record high

 

According to the Korea Venture Capital Association (KVCA), new venture capital (VC) investments made by Korean VC firms reached USD 2.6 billion in 2015, exceeding the previous record of USD 2.01 billion in 2000. This new record represents a 27.2 percent increase from the level of investment (USD 1.49 billion) made in 2014.

 

This trend continued into 2016. The KVCA reported that, as of November 2016, new VC investment in Korea had reached USD 1.68 billion, up 0.9 percent from the level of investment (USD 1.67 billion) recorded in the same period the previous year. This is an even larger increase than the record increase from the previous year. The number of companies receiving investment has grown significantly as well. By the end of November 2016, the number of new venture-backed companies was 1,057, up 13.0 percent from the 935 companies recorded in the same period the previous year.

 

Rapid Increase in Investment in the Bioindustry

 


 

While the ICT services and distribution sectors led new VC investment in 2015, the bioindustry took a significant lead in 2016, seemingly due to a bandwagon effect.

 

According to the KVCA, a total of USD 361.18 million was invested in the bioindustry and medical sectors by the end of November 2016, exceeding the annual investment of USD 288.18 million recorded in the previous year. Investment in the bioindustry sector has increased fourfold since 2012, with the bioindustry’s proportion of total investment having grown significantly as well. In 2012, investment in the bioindustry accounted for only 8.5 percent of total new VC investment. However, it rose continuously every year, reaching 10.5 percent in 2013, 17.8 percent in 2014, and 15.2 percent in 2015, hitting a record high of 21.4 percent in 2016 and rising above the 20 percent range for the first time. By 2016, two out of every 10 investments being made were in the bioindustry or medical sector.

 

Although investment in the electrical manufacturing, machinery, and equipment industries rose by a small margin, and the chemical and materials industries saw a steady flow of investment, the growth of investment in these industries was not nearly enough to have an effect on the general trend. New investment in the electrical manufacturing, machinery, and equipment industries rose from USD 141.82 million in 2014 to USD 147.27 million in 2015. As of November 2016, it had reached USD 177.64 million, showing an increase of over 20 percent from the previous year.

 

Slight decline in investment in ICT services

Sharp drop in investment in the distribution and game industries

 

VC investment in the IT services industry showed remarkable growth in 2015, but remained sluggish throughout 2016. Also, investment in the distribution industry, which had risen sharply in recent years, also slowed down, while investment in the game industry has been falling for the past two years.

 

According to the KVCA, new investment in the game industry in 2016 reached USD 117.82 million by the end of November 2016, falling far below the USD 153 million recorded in 2015. This means that new investment in this industry has declined consistently over the past two years since 2014. Investment in the distribution industry, which had soared over the past three years, also retracted, recording USD 193.97 million in 2016 (as of the end of November), down from USD 276.64 million in 2015, which was nearly a 50 percent increase compared to the previous year (USD 186 million in 2014).

 

Investment in the ICT services industry, which had grown steadily over the previous five years, also shrank in 2016, recording USD 317.64 million as of November, which is below the USD 365.36 million seen in 2015. Although new investment in December still needs to be included in the total for the aggregate annual record, if the current trend continues, the total amount of new investment in the ICT services industry in 2016 is expected to fall below that of 2015.

 

Significant increase in the proportion of investment in early-stage companies 

 

 

The proportion of investment in early-stage companies that have been active for less than three years has been increasing gradually since 2009. Accounting for 28.5 percent of total VC investment in 2009, investment in such companies rose to 29.2 percent in 2010, 29.9 percent in 2012, 30.7 percent in 2014, and 31.3 percent in 2015. In 2016, the proportion of investment grew to 36.7 percent, exceeding investment in late-stage companies for the first time since 2009.

 

Investment in early-stage, venture-backed companies under three years old had accounted for more than 60 percent of total VC investment in the early 2000s, but then declined sharply to the upper-20 percent range, and remained there until 2010. Since the onset of the mobile era in the 2010s, the amount and proportion of investment in such companies have been growing simultaneously. The reason for this is that initial expenses for startups have decreased, while the number of support programs for them has increased, which in turn has led to a surge in the number of venture-backed companies. As a result, more such early-stage companies are receiving initial investments.

 

The proportion of investment in late-stage startups has been declining for the past three years. After jumping from 44.1 percent in 2010 to 49.7 percent in 2013, the proportion of investment in late-stage startups (more than seven years old) fell to 44.4 percent in 2014 and 41.2 percent in 2015, before dropping rapidly to 5.5 percent in 2016.

The proportion of investment in mid-stage startups (between three and seven years old), which are at a point in their development where they are said to be entering the so-called “Valley of Death,” has remained in the mid-20 percent range of total investment. Recording USD 264 million in mid-2010, investment in mid-stage startups accounted for 26.6 percent of total investment (USD 1.74 billion) in startups. This figure, however, fell to 26.1 percent in 2011 and 24.8 percent in 2014. It then jumped to 27.4 percent in 2015 and reached 27.8 percent as of November 2016, showing a trend similar to that of the previous year.

 

This surge in the proportion of investment in early-stage startups, while the proportion of that in mid-stage startups remains steady, indicates that there is growing interest in new startups and an increasing lack of funding for growing and maturing companies. However, this could also mean that the relative number of mid-stage companies worth investing in has decreased.

 

Upward trend in the number of investment sources 

 


 

As of the end of November 2016, investment resources for venture-backed companies, including the number of VC funds and the amount of funds invested, have gradually increased, signifying an increase in the capacity for investment in startups and other venture-backed companies.

 

According to the KVCA, the total number of VC funds in Korea stands at 598, as of the end of November 2016, representing an 11.2 percent increase from the 538 funds recorded at the end of 2015. In the last five years, the number of VC funds has gradually increased, and the sizes of their investments have grown as well. The total amount of VC investments recorded USD 14.77 billion as of the end of November 2016, up 13.3 percent from USD 13.04 billion in 2015 and nearly double the amount (USD 8.42 billion) in 2012.

 

This consistent increase in the total number of VC funds means that investment sources, and investment opportunities, have been expanding, and also that efforts to find new investment opportunities are intensifying. There are some VC funds that invest in a broad range of companies, but most have been created to focus their investments on specific areas.

 

*Exchange rate: 1,100KRW/1USD 

 

 

 

 

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