Discover Korea’s Startup Investment Trends: Angel Investment

 

This is the second post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, exit, and crowdfunding. Stay tuned for the upcoming 3 series.

 

 

Angel investment records 11-year high

 

In 2015, the amount of angel investment exceeded USD 90.91 million annually, which is the highest it has been since 2004. Moreover, angel investment has recorded positive growth for the fourth consecutive year since 2011. According to the Small and Medium Business Administration’s report on angel investment trends, the total amount of angel investment made in Korea in 2015 was USD 127.18 million, reaching a record high in the 11 years since 2004, when total angel investment dropped to USD 42.09 million from USD 42.09 million in 2003 with the collapse of the venture bubble.

 

Personal investment associations have been making a steady rise as well. In 2015, there were 89 personal investment associations, with a total investment amount of USD 40.55 million, representing increases of 61.8 percent and 9.8 percent from the 55 associations and USD 36.91 million in total investment in 2014, respectively. In the first half of 2016, the number of angel investors’ personal investment associations exceeded 100, showing a continuous increase.

 

Number of angel investors exceeds 10,000 in 15 years

 

The number of angel investors registered with the Angel Investment Support Center in the first half of 2016 was 11,314, recording an increase of 19.5 percent from the 9,468 registered in the previous year and exceeding the 10,000 milestone. By occupation, the largest proportion of angel investors were in the service industry (22 percent, 2,488 investors), followed by finance (15 percent, 1,701 investors) and manufacturing (11.4 percent, 1,289 investors).

 

This was the first time in 15 years, since the first venture boom in 2001, that the number of angel investors exceeded 10,000 (12,002 investors). After the venture bubble collapsed, the number of angel investors dropped to a record low of 619 in 2011. Over the five years since, however, the number has been recovering.

 

 

Total angel investment has been increasing for the past four years, exceeding the annual investment milestone of USD 90.91 million, which was a barrier that most believed could not be breached for more than 10 years. Driving this remarkable growth is likely the increase in the number of venture-backed startups, heightened social interest in startups, and the government’s decision to increase the income tax deduction rate for angel investors.

 

In fact, the government has consistently increased the income tax deduction rate for individual angel investors over the past several years in order to boost angel investment. Starting at only 10 percent in 2006, the income tax deduction rate was increased to 20 percent in 2011 and 30 percent in 2012. Then, with the government’s announcement of its policy to promote venture-backed startups in 2013, the deduction rate for angel investors making investments of USD 45.46 thousand or less was increased to 50 percent. Since 2015, a deduction rate of 100 percent has been in place for those making less than USD 13.64 thousand in angel investment. A close examination of the recent investment trend reveals that the investment environment for venture-backed companies has improved with the steady increase in angel investment and investment by VC firms. However, some fundamental problems remain to be solved in order for a strong investment culture to take root in Korea.

 

Until now, investors have avoided making angel investments, not necessarily due to the lack of government tax benefits, such as income tax deductions, but because of the difficulties involved in earning returns from their investments, the lack of information on companies to invest in, and other fundamental problems. In fact, in a survey conducted by the Small and Medium Business Administration and Korea Business Angels Association showed that 48 percent of respondents avoid making angel investments due to the difficulties involved in earning returns.

 

 

*Exchange rate: 1,100KRW/1USD

 

 

 

 

Discover Korea’s Startup Investment Trends: Angel Investment

 

This is the second post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, exit, and crowdfunding. Stay tuned for the upcoming 3 series.

 

 

Angel investment records 11-year high

 

In 2015, the amount of angel investment exceeded USD 90.91 million annually, which is the highest it has been since 2004. Moreover, angel investment has recorded positive growth for the fourth consecutive year since 2011. According to the Small and Medium Business Administration’s report on angel investment trends, the total amount of angel investment made in Korea in 2015 was USD 127.18 million, reaching a record high in the 11 years since 2004, when total angel investment dropped to USD 42.09 million from USD 42.09 million in 2003 with the collapse of the venture bubble.

 

Personal investment associations have been making a steady rise as well. In 2015, there were 89 personal investment associations, with a total investment amount of USD 40.55 million, representing increases of 61.8 percent and 9.8 percent from the 55 associations and USD 36.91 million in total investment in 2014, respectively. In the first half of 2016, the number of angel investors’ personal investment associations exceeded 100, showing a continuous increase.

 

Number of angel investors exceeds 10,000 in 15 years

 

The number of angel investors registered with the Angel Investment Support Center in the first half of 2016 was 11,314, recording an increase of 19.5 percent from the 9,468 registered in the previous year and exceeding the 10,000 milestone. By occupation, the largest proportion of angel investors were in the service industry (22 percent, 2,488 investors), followed by finance (15 percent, 1,701 investors) and manufacturing (11.4 percent, 1,289 investors).

 

This was the first time in 15 years, since the first venture boom in 2001, that the number of angel investors exceeded 10,000 (12,002 investors). After the venture bubble collapsed, the number of angel investors dropped to a record low of 619 in 2011. Over the five years since, however, the number has been recovering.

 

 

Total angel investment has been increasing for the past four years, exceeding the annual investment milestone of USD 90.91 million, which was a barrier that most believed could not be breached for more than 10 years. Driving this remarkable growth is likely the increase in the number of venture-backed startups, heightened social interest in startups, and the government’s decision to increase the income tax deduction rate for angel investors.

 

In fact, the government has consistently increased the income tax deduction rate for individual angel investors over the past several years in order to boost angel investment. Starting at only 10 percent in 2006, the income tax deduction rate was increased to 20 percent in 2011 and 30 percent in 2012. Then, with the government’s announcement of its policy to promote venture-backed startups in 2013, the deduction rate for angel investors making investments of USD 45.46 thousand or less was increased to 50 percent. Since 2015, a deduction rate of 100 percent has been in place for those making less than USD 13.64 thousand in angel investment. A close examination of the recent investment trend reveals that the investment environment for venture-backed companies has improved with the steady increase in angel investment and investment by VC firms. However, some fundamental problems remain to be solved in order for a strong investment culture to take root in Korea.

 

Until now, investors have avoided making angel investments, not necessarily due to the lack of government tax benefits, such as income tax deductions, but because of the difficulties involved in earning returns from their investments, the lack of information on companies to invest in, and other fundamental problems. In fact, in a survey conducted by the Small and Medium Business Administration and Korea Business Angels Association showed that 48 percent of respondents avoid making angel investments due to the difficulties involved in earning returns.

 

 

*Exchange rate: 1,100KRW/1USD

 

 

 

 

Discover Korea’s Startup Investment Trends: Angel Investment

 

This is the second post in our 4 series of investment trends. Born2Global discusses about venture capital investment, angel investment, exit, and crowdfunding. Stay tuned for the upcoming 3 series.

 

 

Angel investment records 11-year high

 

In 2015, the amount of angel investment exceeded USD 90.91 million annually, which is the highest it has been since 2004. Moreover, angel investment has recorded positive growth for the fourth consecutive year since 2011. According to the Small and Medium Business Administration’s report on angel investment trends, the total amount of angel investment made in Korea in 2015 was USD 127.18 million, reaching a record high in the 11 years since 2004, when total angel investment dropped to USD 42.09 million from USD 42.09 million in 2003 with the collapse of the venture bubble.

 

Personal investment associations have been making a steady rise as well. In 2015, there were 89 personal investment associations, with a total investment amount of USD 40.55 million, representing increases of 61.8 percent and 9.8 percent from the 55 associations and USD 36.91 million in total investment in 2014, respectively. In the first half of 2016, the number of angel investors’ personal investment associations exceeded 100, showing a continuous increase.

 

Number of angel investors exceeds 10,000 in 15 years

 

The number of angel investors registered with the Angel Investment Support Center in the first half of 2016 was 11,314, recording an increase of 19.5 percent from the 9,468 registered in the previous year and exceeding the 10,000 milestone. By occupation, the largest proportion of angel investors were in the service industry (22 percent, 2,488 investors), followed by finance (15 percent, 1,701 investors) and manufacturing (11.4 percent, 1,289 investors).

 

This was the first time in 15 years, since the first venture boom in 2001, that the number of angel investors exceeded 10,000 (12,002 investors). After the venture bubble collapsed, the number of angel investors dropped to a record low of 619 in 2011. Over the five years since, however, the number has been recovering.

 

 

Total angel investment has been increasing for the past four years, exceeding the annual investment milestone of USD 90.91 million, which was a barrier that most believed could not be breached for more than 10 years. Driving this remarkable growth is likely the increase in the number of venture-backed startups, heightened social interest in startups, and the government’s decision to increase the income tax deduction rate for angel investors.

 

In fact, the government has consistently increased the income tax deduction rate for individual angel investors over the past several years in order to boost angel investment. Starting at only 10 percent in 2006, the income tax deduction rate was increased to 20 percent in 2011 and 30 percent in 2012. Then, with the government’s announcement of its policy to promote venture-backed startups in 2013, the deduction rate for angel investors making investments of USD 45.46 thousand or less was increased to 50 percent. Since 2015, a deduction rate of 100 percent has been in place for those making less than USD 13.64 thousand in angel investment. A close examination of the recent investment trend reveals that the investment environment for venture-backed companies has improved with the steady increase in angel investment and investment by VC firms. However, some fundamental problems remain to be solved in order for a strong investment culture to take root in Korea.

 

Until now, investors have avoided making angel investments, not necessarily due to the lack of government tax benefits, such as income tax deductions, but because of the difficulties involved in earning returns from their investments, the lack of information on companies to invest in, and other fundamental problems. In fact, in a survey conducted by the Small and Medium Business Administration and Korea Business Angels Association showed that 48 percent of respondents avoid making angel investments due to the difficulties involved in earning returns.

 

 

*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 

 

 

 

 

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 

 

 

 

 


 

Over the past four years, K-ICT Born2Global Centre (Born2Global) has met with numerous startups working hard 

to achieve their dreams. Born2Global has had countless discussions with them about our shared concerns 

and helped make their debuts into overseas markets a reality.

 

Born2Global discovers promising startups and guides them along the road to success in various ways, 

such as providing professional consultation services, connections with overseas networks, customized training, 

and work space. In doing so, Born2Global hopes to enable these startups to take one step closer to their goals.

 

To further promote South Korea’s startup ecosystem, Born2Global has published the Korea Startup Index 2016

the third of its kind in the world.

 

This index is an easy-to-read summary of key information related to the global debut of startups active in Korea 

(e.g. policies, general business environment, investment trends, how each company achieved a successful launch, etc.).

 

This index provides a highly detailed assessment of the business environment and current status of Korean startups in addition to analytical comparisons with startups in other countries. Not only is this resource invaluable in terms of 

its content, but it has been designed to be incredibly easy to read as well.

 

Above all, Born2Global hopes that this index serves as a useful resource for all those working tirelessly to cultivate 

a better environment for startups and entrepreneurship in general all around the world.

 

In 2017, Born2Global will continue its work with startups in order to ensure their successful entry into the global market. 

 

 

Download >> https://www.dropbox.com/sh/opi955hjocewfl9/AADyr-OKCGYIgHHxv5zUPUysa?dl=0

 

Request Hard Copy >> https://goo.gl/MU1XUP

 

*The English version of Korea Startup Index 2016 will be available at the beginning of next month.

 

 

 


 

Over the past four years, K-ICT Born2Global Centre (Born2Global) has met with numerous startups working hard 

to achieve their dreams. Born2Global has had countless discussions with them about our shared concerns 

and helped make their debuts into overseas markets a reality.

 

Born2Global discovers promising startups and guides them along the road to success in various ways, 

such as providing professional consultation services, connections with overseas networks, customized training, 

and work space. In doing so, Born2Global hopes to enable these startups to take one step closer to their goals.

 

To further promote South Korea’s startup ecosystem, Born2Global has published the Korea Startup Index 2016

the third of its kind in the world.

 

This index is an easy-to-read summary of key information related to the global debut of startups active in Korea 

(e.g. policies, general business environment, investment trends, how each company achieved a successful launch, etc.).

 

This index provides a highly detailed assessment of the business environment and current status of Korean startups in addition to analytical comparisons with startups in other countries. Not only is this resource invaluable in terms of 

its content, but it has been designed to be incredibly easy to read as well.

 

Above all, Born2Global hopes that this index serves as a useful resource for all those working tirelessly to cultivate 

a better environment for startups and entrepreneurship in general all around the world.

 

In 2017, Born2Global will continue its work with startups in order to ensure their successful entry into the global market. 

 

 

Download >> https://www.dropbox.com/sh/opi955hjocewfl9/AADyr-OKCGYIgHHxv5zUPUysa?dl=0

 

Request Hard Copy >> https://goo.gl/MU1XUP

 

*The English version of Korea Startup Index 2016 will be available at the beginning of next month.

 

 

 


 

Over the past four years, K-ICT Born2Global Centre (Born2Global) has met with numerous startups working hard 

to achieve their dreams. Born2Global has had countless discussions with them about our shared concerns 

and helped make their debuts into overseas markets a reality.

 

Born2Global discovers promising startups and guides them along the road to success in various ways, 

such as providing professional consultation services, connections with overseas networks, customized training, 

and work space. In doing so, Born2Global hopes to enable these startups to take one step closer to their goals.

 

To further promote South Korea’s startup ecosystem, Born2Global has published the Korea Startup Index 2016

the third of its kind in the world.

 

This index is an easy-to-read summary of key information related to the global debut of startups active in Korea 

(e.g. policies, general business environment, investment trends, how each company achieved a successful launch, etc.).

 

This index provides a highly detailed assessment of the business environment and current status of Korean startups in addition to analytical comparisons with startups in other countries. Not only is this resource invaluable in terms of 

its content, but it has been designed to be incredibly easy to read as well.

 

Above all, Born2Global hopes that this index serves as a useful resource for all those working tirelessly to cultivate 

a better environment for startups and entrepreneurship in general all around the world.

 

In 2017, Born2Global will continue its work with startups in order to ensure their successful entry into the global market. 

 

 

Download >> https://www.dropbox.com/sh/opi955hjocewfl9/AADyr-OKCGYIgHHxv5zUPUysa?dl=0

 

Request Hard Copy >> https://goo.gl/MU1XUP

 

*The English version of Korea Startup Index 2016 will be available at the beginning of next month.

 

 

 

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