Ministry of SMEs and Startups Reports Recovery in Korean Venture Capital Investment
On November 9, the Ministry of SMEs and Startups (MSS) unveiled a report detailing the trends observed in the Korean venture capital landscape for the third quarter, shedding light on both investment performance and fund formation. The report is aligned with the “Plan for financial support to innovative startups and enhancing their competitiveness,” collaboratively formulated by concerned ministries in April 2023.
The key takeaways from the report encompass a comprehensive analysis of investment companies contributing to the establishment of small and medium enterprises, as well as new technology venture capital entities. Here are the key findings:
1. Investment Performance and Trends:
The cumulative investment performance for the first three quarters of 2023 stands at KRW 7.7 trillion.
While this figure is less than the peak years of 2021 and 2022, it surpasses the annual performances of 2018 and 2019.
Venture capital investment has seen a notable recovery in the second half of 2023, with a 24% increase in Q3 compared to the same period last year.
2. Shift in Investment Focus:
The report notes a shift in investment focus from COVID-related sectors to deep-tech and national high-tech strategic industries.
Industries related to “electricity, machinery, and equipment” and “ICT manufacturing” have seen a significant uptick in investments.
3. Recovery Rate Compared to Global Peers:
Although Korean venture capital investment experienced a decline in Q3 2023 compared to the previous year, the recovery rate surpasses that of the US, Europe, and Israel.
Korea exhibited a 27% decline in dollar terms, outperforming the US (△39%), Europe (△47%), and Israel (△62%).
4. Venture Capital Fund Formations:
Cumulative venture capital fund closings are projected to reach KRW 8.4 trillion by the end of Q3 2023, already exceeding the total funding for the entire year of 2019 (KRW 7.9 trillion).
Expectations point to further growth as venture capital funds are typically most actively formed in the fourth quarter.
5. Government Initiatives to Boost Investment Sentiment:
The government has taken proactive measures to elevate investment sentiment, such as increasing the investment limit for banks in venture capital funds and introducing a corporate tax credit for private VC master fund investments.
6. Future Plans:
The MSS is committed to securing available resources for venture capital investment through various means, including the establishment of the Startup Korea Fund and support for private venture capital master funds.
Minister LEE Young emphasizes plans for international collaboration with corporate venture capitalists and leveraging policy tools to attract foreign investment.
In summary, Minister LEE Young expressed optimism, stating, “The third quarter venture capital investment performance suggests that the market is open to a stable and soft landing.” She added that efforts will be made to enhance collaboration with international CVCs to assist Korean startups in attracting foreign investment, utilizing policy tools such as the Startup Korea Fund and the private venture capital master fund.
[Venture Investment Stats in Korea]
- [Official] Korean VC Market Reaches $8.4B in Investment and $9.8B in Fundraising in 2023
- 2023 Korean Startup Investments Shrink: THE VC Report Highlights
- “2023 Startup Total Investment Amounts to KRW 5.338 Trillion, Halved Compared to Previous Year” – STARTUP ALLIANCE
- Korean Venture Capital Investment Declines in H1 2023, but Still Up From Pre-COVID Levels
- South Korea’s Q1 2023 venture investment down 60% year-on-year
- Venture investment in South Korea to reach $5.4B in 2022, down 12% from last year
