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All Government Startup News in Korea (Korean Startup News)

South Korea Reports 6% and 42% Growth in Venture Investments and Funds Early in 2024

2024-05-13 4 min read

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South Korea Reports 6% and 42% Growth in Venture Investments and Funds Early in 2024

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On May 13th, the Ministry of SMEs and Startups (MSS) in South Korea, during an emergency economic ministerial meeting chaired by the Deputy Prime Minister, announced a detailed report titled “Venture Investment Status Diagnosis and Response Measures.” This report outlined the trends in domestic venture investments and fund formations for the first quarter of 2024.

There was a sustained recovery in venture investments during the first quarter of 2024, continuing the upward trend from the previous year. Investments initiated (KRW 1.9 trillion) and funds formed (KRW 2.4 trillion) saw increases of 6% and 42% respectively compared to the same quarter of the previous year. This period also marked an ongoing positive trend with an average annual increase of 6% and 23% respectively over the last five years (2020-2024).

When compared to leading venture investment nations like the United States, Korea’s venture investments for the first quarter of 2024 demonstrated a notable recovery. Converted to dollars, Korea’s venture investments were up by 15% from the pre-COVID-19 levels of Q1 2020, whereas investments in the USA and UK were down by 10% and 8%, respectively, from the same quarter in 2020.

Investor sentiment was particularly robust in deep tech startups focused on areas such as aerospace, artificial intelligence (AI), and robotics. A focused analysis on enterprises receiving venture capital investments revealed that the proportion of investments in the top ten deep tech sectors rose from 31% at the end of last year to 40% in the first quarter of this year.

The growing interest in the deep tech sector has led to an increase in significant investments around KRW 100 billion. In the AI sector, for instance, firms like Rebellions (specializing in AI semiconductor design) and Upstage (offering generative AI services) successfully raised investments exceeding KRW 100 billion. Similarly, Bear Robotics, a company founded by a Korean entrepreneur in the USA, secured an investment of KRW 80 billion in the robotics field.

The venture investment market is expected to continue its growth trajectory through 2024, though challenges such as prolonged high interest rates persist. The MSS acknowledged, “While the venture capital industry sees the adjustment of startup valuations as an opportunity for increased investments, the ongoing high interest rates pose challenges in forming new funds.” They further mentioned, “A potential interest rate reduction or recovery in the stock market later this year could positively influence the venture investment market, yet as of May, the continued high interest rates and weak stock indices add to the prevailing uncertainties.”

In response to these challenges, the government is strategically providing policy finance, tailored to specific sectors, and enhancing conditions to facilitate the inflow of private capital into the venture investment market.

Central to this initiative are several key strategies:

First, the establishment of specialized funds is a cornerstone of this new policy. Notable among these are the Startup Korea Fund, which focuses on deep tech and secondary markets, the Regional Innovation Venture Fund, targeting regional investments, and the Global Fund, which is geared towards global engagements. These initiatives have successfully mobilized substantial private capital. The Startup Korea Fund alone has attracted over KRW 300 billion and aims to establish more than KRW 800 billion in venture funds by the end of the year.

Second, the rapid advancement of the Fund of Funds investment project is designed to alleviate industry challenges related to fund formations. With contributions totaling KRW 1.4 trillion completed within the first quarter, the project plans to inject over KRW 2 trillion of liquidity promptly into the market.

Third, the legalization of private venture mother funds and the introduction of advanced financial mechanisms, such as investment-conditioned loans, aim to enhance the overall investment framework. These measures are expected to facilitate the entry of substantial private funds into the venture investment sector, bolstering overall economic growth.

These strategies underscore the government’s commitment to fostering a robust venture investment environment and ensuring sustained economic development.

Despite ongoing global and domestic uncertainties, the government remains committed to supporting the stable growth of the venture investment market through multifaceted measures.

Additionally, the MSS is actively working to assist innovative technology companies in attracting investments by sharing outstanding startup technology evaluations (provided by the Korea Technology Finance Corporation) with venture capitalists to aid them in discovering new investment opportunities. Furthermore, the ministry plans to increase the Global Fund to KRW 4 trillion by 2027 and introduce carefully selected domestic startups to foreign investors through the “K-Global Star” program, starting in Japan (May 10) and subsequently expanding to the USA, Asia, and Europe.

Minister Oh Young-ju of the MSS emphasized the government’s commitment to closely monitor market conditions and deploy timely policy instruments to secure the economic growth engines, stating, “We are dedicated to engaging closely with the industry to ensure the comprehensive plan for revitalizing venture investments is meticulously prepared and effectively implemented.”

[Venture Investment Stats in Korea]



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