'Venture Investment 4 Trillion Won Era' Opens... 4th Highest Share Relative to GDP Worldwide

Angel Investment in 2018 Reaches 553.8 Billion KRW, Surpassing Records from the First Venture Boom After 18 Years

[Asia Economy Reporter Kim Cheol-hyun] Last year, venture investment in South Korea surpassed 4 trillion won for the first time in history. All indicators, including the number of invested companies, investment size per company, and investment in the Fourth Industrial Revolution sectors, showed an upward trend, placing South Korea among the top four countries worldwide in terms of venture investment relative to Gross Domestic Product (GDP). The Ministry of SMEs and Startups (Minister Park Young-sun, hereafter MSS) along with the Korea Venture Capital Association (Chairman Jung Sung-in) and the Korea Angel Investment Association (Chairman Ko Young-ha) announced the '2019 Venture Investment and 2018 Angel Investment Performance' on the 29th, revealing these results.

Last year, venture investment reached 4.2777 trillion won, marking a 25% increase from the previous year's 3.4249 trillion won and surpassing 4 trillion won for the first time ever. Examining the trend over the past three years, the figures have risen sharply enough to change the trillion-won unit annually, with a 1.8-fold increase compared to 2017 over two years. Angel investment also recorded 553.8 billion won in 2018, surpassing the 549.3 billion won angel investment amount during the first venture boom in 2000, which had remained unbroken for 18 years.

◆The Era of 4 Trillion Won Venture Investment Begins = The increase in venture investment is analyzed to be due to the 'Second Venture Boom' spreading mainly in the private sector. Last year, 35% of the venture investment amount came from pure private funds, and this trend has steadily increased. This indicates that the private sector is actively participating in investments, driving the venture boom.

With the increase in venture investment last year, the ratio of venture investment to GDP, a comparative indicator by country, rose to 0.22%, entering the top four alongside the United States, Israel, and China. The number of companies receiving venture investment increased by 15%, from 1,399 in the previous year to 1,608. This is evaluated as an environment where more startups can attract venture investment. Not only the number of invested companies but also the average investment size per company increased from 2.4481 billion won in 2018 to 2.66026 billion won last year, showing a trend toward larger investments. In particular, the number of companies attracting large-scale investments of over 10 billion won increased by 33%, from 51 to 68 companies compared to the previous year, and among them, companies attracting investments exceeding 20 billion won reached 22, doubling annually since 2017. DND Pharmatech, a bio company, attracted 83 billion won last year, becoming the first company to secure over 50 billion won in a single year.

Investment in Fourth Industrial Revolution sectors such as healthcare and artificial intelligence (AI) amounted to 1.706 trillion won, a 27% increase compared to 2018, accounting for about 40% of total investment. By sector, smart healthcare led with 617.2 billion won, followed by the sharing economy (276.1 billion won), AI (225.8 billion won), fintech (120.7 billion won), and big data (90.1 billion won). The amount of indirect investment by individuals through venture funds, in addition to angel investment, nearly doubled to 571 billion won compared to the previous year. The proportion of individual participation in total funds increased from 6.2% last year to 13.9%, up by 7.7 percentage points, indicating growing individual involvement in venture funds. Although the total venture fund formation amount slightly decreased to 4.1105 trillion won compared to last year, it still maintained the 4 trillion won level.

◆Venture Investment Growth Expected to Continue This Year = The upward trend in venture investment is expected to continue this year as well. According to a survey conducted by the Korea Venture Capital Association among 107 member companies, planned venture investment for this year is around 4.6 trillion won. Considering the doubling of the mother fund budget to 1.1065 trillion won across all ministries this year and the expected increase in fund formation size, the investment scale is anticipated to grow further.

Meanwhile, the MSS announced this year's mother fund contribution plan. This year, a total of 900 billion won will be contributed, combining the largest-ever budget allocation of 800 billion won and recovered funds, aiming to form funds worth 1.9 trillion won based on this. The MSS stated, "The contribution fields will be balanced to cover not only the startup phase but also the subsequent leap phases, establishing a detailed growth support system that enables startups to grow into unicorns."

To further accelerate the enthusiasm for venture investment, following the mother fund contribution, the 'K-Unicorn' project and measures to revitalize angel investment will be announced consecutively. The K-Unicorn project, to be announced in February, will include plans to identify and nurture potential unicorn companies intensively, facilitating their rapid growth into unicorns. To further invigorate the recently revived angel investment market, angel investment revitalization measures will be announced in March. These are expected to include plans for professional angel development and accelerator advancement. Additionally, the MSS plans to promptly analyze and announce the outcomes such as employment generated by companies that received venture investment.

This content was produced with the assistance of AI translation services.