Startup Industry Backlash: "Domestic Startups Isolated in Global Investment Market"

Fair Trade Commission's 'Strong Measures' on Baemin-DH Merger Review... Startup Industry Concerns

[Asia Economy Reporter Kim Cheol-hyun] The startup industry has expressed concerns that the Fair Trade Commission's (hereinafter referred to as the FTC) final conclusion requiring Delivery Hero (hereinafter DH) to divest Yogiyo in order to approve the merger with Woowa Brothers is an unprecedented measure tantamount to disapproval, which could stifle the domestic startup ecosystem.

On the 28th, the FTC conditionally approved the merger in which DH acquires about 88% of Woowa Brothers' shares, while imposing a measure to divest 100% of Delivery Hero Korea (DHK) shares. In other words, to acquire Baemin, they must sell Yogiyo.

◆Isolation of Domestic Startups in the Global Investment Market = In response, the startup industry pointed out that this could derail an investment worth 5 trillion won, ultimately leading to the isolation of domestic startups in the global investment market. The merger review between Baemin and DH has already been delayed for over a year, sending negative signals such as the 'Korea discount' in the global investment market. The unprecedented decision to require corporate divestiture will inevitably lead to a contraction of future investments.

According to the Korea Startup Forum and others, exit (capital recovery) is crucial for the virtuous cycle of the domestic startup ecosystem, and strategic cooperation with global companies is necessary for startups to grow beyond the domestic market. For this reason, the merger of Korea's representative unicorn Baemin and global company DH was regarded as a symbolic case of a global exit through the largest M&A in Korea. A startup industry insider said, "If the M&A, considered an important milestone for the development of the domestic startup ecosystem, fails, no global company will readily decide to invest in domestic startups," adding, "The perspective of global companies toward Korea's innovation ecosystem will narrow further, and successful exit opportunities for Korean startups will inevitably decrease." Moreover, the exit of venture capitalists (VCs) who invested in Baemin will also be blocked, which is expected to have a negative impact on future domestic startup investments.

◆Overlooking the Most Dynamic Market Situation = The industry also expressed concerns that the FTC overlooked the fact that the food delivery market is a dynamic market with global alliances and fierce competition.

According to global consulting firm Frost & Sullivan, the global food delivery market is expected to grow at an average annual rate of 14% until 2025, reaching $200 billion. The world's largest retailer Amazon has made large-scale investments in the delivery food platform Deliveroo, and China's largest online shopping platform Alibaba acquired Ele.me, China's number one food delivery platform. In the U.S., in June, Dutch delivery app company Takeaway acquired the second-largest market share company Grubhub, and in July, the third-largest company Uber Eats acquired the fourth-largest company Postmates. M&A among companies is actively occurring, leading to the fastest market restructuring compared to any other market.

Domestically, the market is rapidly growing this year in conjunction with the spread of COVID-19. The industry shares a common recognition that the domestic delivery market has changed compared to a year ago when the M&A between Woowa Brothers and DH was announced. Non-delivery app companies such as open market operators have entered the market and emerged as strong competitors, and the possibility of entry from adjacent markets such as internet portals and large retailers has already been demonstrated. A Korea Startup Forum official said, "Domestic startups are fiercely competing in the global alliance phase," and criticized, "This FTC decision is a judgment that does not consider the characteristics of the digital economy, where boundaries between countries and industries are collapsing."

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