Global Startup Investment Shifts Toward Developed Countries and Late-Stage Focus

[Asia Economy Reporter Park So-yeon] As global startup investments have increasingly prioritized stability following the COVID-19_ pandemic, there are calls for active support for seed and early-stage startups to ensure the sustainable development of the domestic startup ecosystem.

Startup investments are categorized by investment amount: under $3 million as 'seed', $3 million to under $15 million as 'early', and $15 million or more as 'late' stage.

According to the "Global Startup Investment Trends and Implications in the COVID-19 Era" report released on the 14th by the Korea International Trade Association's Institute for International Trade and Commerce, despite the economic downturn caused by the pandemic, global startup investment in the first to third quarters of 2020 reached $235.2 billion, a 4.6% increase compared to the same period last year. However, the number of investment deals dropped significantly by 24.4% to 11,969 deals compared to the previous year.

By investment stage, relatively safer late-stage investments increased by 15.9% year-on-year to $162 billion, early-stage investments decreased by 12.9% to $64.3 billion, and seed-stage investments fell by 21.2% to $9 billion.

In terms of investment share, late-stage investments accounted for the highest proportion at 68.9%, followed by early-stage at 27.3%, and seed-stage at 3.8%. Notably, the share of late-stage investments reached a record high since 66.5% in 2017, indicating an expansion of conservative investment tendencies.

Regionally, the share of investments in North America, which has a stable startup ecosystem, increased by 3.4 percentage points to 50.5% in the first to third quarters of 2020 compared to 2019. In contrast, investments in emerging startup ecosystems such as China and India decreased from 34.4% in 2019 to 33.3% in the same period of 2020, highlighting a preference for investment safety.

The impact of these global startup investment trends was clearly reflected in investments in Korean startups. Startup investment in Korea during the first to third quarters of 2020 dropped by 37.9% year-on-year to $1 billion. The share of late-stage investments rose by 19.4 percentage points to 72.9%, while early-stage and seed-stage investment shares declined by 19.9 percentage points and 0.4 percentage points to 25.2% and 1.8%, respectively.

The report stated, "Not only Korea but also China and India have seen increased concentration in late-stage investments," adding, "Investors' portfolios have shifted toward stability after COVID-19."

By sector, investments in bio-healthcare, mobile, and education?areas gaining attention during the COVID-19 era?significantly increased in 2020. In particular, the share of investment in bio-healthcare rose from third place (13.3%) in 2019 to first place (16.3%) in the first to third quarters of 2020. The mobile sector also jumped from 11th place (3.1%) to 4th place (7.8%), emerging as the most promising investment destination in the COVID-19 era.

The report analyzed this trend as a result of "increased interest in personal hygiene and immunity, the spread of online education, and a surge in consumption of mobile content such as movies and games."

Researcher Yoo Seo-kyung of the Korea International Trade Association said, "The trend of global investors prioritizing stability is expected to continue for the time being," adding, "As overall investments in emerging countries decrease and investments concentrate on late-stage rounds, the government should boldly inject policy funds to help our startups transition from seed and early investment stages to the more accessible late investment stage. The industry also needs business strategies that respond swiftly to global issues such as health crises and environmental sustainability."

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