The Second Venture Boom Drives Q1 Venture Investment and Fund Formation to Record Highs

Analysis of the Ministry of SMEs and Startups' '2021 Q1 Venture Investment Performance'
Q1 Investment Increased by Over 60% Compared to the Same Period Last Year
Growth Driven by Distribution & Services, ICT, Bio & Medical Sectors
23 Companies Raised Over 10 Billion Won
Significant Increase in Policy Finance and Private Equity Leading to Clear Follow-up Investment Trends

Venture investment performance and fund formation both surpassed 1 trillion won in the first quarter of this year. Photo by Ministry of SMEs and Startups

[Asia Economy Reporter Kim Heeyoon] Venture investment performance and fund formation both surpassed 1 trillion KRW in the first quarter of this year. Despite the economic downturn caused by COVID-19, venture investment and funds recorded all-time highs, indicating that the enthusiasm for the 'Second Venture Boom' continues.

The Ministry of SMEs and Startups announced on the 27th that venture investment performance in the first quarter of this year amounted to 1.2455 trillion KRW, and fund formation reached 1.4561 trillion KRW. This is the highest first-quarter figure ever recorded across all years.

Kang Sungcheon, Vice Minister of the Ministry of SMEs and Startups, explained, "The abundant investment capacity created by last year's record fund formation of 6.6 trillion KRW, increased investments in promising sectors such as bio-medical and information and communication technology (ICT) services that emerged during COVID-19, and heightened expectations for the recovery market following the KOSDAQ surpassing 1,000 points all contributed to sustaining the investment enthusiasm."

With venture investment performance hitting a quarterly record high, the number of investment deals and the number of invested companies also reached all-time highs. In the first quarter of this year, there were 989 investment deals and 558 invested companies, marking the highest performance since 2000.

Looking at monthly investment performance, investments steadily increased each month from January. In particular, March recorded 571 billion KRW, a significant increase of about 66.8% compared to February and over 80% compared to the same month last year.

Venture Investment Status by Industry for the First Quarter of 2021. Photo by Ministry of SMEs and Startups

By industry, investments increased across all sectors, with three sectors highlighted during the COVID era?△Distribution & Services △Information and Communication Technology (ICT) △Bio & Medical?each seeing an increase of over 100 billion KRW compared to the same period last year, maintaining their positions as the top three sectors by investment share this year as well.

Among these, Distribution & Services, which experienced sluggish investment last year due to the COVID impact, saw the largest increase in investment in the first quarter of this year, driven by significant growth in e-commerce and professional services-related investments. The ICT and Bio & Medical sectors also emerged as promising post-COVID industries, with investments increasing by 115.2 billion KRW and 102.1 billion KRW respectively compared to last year.

By field, venture investments in digital and other non-face-to-face sectors continued to rise, totaling 561.7 billion KRW, about 60% higher than the same period last year. The number of invested companies in the non-face-to-face sector increased by 87 to 262 compared to the same period last year.

Regarding investment status by company age, investments in companies with less than 7 years of operation decreased compared to the same period last year, while investments in companies older than 7 years increased. This is interpreted as a result of a particularly high proportion (78.1%) of follow-up investments in mid-stage companies.

Accordingly, the Ministry of SMEs and Startups analyzed that as many excellent startups emerge and venture capitalists improve their ability to select startups, the number of companies with high potential for follow-up investment is gradually increasing.

Graph of companies that attracted large-scale investments of 10 billion KRW or more among venture investment-attracting companies in the first quarter. Photo by Ministry of SMEs and Startups

Among companies that attracted venture investments in the first quarter, 23 companies secured large-scale investments of 10 billion KRW or more, marking a record high. This figure more than doubled from 10 companies in the first quarter of last year. The number of companies attracting investments of 10 billion KRW or more has been on the rise since 2 companies in the first quarter of 2017, 10 in 2018, and 9 in 2019, and this year’s number is expected to exceed previous years’ levels.

Along with venture investment performance, venture fund formation also recorded an all-time high in the first quarter. It increased by a whopping 186.7% (948.3 billion KRW) compared to the same period last year, reaching 1.4561 trillion KRW and surpassing 1 trillion KRW.

This figure is about 186.7% higher than the fund formation performance in the first quarter of last year, with both the amount raised and the number of formed funds reaching the highest first-quarter records. The Ministry of SMEs and Startups analyzed that this was influenced by the approximately 300 billion KRW contribution to the mother fund’s sub-fund in October last year, which led to the formation of funds exceeding 1 trillion KRW in January alone.

Regarding the status of contributors, policy finance contributions increased by about 231.0% compared to the same period last year to 465 billion KRW, and private contributions rose by about 169.8% to 991.1 billion KRW. In particular, contributions from financial institutions, venture capital (VC), and corporations increased significantly by more than 100 billion KRW compared to the same period last year, and individual contributions, which had sharply declined compared to 2019, also increased by more than 70 billion KRW, demonstrating strong interest in venture investment.

Vice Minister Kang said, "The venture investment enthusiasm that achieved record performance last year has continued this year, resulting in the highest first-quarter performance. Recently announced U.S. first-quarter investments also recorded an all-time quarterly high (about 69 billion USD, approximately 76.7 trillion KRW), showing that the venture boom is happening not only in Korea but globally. We will review supplementary measures to ensure the smooth operation of the startup and venture ecosystem, which connects investment, recovery, and reinvestment, along with introducing multiple voting rights, the K-Unicorn Project, and Silicon Valley-style financial systems to sustain the momentum of the Second Venture Boom."

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