Last Year, 630 Billion KRW Raised by Private Investment Associations... Record High Performance

Venture Funds and Investments Hit Record Highs, Individual Investment Associations Also Reach Peak Levels

[Asia Economy Reporter Kim Cheol-hyun] Last year, the amount raised by private investment associations reached 630 billion KRW, marking a record high. The Ministry of SMEs and Startups (Minister Kwon Chil-seung, hereinafter referred to as the Ministry) announced on the 7th that the amount raised by private investment associations (hereinafter referred to as associations) in 2021 was analyzed to be 627.8 billion KRW. A private investment association refers to an association registered with the Ministry under the 'Venture Investment Act,' formed by individuals (angel investors) or corporations (such as startup planners) who contribute at least 100 million KRW and invest at least 50% of the total contribution amount in startup and venture companies to earn profits.

The amount raised by associations in 2021 was 627.8 billion KRW, approximately double the previous record of 332.4 billion KRW in 2020, and the number of newly formed associations also nearly doubled to 910 from 485 in 2020, the previous record high. Looking at it quarterly, all four quarters of last year recorded the highest quarterly performance ever, continuing the upward trend in association formations from the previous year. In particular, the fourth quarter, which is the most active period for association formation in the second half of the year, recorded a record high of 233.1 billion KRW (37.1%).

When dividing the newly formed associations last year by formation amount, associations with 500 million KRW or more but less than 1 billion KRW numbered 309, about 2.5 times the previous year’s 126. The Ministry explained that while the proportion of associations with less than 500 million KRW has been decreasing annually, the proportion of associations with formation amounts of 500 million KRW or more is gradually increasing.

Looking at the status of association contributors, the number of individual contributors more than doubled to 16,681 from 8,162 the previous year, and the individual contribution amount reached a record high of 576.3 billion KRW, 2.4 times the previous year’s 239.3 billion KRW. This is interpreted as a result of the recent surge in interest and investment demand in unlisted venture companies not only from professional investors but also from general individuals, influenced by the second venture boom.

The new investment amount by associations increased by 54.8% year-on-year to 401.3 billion KRW, marking the highest investment amount ever, and the number of invested companies exceeded 1,000 for the first time. By the age of invested companies, 68.2% of the companies and 57.7% of the investment amount were directed to early-stage startups within three years. This is a high figure compared to venture investment associations where follow-up investments have increased and the proportion of investment in early-stage companies is decreasing.

Private investment associations invested an average of 400 million KRW per company. This is analyzed to serve as seed money that startup companies need in their early stages. Since the implementation of the association registration system, the cumulative investment amount until 2021 reached 1.1268 trillion KRW, with 71.1% of the total amount raised by associations currently under management (1.5845 trillion KRW) invested.

Jeon Se-hee, head of the Investment Recovery Management Division at the Ministry, said, "The 600 billion KRW raised last year accounts for about 60% of the 1 trillion KRW scale achieved over 20 years since the implementation of the association registration system." She added, "We plan to revise the Enforcement Decree of the Venture Investment Act by June this year to establish new operational capability requirements for managing general partners of associations and to ease the burden of contribution shares, in line with the increasing number of associations and formation amounts, to spread a sound investment culture and promote angel investing."

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