June Startup Investments Hit Yearly High but Outlook Remains Gloomy

[Asia Economy Reporter Donghyun Choi] This month, over 1.3 trillion KRW flowed into the domestic startup investment market, marking the highest level so far this year. However, this figure was inflated by a single fintech company that received 780 billion KRW in investment through virtual assets. Excluding this, the actual investment amount has sharply dropped to about half compared to the beginning of the year. This explains the widespread concerns that investment sentiment in the startup sector will worsen due to inflation and interest rate hikes.

According to Startup Alliance on the 23rd, the scale of domestic startup investments this month reached 1.3419 trillion KRW (as of the 22nd), the highest this year. The startup investment market in the first half of this year recorded 1.2552 trillion KRW in January, 1.1347 trillion KRW in February, 762.5 billion KRW in March, 1.2489 trillion KRW in April, and 757.7 billion KRW in May. With monthly investments exceeding 1 trillion KRW since the beginning of the year, there were expectations that a full-fledged '1 trillion KRW era' was opening.

However, looking into this month's investment details tells a different story. The largest investment this month was by Delio, a virtual asset fintech specialist, which signed a $600 million (approximately 773.3 billion KRW) deal with the global virtual asset investment fund Three Arrows Capital. This accounts for 59% of the total domestic startup investment this month. Moreover, this investment is a supply contract where Delio uses virtual assets held by Three Arrows Capital, such as Bitcoin, Ethereum, and Tether, for its deposit and lending services, which is quite different from typical series investments. Excluding this deal, the startup investment scale this month is about 550 billion KRW, roughly half of the amount at the beginning of the year.

In the venture and startup investment market, it is anticipated that the aftershocks of the economic recession and the US interest rate hikes will soon hit Korea as well. The pre-IPO (pre-listing equity investment) market is already showing signs of trouble. Cases where investment plans are withdrawn due to the inability to attract investors even after lowering company valuations are increasingly emerging.

Startups preparing for initial public offerings (IPOs) are also visibly tense. The shock from the global stock market plunge has been transmitted domestically, leading to cases of IPO plans being withdrawn or postponed. Market Kurly, a fresh food sales platform, was highly anticipated as the 'first domestic e-commerce IPO' this year, but there are talks that its listing schedule may be pushed to next year. Yanolja, which is pursuing a Nasdaq listing within this year, is also struggling as its stock price recently plummeted in the over-the-counter market. Yanolja's stock price, which was 115,000 KRW in the OTC market last August, slid to the 80,000 KRW range this month. Coupang, which became a 100 trillion KRW market cap company after listing on the New York Stock Exchange last year, has recently seen its market cap shrink to 27 trillion KRW, a quarter of its previous value. A CEO of a domestic job information startup said, "I recently went to the US for a meeting with an investment firm and was told that they plan to complete all investments for this year by September and will not make new investments for the time being," adding, "We will also monitor the domestic market and adjust our IPO schedule accordingly."

Experts predict that valuation adjustments for startup companies will soon occur. Early-stage companies founded with ample government support funds may experience delayed impacts from the investment market shock, but late-stage companies (Series B, C, etc.) that rely heavily on overseas capital injections may face immediate valuation adjustments. Choi Hangjip, head of Startup Alliance, said, "Although the market sentiment felt in Korea is still different from that in the US, domestic investors are increasingly trying to lower company valuations," adding, "While this process will shrink the market, it will also lead to a selection phenomenon where investments concentrate on quality companies."

Meanwhile, there were notable investments this month as well. On the 3rd, Rebellion raised 62 billion KRW in Series A investment from KDB Industrial Bank and others. Pavilion Capital, a subsidiary of Singapore's sovereign wealth fund Temasek, participated as the first overseas investor and became a shareholder of Rebellion. Rebellion is an AI-based fabless semiconductor startup led by CEO Seonghyun Park, a PhD graduate from MIT who previously worked as an engineer at Intel, SpaceX, and Morgan Stanley. Founded in September 2020, Rebellion was valued at 350 billion KRW in less than two years.

On the 10th, Contec, a startup providing space ground station services, raised 61 billion KRW in Series C investment. Contec was founded in 2015 by CEO Seonghee Lee, a former researcher at the Korea Aerospace Research Institute. Using its proprietary technology to build space ground stations, Contec provides data reception, satellite image preprocessing, and utilization services for satellites operated by domestic and foreign government agencies and private entities.

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