Venture Investment Ice Age... Increasing 'Temporary Closures' Among VCs

Symphony Invest, IDG Capital, Falcon J, NBlock Invest Receive Administrative Orders
"Symbol of Venture Capital... Increase in Non-Investing VCs Indicates Worsening Market Conditions"

[Asia Economy Reporter Kwangho Lee] The number of venture capital (VC) firms that are not making investments is increasing significantly. As market conditions rapidly deteriorate, these firms are clearly becoming more cautious. Attention is focused on whether the number of houses maintaining a 'business suspension' status will further increase.

According to the Small and Medium Business Startup Investment Company electronic disclosure (DIVA) on the 16th, as of 2022, a total of eight venture capital firms have received corrective orders from the Ministry of SMEs and Startups for 'no investment for one year.' These firms are Alpha One Investment, FMC Investment, Symphony Investment, IDG Capital Partners Korea, E-Land Ventures, Falcon J Partners, N-Block Investment, and Seoul Management Partners.

They violated Article 49, Paragraph 1, Subparagraph 4 of the Act on Promotion of Venture Investment related to investment activities. According to this law, if a startup investment company fails to make investments for more than one year without justifiable reasons according to relevant regulations, it will face disadvantages. Following a corrective order, the process may proceed to warnings, suspension of business, and ultimately, the cancellation of the startup investment company registration.

If investments are made within three months after receiving the corrective order, the disadvantages can be avoided. Among them, E-Land Ventures, a corporate venture capital (CVC) affiliated with the E-Land Group, managed to escape the crisis by completing investments within three months. Alpha One Investment and FMC Investment also took action after receiving corrective orders.

The problem lies with the remaining houses. Symphony Investment, IDG Capital Partners Korea, Falcon J Partners, and N-Block Investment have still not made any investments even after receiving corrective orders. In particular, Symphony Investment and IDG Capital Partners Korea have remained silent even though more than three months have passed since the corrective orders were issued. Additional penalties such as warnings and business suspensions may be imposed.

It is unusual that as of December, there are eight venture capital firms with no investments for one year. Previously, only two firms, TSP Venture Investment and MK Ventures, received corrective orders last year. In 2020, only Cosnet Technology Investment and SMCI Technology Investment faced such a crisis, and in 2019, only Unicorn Nest Startup Investment did.

The number of non-investing venture capital firms may increase further. Currently, small and medium-sized venture capital firms are struggling with fundraising. With a shortage of investment funds and declining valuations of investee companies, they are becoming more cautious. There are concerns that they may end up carrying the uncomfortable label of 'non-investing VC' unable to act either way.

A venture capital industry insider said, “Venture capital, known as the epitome of risk capital, would not want to be stigmatized as not making investments. The increase in non-investing VCs compared to previous years means that market conditions are that difficult.”

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