CVC New Investment Funds of 211.8 Billion Won, 74% Directed to Startup Companies

Corporate Venture Capitals (CVCs) affiliated with general holding companies executed new investments totaling 211.8 billion KRW in 130 companies last year.

According to the Korea Fair Trade Commission on the 21st, there are currently 12 CVCs affiliated with general holding companies, of which 8 were newly established and registered. Seven CVCs belonged to large business groups such as POSCO Holdings, GS, and CJ.

CVC refers to venture capitals established by non-financial general companies. Although CVCs are financial companies and thus generally cannot be owned by general companies due to the principle of separation between banking and commerce, regulations were relaxed last year to allow limited stock ownership.

Looking at the investment status of 10 CVCs required to report their business activities this year, direct investments through proprietary accounts amounted to 24.3 billion KRW (11.5%), while indirect investments through investment associations totaled 187.5 billion KRW (88.5%). The Fair Trade Commission explained, “Considering that it is still in the early stages of operation, the scale of investment is expected to gradually expand.”

Among new investments by CVCs, 73.8% were made in startup companies (with less than 7 years of operation). By industry, investments in information and communication technology (ICT) services such as Artificial Intelligence (AI) and Internet of Things (IoT) were the highest. The autonomous driving and electric vehicle sectors followed, with chemical and material sectors such as electricity, machinery, equipment, secondary batteries, and new materials coming next.

The CVC activity restriction regulations were judged not to act as constraints on investment. Following amendments to the Fair Trade Act allowing general holding companies to own CVCs, regulations on debt ratio (200%), internal investment ratio (60%), and overseas investment ratio (20%) must be observed to prevent economic power concentration and private interest appropriation. The average debt ratio of CVCs was 12%, internal investment ratio was 56.4%, and overseas investment ratio was 3.9%.

The Fair Trade Commission stated, “Due to factors such as the recent slowdown in the real economy, increased funding costs from high interest rates, and expanded uncertainty in financial markets, venture investments are shrinking globally.” It added, “To ensure smooth market settlement of the system, we will continue to monitor the status and review whether there are any institutional improvements needed to activate venture investments.”

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