Startup Investment Rebounds...? 4.4 Trillion Won Invested in the First Half of the Year

Significantly Exceeding Pre-COVID-19 Levels

Venture investment in the first half of this year reached 4.4 trillion KRW, surpassing pre-COVID-19 levels. Expectations are growing that the startup investment market, which entered a harsh winter from the second half of last year due to US interest rate hikes and a global economic recession, will rebound.

According to the "2023 First Half Domestic Venture Investment and Fund Formation Trends" announced by the Ministry of SMEs and Startups on the 10th, venture investment in the first half of this year recorded 4.4 trillion KRW. This represents an increase of 25% and 40% compared to the first halves of 2019 and 2020, respectively. However, it decreased by 42% compared to the first half of last year. A ministry official explained, "Last year was an unusual period when venture investment surged compared to previous years due to liquidity expansion measures in response to COVID-19 by major countries worldwide," adding, "It is necessary to consider comprehensively the fact that investment was also concentrated in certain sectors."

The ministry attributed the significant surpassing of pre-COVID-19 levels in venture investment this year to the full-scale implementation of measures to support funding and strengthen competitiveness for innovative ventures and startups, such as the establishment of new and Ki-bo special guarantees, raising banks' venture fund investment limits, and introducing tax credits for corporate investments in private venture mother funds. This suggests an increased possibility of a soft landing for the venture investment market.

Fund formation also exceeded usual levels. Fund formation in the first half of this year amounted to 4.6 trillion KRW, an increase of 35% compared to the first half of 2019 and 105% compared to the first half of 2020. Considering that the second regular investment project selection for the Korea Fund of Funds was completed at the end of last month and that the formation of partnerships selected in the first regular investment project of the Korea Fund of Funds is expected to be completed by the end of October, venture investment partnership formations are likely to increase further in the second half of the year.

Both policy finance and private sector contributions to venture funds decreased compared to the same period last year. The private sector saw a relatively larger decline, which was analyzed to be due to the continued burden of investment caused by high interest rates.

This statistic is part of the follow-up measures to the "Innovative Venture and Startup Funding Support and Competitiveness Enhancement Plan" jointly prepared by related ministries in April. The Ministry of SMEs and Startups has been announcing investment performance of small and medium enterprise venture capital companies quarterly. This time, with the cooperation of the Private Venture Investment Council, it compiled and analyzed the performance of new technology business financiers under the jurisdiction of the Financial Services Commission. A ministry official explained, "Analyzing venture investment trends over the past 15 years from 2008 to 2022 confirmed that this year's first half performance is recovering the long-term trend."

Lee Young, Minister of SMEs and Startups, said, "Investment amounts that surged unusually in 2021-2022 due to liquidity expansion were concentrated in certain sectors, but this year, the investment proportion by sector has eased compared to before, increasing the possibility of a soft landing for the overall investment market," adding, "We will continue to support the formation of private venture mother funds and implement comprehensive Startup Korea measures without delay to maintain the recovery momentum."

Kim Ju-hyun, Chairman of the Financial Services Commission, stated, "We are focusing policy capabilities on supporting venture companies' funding through inter-ministerial cooperation," and added, "Since fostering venture companies for innovative growth is an important national policy direction of this government, we will continue necessary measures such as funding support through policy financial institutions and institutional improvements."

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