Venture Industry: "Performance-Based Evaluation Most Challenging When Raising Investment"

Announcement of 'Investment Attraction Status and Difficulty Survey' Results
What Is Needed: 'Expansion of Government Venture Investment Budget'

Domestic venture companies cited “performance-oriented conservative investment screening” as the most difficult reason they experienced when attracting investment.

Photo by Korea Venture Business Association

The Korea Venture Business Association announced on the 4th the results of the “Status and Difficulties of Venture Company Investment Attraction” survey conducted on 308 venture investment-type companies from July 26 to last month. Venture investment-type companies are those with a total investment amount of 50 million KRW or more and an investment amount ratio of 10% or more of the capital stock.

When asked about the “difficulties experienced during investment attraction,” 48.1% answered “performance-oriented conservative investment screening,” which was the highest. This was followed by “undervaluation of company value” at 20.5%, “lack of knowledge and know-how related to investment attraction” at 18.2%, “concerns about dilution of founder’s shares” at 5.8%, and “unfair investment contract terms” at 4.5%.

114 companies (37%) responded that they had been asked for prior consent from investors when signing investment attraction contracts. The types of prior consent were led by “follow-up investment attraction (such as new share issuance)” at 18.6%. “Mergers and splits” accounted for 17%, and “sale of major assets” was 15.4%.

Due to prior consent clauses, 36.8% of respondent companies experienced difficulties. The difficulties caused by these clauses included “rapid decision-making” (34.7%), “fundraising” (18.9%), and “management interference” (13.7%).

Regarding support needed for investment attraction, “expansion of the government’s venture investment budget” was the highest response at 31.0%. This was followed by “activation of networking with domestic and foreign investors” (20.7%) and “activation of the Corporate Venture Capital (CVC) system” (17.6%).

The Korea Venture Business Association stated, “Through this survey, we were able to identify the status of investment attraction by successful venture companies as well as the difficulties and areas for improvement related to investment attraction. We reflected the difficulties and policy support demands collected through this survey in the association’s ‘core policy tasks for the second half of 2023’ and will strengthen policy activities to revitalize venture investment in the second half of the year based on this.”

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