Kakao Ventures "Next Year's Investment Market, Mega Funds Decline and Small Funds Prevail"

Accumulated Investment of 7.6874 Trillion Won in Q1-Q3 This Year... 30% Decrease YoY
Investment Gap Between Poor and Rich Deepens
"Small Funds with Small-Scale Diversified Investments Are Advantageous"

Jang Won-yeol, Senior Investment Officer of the Kakao Ventures Investment Team, is holding the 'KV Brown Bag Meeting' on the 29th at a seminar room near Yeoksam-dong, Gangnam-gu, Seoul, explaining the global startup investment market for next year.

"Next year, the era of mega funds will end, and small funds are expected to deliver results."

Jang Won-yeol, Senior Investment Officer of the Kakao Ventures investment team, made this forecast on the 29th during the 'KV Brown Bag Meeting' held at a seminar room near Yeoksam-dong, Gangnam-gu, Seoul, regarding the global venture and startup investment market for the coming year. The KV Brown Bag Meeting is an event where Kakao Ventures introduces startups it has invested in.

Jang said that the global investment market has not yet emerged from a prolonged cold spell. Looking at the domestic venture investment status, the cumulative investment amount from Q1 to Q3 this year is 7.6874 trillion KRW. Compared to the same period in 2021 (10.8679 trillion KRW) and 2022 (10.2126 trillion KRW), the investment amount has decreased by nearly 30%. Jang explained, "Although monthly investment amounts have been picking up since the second half of this year, it is difficult to see it as a recovery trend," adding, "There has also been a severe concentration of investments in the electric, machinery, equipment, and ICT manufacturing sectors due to the influence of secondary batteries and artificial intelligence (AI) semiconductors."

Although the investment amount has decreased, the number of investment deals remains similar to past levels. This means that despite the cold spell, venture capitalists (VCs) have not stopped investing. Jang said, "Recently, VCs have been adopting a strategy of lowering valuations and investment amounts," and "the investment amount per round is being diluted by about 20% compared to previous years." He added, "In this situation, startup CEOs feel the cold spell more acutely than investors," noting, "Those with shorter business histories or in less promising industries will feel it even more."

Next year, small funds are expected to outperform mega funds of over 500 million USD (approximately 650 billion KRW). Jang said, "During market growth phases, mega funds that invest heavily in specific companies to achieve multiple returns have an advantage, but the situation changes when the mood sours," and "In the stable phase expected next year, small funds that make diversified investments on a smaller scale will perform better." According to the internal rate of return (IRR) trends by fund size from 1969 to 2015 by global asset management firm Invesco, funds under 100 million USD (approximately 129 billion KRW) had an average IRR of 20%, and funds between 100 million and 400 million USD had 19.4%, showing high performance. In contrast, funds between 400 million and 1 billion USD had 7.2%, and those over 1 billion USD (approximately 1.29 trillion KRW) had an average IRR of only 2.4%, less than 10%. One of the mega funds, SoftBank's Vision Fund, recently suffered an investment loss of 15 trillion KRW due to the bankruptcy filing of shared office company WeWork.

Kakao Ventures plans to actively invest in ICT services, digital healthcare, and deep tech sectors next year as well. At the event, Kakao Ventures introduced NeuroXTI, which combines brain imaging techniques such as magnetic resonance imaging (MRI) and positron emission tomography (PET) with AI to predict the efficacy of dementia treatments; VIVL, which develops an AI-based virtual production platform; and Talentree, which hires top talent on a project basis.

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