VC Investment Rebounds After 3 Years... But 'Risk Aversion' Remains Clear

VC Investment Growth in 3 Years, Focused on Later-Stage Companies
Early-Stage Company Share Hits Lowest in 10 Years... Negative Impact on Ecosystem
53 'Ghost VCs' That Haven't Invested a Single Penny

Venture capital (VC) investment has successfully rebounded after three years. However, as the tendency for 'venture investment' has contracted, the phenomenon of 'the rich getting richer and the poor getting poorer,' with a concentration of investments in large houses, has also intensified.

According to the VC Association on the 6th, the total amount of new VC commitments from January to November 2024 was 5.6411 trillion KRW. Even though the December figures have yet to be compiled, this already surpasses the total new commitments for 2023 (5.3977 trillion KRW). After peaking at 7.6802 trillion KRW in 2021, the VC investment market experienced a decline in 2022 and 2023 but has now succeeded in rebounding after three years. Considering the remaining December data, the final annual figure is expected to reach around 6 trillion KRW.

End of the lean period? ... 'Venture capital' avoiding 'venture'

Within the VC industry, cautious opinions are emerging that "2024 has hit the bottom." However, despite the apparent growth, there are concerning aspects. Contrary to the name 'venture capital,' there is a strong tendency to focus on stable late-stage investments. According to the VC Association's 2024 new investment status by company age, late-stage companies (over 7 years) accounted for 45.2% of all investment rounds. This is an increase of 7.4 percentage points compared to 37.8% in 2023. In VC statistics, company age is classified into three categories: late-stage companies, early-stage companies (3 years or less), and mid-stage companies (over 3 years to 7 years or less).

On the other hand, the proportion of investment in early-stage companies was 19.7%, the lowest in the past decade. It had been gradually declining from 30.7% in 2020, 24.2% in 2021, 29.6% in 2022, and 23.5% in 2023, finally falling below the 20% mark. There are concerns that this avoidance of early-stage investment negatively impacts the startup ecosystem. Regarding this, Youngchul Noh, Head of Management at Ajou IB Investment, said, "Due to the more difficult fundraising environment, performance and returns have become more important than before, so the proportion of late-stage investments is increasing as a risk management measure. Also, as Korea's venture startup market enters a mature phase, it is not easy to find new early-stage companies worth investing in."

'Ghost VCs' with zero new investments: 53 firms

Additionally, the phenomenon of 'the rich getting richer and the poor getting poorer,' where funds are concentrated in large houses and investments are focused, has become more severe. Based on 2024 new investment performance, the top 20 firms accounted for 42.5%, an increase of 4.3 percentage points from 38.2% in 2023. Among the top 10 firms in new commitments, half (5 firms) were financial group-affiliated VCs. The top-ranked was Korea Investment Partners, which made new commitments of 272.8 billion KRW. While the market has not fully recovered from the slump, financial VCs have the advantage of easier fundraising than general VCs due to the strong commitment capabilities of their parent groups.

On the other hand, there were 53 VCs that did not make a single new investment. This includes both proprietary accounts (own capital) and funds (investments through externally raised funds), with zero investment amounts. Out of the 367 VCs included in the statistics, 14.4% were 'ghost VCs.' Furthermore, 10 of these were subject to management improvement orders from the Ministry of SMEs and Startups in 2024 due to capital erosion. This number increased again from 2 in 2021, 3 in 2022, and 8 in 2023.

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