Private Investment Associations Surpass 1 Trillion Won in 20 Years... Invested in 2,360 Startups and Ventures

Ministry of SMEs and Startups Announces Formation and Investment Performance of Private Investment Associations
Number of Associations and Formation Amount Increasing Annually... Active ICT Investment
"Strengthening Management and Supervision for Responsible Association Operation"

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[Asia Economy Reporter Kim Bo-kyung] Twenty years after the implementation of the personal investment association registration system, the total amount raised by associations has surpassed 1 trillion KRW. It has been revealed that a total of approximately 760 billion KRW has been invested in startup and venture companies during this period.

The Ministry of SMEs and Startups announced on the 11th that since the personal investment association registration system was implemented in May 2001, the total amount raised by associations currently in operation is 1.0623 trillion KRW.

The cumulative investment amount accounts for 72% (765.2 billion KRW) of the total amount raised by associations in operation, with an average investment of 320 million KRW made in a total of 2,360 companies.

A personal investment association refers to an association registered under the Venture Investment Act, formed by angel investors (individuals) or corporations for the purpose of investing in startup and venture companies and earning profits.

Associations can be formed by individuals or corporations such as startup planners aiming to support and invest in small and medium-sized enterprises. The association must have no more than 49 members, with individuals and corporations contributing a total of at least 100 million KRW, and must operate for more than five years.

As of the end of the first quarter of this year, the amount raised by associations in operation exceeded 1 trillion KRW (1.0623 trillion KRW), and the amount raised last year also recorded an all-time high of 324.4 billion KRW.

The number of associations last year was 485, an increase of 44.3% compared to 2019, and in the first quarter of this year, 156 new associations were formed, more than double the number in the first quarter of last year.

From 2016 to 2020, the average amount raised per association over the recent five years was 680 million KRW, and the average amount raised since 2018 (720 million KRW) increased by 33.3% compared to before 2017 (540 million KRW). This is attributed to the increase in the number of associations and the amount raised by associations funded by the Korea Fund of Funds since 2018.

Last year's investment amount recorded 253.4 billion KRW, an increase of 36.8% from the previous year, and the number of companies invested in increased by 44.0% to 835 compared to 2019.

Looking at the investment sectors, the information and communication technology (ICT)-based service platform industry, which gained prominence due to COVID-19 last year, rose by 7.6 percentage points compared to the previous year, accounting for the highest proportion at 26.0%.

Regarding the trend of association formation by individual and corporate managing partners, since the allowance of association formation by startup planners (accelerators) from 2017, the proportion of associations formed by corporations increased from the 5% range in 2016 to 20.1% in 2017 and 34.4% last year.

The proportion of the total amount raised accounted for by corporations also rose by 14.1 percentage points from 42.3% in 2016 to 56.4% last year.

Over the past five years, the average number of contributors per association is 18.8, and the average contribution per contributor is 36 million KRW.

Last year, the Ministry of SMEs and Startups enacted and implemented the Venture Investment Act to encourage the active formation of personal investment associations. The system was improved to be more market-friendly by relaxing investment obligation ratios and allowing investments in listed companies.

However, as the number of associations increases, the need to strengthen management and supervision has been raised to protect contributors and ensure that managing partners operate associations responsibly.

Accordingly, the Ministry plans to introduce a disclosure obligation on the operation status of associations for managing partners operating associations with total contributions of 2 billion KRW or more.