Venture Investment in the First Half of the Year Hits 3.073 Trillion Won... 'All-Time High'

ICT, Distribution & Service, Bio & Medical Lead H1 Investments
61 Companies Raised Over 10 Billion KRW... Highest H1 Record Ever

Minister Kwon Chil-seung of the Ministry of SMEs and Startups is giving a briefing on the trends of venture investment and fund formation in the first half of 2021 at the Seoul Government Complex Annex on the 28th. Photo by Ministry of SMEs and Startups

[Asia Economy Reporter Kim Heeyoon] As the post-pandemic venture investment boom continues, both venture investment and venture fund formation amounts in the first half of this year have recorded all-time highs.

According to the 'Venture Investment and Fund Formation Status' announced by the Ministry of SMEs and Startups on the 28th, venture investment in the first half of this year reached 3.073 trillion KRW, and venture fund formation amounted to 2.7433 trillion KRW, both marking the highest performance ever recorded in the first half of a year.

The first half venture investment performance increased by 85.6% (1.4176 trillion KRW) compared to the same period last year. This is about 70% of last year's annual record high of 4.3045 trillion KRW. The number of venture investment deals in the first half was 2,367, and the number of companies receiving investment was 1,166, both the highest ever. The average investment amount per deal was 1.3 billion KRW, and the average investment amount per company was 2.64 billion KRW.

Looking at quarterly investment performance, the second quarter of this year recorded 1.7686 trillion KRW, more than double compared to the second quarter of last year, achieving the highest quarterly performance ever. This is nearly 1.5 times higher than the second quarter of 2019. Compared to last year's first half investment performance by industry, investments in all industries increased in the first half of this year. In particular, the top three industries with the highest investment growth among all industries were Information and Communication Technology (ICT) services, distribution and services, and bio and medical sectors. The investment increase in these three industries accounted for more than 80% of the total investment growth.

Due to the prolonged COVID-19 situation and the surge in demand for remote work, investment in the distribution and service sectors increased by more than 380 billion KRW compared to the first half of last year. The bio and medical sector increased by more than 370 billion KRW compared to the first half of last year, maintaining the highest proportion of total investment in the first half of this year following last year.

Venture investment in non-face-to-face sector companies in the first half was recorded at 1.4596 trillion KRW, nearly double the 753.5 billion KRW of the first half of last year, and the number of invested companies increased by about 43% from 381 companies in the first half of last year to 546 companies. In particular, the proportion of investment and invested companies in the non-face-to-face sector also increased compared to last year, showing strong performance in this sector.

Venture investment performance, number of investments, and number of investees in the first half of the last 5 years. Table = Ministry of SMEs and Startups

The amount of venture fund formation was 1.511 trillion KRW in the first quarter and 1.2323 trillion KRW in the second quarter, exceeding the first half of 2019 when there was no impact from COVID-19. Among the total fund formation in the first half of this year, the amount of fund-of-funds formed with contributions from the Korea Fund of Funds (FoF) was 1.2711 trillion KRW, an increase of 46.3% compared to the same period last year. The proportion of FoF contributions, which was about 55% in the first half of 2019, decreased to about 30% in the first half of this year, while the proportion of other contributions driven by FoF increased from about 45% to about 70%.

The follow-up investment performance in the first half was 2.2177 trillion KRW, accounting for about 72.2% of the total investment performance (3.073 trillion KRW). Looking at the proportion of follow-up investments in the first half over the past five years, it was only about 50% in the first half of 2017 but has increased every year since then, reaching the highest proportion in the past five years in the first half of this year. The amount of follow-up investment in the first half of this year also doubled compared to the first half of last year.

Among the companies that received investment, those that attracted more than 10 billion KRW numbered 61, the highest ever in the first half of a year. With record-high investments, the number of companies attracting large investments of over 10 billion KRW also increased. More than 80% of the 75 companies that attracted over 10 billion KRW in the entire last year received investments of over 10 billion KRW in the first half of this year. Among them, four companies attracted investments exceeding 30 billion KRW.

The status of fund formation investors in the first half of this year showed that the policy finance sector increased by about 83.8% compared to the first half of last year to 766.3 billion KRW, while the private sector was 1.977 trillion KRW, about 2.6 times more than policy finance. Looking first at the policy finance contribution sector, contributions from the Korea Fund of Funds increased by 44.1 billion KRW compared to the first half of last year to 387.6 billion KRW, accounting for the largest share among policy finance. Other policy institutions increased by 182.2 billion KRW to 224.2 billion KRW, and Growth Finance increased by about 123 billion KRW to 154.5 billion KRW.

In the private contribution sector, contributions from general corporations, financial institutions, and venture capital (VC) increased by more than 200 billion KRW compared to the first half of last year. Individual contributions increased the most by about 343.2 billion KRW, accounting for the largest share among private contributors. Looking only at pure individual contributors excluding specific monetary trusts, the contribution amount in the first half of this year was about 8.7 times higher and the number of contributors about 13.5 times higher compared to the first half of 2017.

Minister Kwon Chilseung of the Ministry of SMEs and Startups said, "Although venture investment slowed down in the first half of last year during the early COVID-19 period, venture investment and venture fund formation have been continuously expanding due to active financial input from the Korea Fund of Funds and the expansion of private funds under the Moon Jae-in administration." He added, "The Ministry of SMEs and Startups will strive to supplement venture and startup-related systems such as stock options and activation of the exit market so that the second venture boom continues to spread and a sustainable venture and startup ecosystem centered on the private sector is established."