Startups Are Currently in a 'Winter'... Decline in VC Investments

Liquidity Crisis Dampens Investment Sentiment
VC Funding Declines Starting Second Half of This Year

[Asia Economy Reporter Kwangho Lee] Investment sentiment is freezing due to the global liquidity crisis. The aftermath of the liquidity party ending is gradually spreading to the startup scene.

According to Startup Alliance, a public-private cooperation network for startups, on the 15th, the total investment amount raised by domestic startups in July was 836.8 billion KRW. This is a 72.7% decrease from 3.0659 trillion KRW in July last year. Compared to the previous month, June (1.3888 trillion KRW), investment funds also decreased by 38.9%. Concerns about inflation, interest rate hikes, and the Ukraine war are becoming more pronounced.

Until the first half of this year (January to June), the indicators were relatively good compared to the same period last year. The amount of startup investment raised in the first half was 7.0873 trillion KRW, with 977 investment cases. Compared to 4.3549 trillion KRW and 512 cases in the first half of last year, these figures are 62.7% and 90.8% higher, respectively. There were 16 startups that received large-scale investments exceeding 100 billion KRW in the first half, more than double the 7 companies in the first half of last year. Exits (investment recoveries) were also more active. Initial Public Offerings (IPOs) increased from 4 to 5, and Mergers and Acquisitions (M&A) rose from 29 to 56.

However, the indicators for July, the second half of the year, retreated. According to the ‘2022 First Half Venture Investment Trends’ recently announced by the Ministry of SMEs and Startups, venture investment in the first quarter of this year was 2.1802 trillion KRW. The market’s expectations surged as it surpassed 2 trillion KRW for the first time. However, in the second quarter, it decreased by 79.4 billion KRW (4.2%) year-on-year to 1.8259 trillion KRW.