[CVC Golden Age]③Investment Strategies Differ According to Parent Company Industry

Raising Funds from Affiliates... Pursuing Strategic Synergy
Focusing on Discovering Portfolios Related to Parent Company's Core Business
Also Pursuing Other Purposes Such as New Businesses and M&A Beyond Main Operations

Editor's NoteThe status of Corporate Venture Capital (CVC) led by companies is changing amid the market downturn. While they have long been perceived as the 'second tier' behind general Venture Capital (VC), they have quietly established themselves as key players in the venture investment market. During times when raising funds is difficult, they are thriving with support from parent companies and various affiliates. By securing diverse Limited Partners (LPs), they are reducing the burden of fundraising. While VCs maintain a conservative investment stance, CVCs are actively investing, injecting vitality into the investment ecosystem. Asia Economy examines the facets of CVCs to predict the future of the venture investment market.

[Asia Economy Reporter Kwangho Lee] Corporate Venture Capital (CVC) is born with different purposes. Generally, they focus their investments on sectors closely related to their parent company's industry. Because they are inherently launched with the mission of 'parent company synergy,' their approach differs somewhat from general Venture Capital (VC). Even if they conduct comprehensive investments like VCs, they inevitably concentrate on specific fields.

Samsung Venture Investment, the eldest among CVCs, is a representative example. Its investment purpose focuses more on strategic decisions to discover and nurture growth engines at the group level rather than short-term profits. It invests in companies that can maintain long-term cooperative relationships and generate synergy effects. It is actively investing not only domestically but also overseas.

Major affiliates contribute to the 'SVIC New Technology Investment Association' managed by Samsung Venture Investment, making the investment purpose clear. Samsung Electronics accounts for about 60% of the contributions. The focus is on maximizing synergy with key affiliates centered on Samsung Electronics while investing in promising startups in emerging countries to seek new opportunities.

Other CVCs have similar directions. Unlike VCs that form funds mainly through policy funds and various private LPs, CVCs typically receive support from affiliates. While the lower fundraising burden compared to general VCs is an advantage, affiliate influence often plays a role in the investment process. Therefore, CVCs that independently lead investments are rare.

Recently established CVCs have clear investment strategies. Hyosung Ventures, established with a capital of 10 billion KRW contributed by the Hyosung Group, is a representative case. Hyosung Group announced plans to invest in startups in the materials, parts, and equipment (SoBuJang) sector that can maximize synergy with the group's core businesses. The aim is to lead the localization of core technologies through SoBuJang investments.

LF Investment, established with a capital of 11 billion KRW contributed by LF (formerly LG Fashion), plans to focus on various lifestyle sectors closely related to consumer trends such as fashion, beauty, e-commerce, and food. While examining industries related to LF's core business, it will also actively discover digital and tech-based platform companies and startups.

F&F's subsidiary, F&F Partners, has been actively investing since the formation of the 'F&F Partners Discovery Fund No.1' in January last year. It has invested in Victory Contents, Bambunetwork (a short-form drama production company), Why Not Media (a web drama production company), and By4M (a content distribution company). This is interpreted as an effort to enhance brand awareness linked to content.

Prologue Ventures, an affiliate of Hyundai Corporation (formerly Hyundai General Trading), recently invested in 'Armed Fresh,' a vegan cheese producer, through the 'Prologue New Technology Investment Association No.1.' Earlier, Hyundai Corporation Holdings made a strategic investment in Open the Table, a startup specializing in home meal replacements (HMR), and Hyundai Corporation invested in Ion Earth, a climate tech startup. They are expected to actively utilize the parent company's global business network.

Seah Technology Investment, a newly launched CVC last week, is a subsidiary of the Seah Group, which operates in the steel industry. Seah Group has various affiliates centered on Seah Holdings, including Seah Steel, Seah Besteel, Seah Special Steel, and Seah Aerospace Defense Materials. Through Seah Technology Investment, they plan to secure future technologies and manufacturing competitiveness that can maximize synergy with the steel industry. They particularly focus on robot automation, visioning, and eco-friendly technologies.

It is not always the case that the main investment target is related to the parent company's industry. Rising S Ventures, affiliated with Geumseong Baekjo, has secured a diverse portfolio including InnoMaxin, Dain Medical Group, GTI Bioscience, Switch One, Teamwork, and Oasis Business. Additionally, Dongwon Group's Dongwon Technology Investment focuses on startup investments as well as mergers and acquisitions (M&A) for discovering new businesses.

A CVC representative said, "Unlike independent VCs, we inevitably reflect the intentions of various affiliates since we receive their support. However, even if we invest in sectors related to the parent company, there are various fields within those sectors, so there are no significant restrictions on investments."