Startup Investment, From Harsh Winter to Ice Age

Last Year Startup Investment Amount 10.8625 Trillion KRW
Second Half Investment Amount Halved Compared to First Half
Kurly IPO Indefinitely Postponed... Restructuring Storm Also

[Asia Economy Reporter Donghyun Choi] The startup investment market is rapidly freezing up. The investment scale, which reached about 8 trillion won in the first half of last year, sharply declined to half that level in the second half. Unicorns (unlisted companies valued at over 1 billion dollars) that had raised expectations withdrew their IPOs, and large-scale restructuring involving cutting half of the workforce continued.

On the 13th, Startup Alliance announced a provisional tally showing that last year's startup investment amount was 10.8625 trillion won. In the first half alone, investments came in at an average of 1 trillion won per month, totaling 7.0874 trillion won, but in the second half, it was halved to 3.7751 trillion won. This is a 48.2% sharp decline compared to the second half of 2021 (7.2989 trillion won).

Startup mergers and acquisitions (M&A) increased in the second half with 67 cases compared to 56 cases in the first half. This is interpreted as a result of increased demand for 'exit' (investment recovery) as the global investment market tightened due to interest rate hikes and the Ukraine war. M&As between startups in the same industry, which could create synergy, were particularly prominent.

Last month, serving robot startup VD Company acquired 100% of the shares of cloud-based integrated store management solution startup FakeLux Company. This is part of a growth strategy to leap beyond serving robots to become an integrated platform company for the food service industry. In the same month, Korea Beauty Data (formerly Code Communication), which operates the beauty salon customer management program 'Viewca Pro,' acquired Lookki, a beauty professional recruitment platform company. The strategy is to become a comprehensive platform for beauty experts. CareNation, a caregiver matching platform, also acquired Elderly World, a long-term care insurance service specialist, as a 100% subsidiary.

There were five initial public offerings (IPOs) in both the first and second halves of last year. In particular, there were many cases of planned IPOs being withdrawn or postponed last year. Market Kurly's operator Kurly, which had denied rumors of withdrawing its KOSPI listing since last year, announced on the 4th that it would indefinitely postpone its IPO. Kurly was valued at 4 trillion won as of December 2021, but recently, the dominant evaluation is that even 1 trillion won is difficult. The deficit has sharply increased every year from 33.7 billion won in 2018 to 101.3 billion won in 2019, 116.3 billion won in 2020, and 217.7 billion won in 2021, leading to talk that the bubble has burst.

The restructuring storm is also blowing. Today’s Table, operator of the same-day seafood delivery service Oneulhoe, notified all employees of voluntary resignation in August last year and suspended its service. Riiid, an AI education solution startup that attracted attention with a 200 billion won investment from SoftBank Chairman Masayoshi Son in 2021, suddenly accepted voluntary retirement in September last year. Logistics startup Two Hands also notified more than half of its employees, including developers, of voluntary resignation in October last year. Meat distribution platform Jeongyookgak notified its headquarters employees of voluntary and encouraged resignations in early last month.

The outlook for this year is also not optimistic. According to the 'Startup Trend Report' published at the end of last year by Startup Alliance and Open Survey, 77.5% of startup founders expect the current level of recession to continue or worsen after one year. According to a survey conducted by career tech startup Publy targeting about 500 developers, 83% of developers responded that the startup winter will continue this year. Additionally, 51% of developers said that hiring developers will be more difficult this year than last year. Choi Hangjip, head of Startup Alliance, said, "Startups are focusing on cost reduction and changes in revenue models to overcome difficulties," adding, "Startups need to build resilience, and the government must provide sufficient support for them to survive the winter and welcome spring."