[Exclusive] Kakao Investment to Transition to SI

After Portfolio Reorganization, Kakao Invest Becomes a 'Metaverse' Specialized Investment Firm
Kakao Invest as SI, Kakao Ventures as FI for Clear Role Division

Kakao-affiliated investment company Kakao Investment has shifted its focus from a financial investor (FI) to a strategic investor (SI). Kakao Ventures, also affiliated with Kakao, remains as an FI, effectively organizing the investment roles within the group’s investment firms.

According to the investment banking (IB) industry on the 21st, Kakao Investment plans to change its investment concept from FI to SI. Although it has occasionally operated as both FI and SI, it will now exclusively conduct SI-type investments. In particular, it intends to focus intensively on the metaverse-related industry. A recent example is its investment in Petaverse, a pet metaverse avatar company.

Initially, there were industry talks about Kakao Investment being absorbed into Kakao’s headquarters. Kakao holds 100% of Kakao Investment’s shares. Some speculated that Kakao might shut down Kakao Investment. Ultimately, it remained as a specialized SI investment firm.

An IB industry insider said, “Kakao Investment is preparing to reorganize its existing portfolio and transform into a metaverse-specialized SI,” adding, “It has already put some of the shares of startups it previously invested in on the market.”

Kakao’s investment subsidiaries are broadly divided into Kakao Ventures and Kakao Investment. Kakao Ventures is a venture capital (VC) firm established in 2012 by Kim Beom-su, Kakao’s center chief, who invested 5 billion KRW of personal funds. Shortly after its establishment, it completed registration as a startup investment company (Changtu company) with the Ministry of SMEs and Startups.

Later, in 2015, Kakao established another investment company, Kakao Investment. While Kakao Ventures became a typical venture capital firm registered as a Changtu company, Kakao Investment did not register as a startup investment company or a new technology business finance company (Singisa).

Kakao Investment used its own funds to invest in startups. It has invested in Stage Five, Team Fresh, Amazing Brewing Company, Oasis, Ndatelight, Fast Five, Three Billion, and Metlo Lab, among others. At the same time, it also acted as a limited partner (LP) in other companies’ funds.

Initially, their roles seemed distinct. Kakao Ventures mainly focused on early-stage investments from seed to Series A, while Kakao Investment concentrated on Series B to pre-IPO (pre-listing equity investments).

Because of this, the industry perceived Kakao Ventures as the front-end and Kakao Investment as the back-end. However, exceptions occurred frequently, unintentionally creating a competitive dynamic between the group’s affiliates. This led to questions about the roles of the two companies. Kakao Ventures was able to engage in fund plays by securing policy institution funds such as the mother fund, but Kakao Investment was considered to have limitations.