Increased Possibility of Venture Investment Recovery in the Second Half of the Year
The recovery trend in venture investment observed in the first half of this year is accelerating as we move into the second half. The third-quarter performance increased by 24% compared to the same period last year.
The Ministry of SMEs and Startups (Minister Lee Young) announced the trends in domestic venture investment and fund formation for the third quarter of 2023 on the 9th. This trend report includes the performance of Small and Medium Business Startup Investment Companies (hereafter Startup Investment Companies) and New Technology Business Financial Companies (hereafter New Technology Financial Companies), following the "Innovation Venture and Startup Funding Support and Competitiveness Enhancement Plan" jointly prepared by related ministries last April.
The third-quarter performance of 3.2 trillion KRW increased by 24% compared to the same period last year, marking three consecutive quarters of investment growth. Monthly investment performance by Startup Investment Companies and others (excluding New Technology Financial Companies) has also shown continuous improvement since January. Accordingly, the cumulative investment performance up to the third quarter of 7.7 trillion KRW is less than the unusually rapid investment surge seen in the same periods of 2021 and 2022 due to liquidity expansion, but it exceeds the annual performances of 2018 and 2019. It is also approaching the annual performance of 2020. The annual performance for this year is expected to be the highest ever, excluding 2021 and 2022.
Although domestic venture investment decreased compared to the same period last year on a cumulative basis up to the third quarter, it is recovering at a considerably faster pace compared to major countries. When converted to dollars, it decreased by 27% compared to the same period last year, which is relatively better than the United States, Europe, and Israel. The extent of performance improvement was also at the highest level.
The cumulative venture fund formation amount up to the third quarter was 8.4 trillion KRW, already exceeding the annual performance of 2019. Considering that venture funds are typically most actively formed in the fourth quarter and that the formation of partnerships selected in the first regular investment project of the Korea Fund of Funds is expected to be completed during the fourth quarter, it is highly likely that the annual performance of 10 trillion KRW in 2020 will also be surpassed by the end of the year.
Minister Lee Young said, "The third-quarter venture investment performance this year suggests that the market is likely to achieve a stable soft landing," adding, "To accelerate the recovery of investment sentiment, we plan to fully mobilize necessary policy measures such as strengthening cooperation with global CVCs to help our startups attract overseas investment, and preparing abundant venture investment resources like the Startup Korea Fund and private venture mother funds."
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