Domestic Venture Investment Amount Decreased by 12.5% to 11 Trillion Last Year... Recovery Trend in the Second Half

Venture Investment in 2023 Reaches 11 Trillion Won, Fund Formation 13 Trillion Won
Increase Compared to 2020... Maintaining Mid- to Long-Term Growth Trend

Last year, the scale of domestic venture investment in South Korea decreased by 12.5% compared to the previous year. This was due to the global 'investment winter.' However, as the year progressed into the second half, a recovery trend was observed, resulting in better performance than in 2020, before the COVID-19 pandemic.

The Ministry of SMEs and Startups announced the trends in domestic venture investment and fund formation for 2023 on the 20th. These trends include the performance of venture investment companies and new technology business finance companies (new technology finance firms), in accordance with the 'Innovation Venture and Startup Funding Support and Competitiveness Enhancement Plan' jointly prepared by related ministries in April 2023.

[Image source=Yonhap News]

Last Year’s Venture Investment Reached 11 Trillion Won

Last year, domestic venture investment amounted to 10.9 trillion won, a 12.5% decrease from the previous year. This marks a decline in venture investment for two consecutive years. Investment surged from 8.1 trillion won in 2020 to 15.9 trillion won in 2021. It then decreased to 12.5 trillion won in 2022 and declined further last year. However, when looking at the quarterly venture investment amounts last year, there was a recovery trend in the second half: 1.8 trillion won in Q1, 2.7 trillion won in Q2, 3.2 trillion won in Q3, and 3.3 trillion won in Q4.

The Ministry of SMEs and Startups explained, “Last year’s venture investment increased by 22% compared to 2020, before COVID-19. Although it decreased compared to the exceptional surge in 2021-2022 due to liquidity expansion in venture investments worldwide, the Korean market performed relatively well compared to countries like the United States and Europe.”

There were also changes in the sectors receiving investment. While non-face-to-face and bio-related sectors dominated in 2021-2022 due to COVID-19, deep tech fields such as artificial intelligence (AI), semiconductors, and robotics became the main investment targets last year. Investment in two sectors, ‘ICT Manufacturing’ and ‘Electricity, Machinery, and Equipment,’ increased by 63% and 40%, respectively, compared to the previous year.

Minister Oh Young-joo of the Ministry of SMEs and Startups is explaining the ministry's key policies at the 2024 Policy Direction Briefing held on the 11th at the Korea Federation of SMEs in Yeouido, Yeongdeungpo-gu, Seoul. Photo by Jo Yong-jun jun21@

Venture Fund Formation at 12.8 Trillion Won... Government “Full Effort to Raise Funds”

Last year, fund formation amounted to 12.8 trillion won, a 27.7% decrease from the previous year. Fund formation surged from about 10 trillion won in 2020 to 17.8 trillion won in 2021. It remained at a similar level of 17.7 trillion won in 2022 before sharply declining last year.

The Ministry of SMEs and Startups stated, “Excluding 2021-2022, last year’s fund formation increased by 16% compared to 2020, reflecting a mid- to long-term growth trend with an average annual increase of 18% since 2008.”

To revitalize the venture investment market, the Ministry plans to allocate the entire 910 billion won budget for the 2023 Korea Fund of Funds within the first quarter and will promptly proceed with gathering opinions from private investors and detailed investment negotiations for the 'Startup Korea Fund,' which is jointly raised by the public and private sectors.

Minister Oh Young-joo of the Ministry of SMEs and Startups said, “The domestic venture investment market in 2023 demonstrated superior recovery capabilities compared to major overseas countries. Industry feedback indicates that investment plans for 2024 are increasing compared to the previous year, suggesting that market conditions will improve further. We plan to mobilize all appropriate policy measures to maintain this positive momentum.”