[Market Insight] 'Venture-VC Bridge' QuotaLab to Lead Financial Digitalization

Interview with Choi Donghyun, CEO of Quotalab
Major Domestic Institutions, PE, VC Clients
"Infrastructure Advantages Should Be Accessible to All"

"The domestic venture market is a capital market with over 50 trillion won in active funds. Considering that there are 7.3 million people involved, I believe a computerized infrastructure is essential."

Choi Dong-hyun, CEO of Quantalab, whom I recently met at their office in Gangnam-gu, Seoul, explained the reason for founding Quantalab in 2019 as such. Quantalab's Quantalbook started as a digital 'securities administration' platform connecting unlisted companies and investors (GPs). In July last year, they expanded their business by acquiring Logos System, which connects GPs and limited partners (LPs).

Choi Dong-hyun, CEO of Quotalab.
Photo by Kim Dae-hyun kdh@

"Digitalization of Finance is Essential... Korea's First Securities Administration System for Unlisted Companies"

Choi, who began working as a venture capital (VC) analyst in 2017, felt a strong need for 'system computerization' while handling not only investments but also operations and administrative tasks. At that time, most places managed securities-related ledgers using Excel or handwritten records. He said, "Since 2005, the Korea Fund of Funds has played a catalytic role in greatly expanding the venture market, and currently, about 7.3 million people are involved in startup-related work. However, there has been no infrastructural development for over 20 years, so I thought domestic commercialization was necessary."

In reality, the securities data companies must handle?such as ▲stocks ▲bonds ▲stock options ▲restricted stock units (RSUs)?are vast in type and volume, but there was a lack of computerized infrastructure until the initial public offering (IPO) stage. The 'Act on Electronic Registration of Stocks and Bonds,' which mandates electronic securities only for listed companies, was only enacted in 2019.

Choi pointed out, "There were many shortcomings, such as losing contract documents which could eliminate proof of investment. On the other hand, overseas markets like the U.S., Europe, and Japan had services where unlisted companies issued electronic securities, and stakeholders, investors, and individual shareholders could participate and check related information online."

He added, "Quantalab provides a clear and transparent system for a company's securities administration and communication," explaining that "various management-related tasks such as shareholders' meetings, consent rights, and business reporting can be efficiently handled on the platform." Furthermore, by acquiring Logos System for about 30 billion won, they secured systems for GP fund management and operation instructions, fund accounting, and LP mother fund management.

Choi Dong-hyun, CEO of Quotalab, is being interviewed at the Quotalab office in Gangnam-gu, Seoul. Photo by Kim Dae-hyun kdh@

"Services Covering Companies, Employees, Investors, and Limited Partners... Plans for Overseas Expansion"

In the early stages of the business, there were many difficulties explaining the service. He said, "Many companies were accustomed to existing business practices. Some asked, 'Why should we pay to use this service?'" He continued, "When the fintech securities company Toss started using the service, it became a reference case for other venture startups, and from then on, the business really took off." Recently, to grant and manage stock options, RSUs, and phantom stocks in large quantities, listed companies and subsidiaries of large corporations have also started using the service, forming a B2B2C (business-to-business-to-consumer) market.

According to Quantalab, participants in the venture market's fund management include ▲institution-only private collective investment vehicle operating GPs 323 ▲New Technology Business Finance Companies (Shingisa) 111 ▲venture investment companies 248 ▲limited liability company-type venture capitals (LLCs) 43 ▲accelerators (ACs) 490, totaling about 1,200 entities (excluding individual investors and professional individual investors). Quantalab holds an average market share of 45% in each sector. Choi explained, "Quantalab manages about 50% of licenses for venture capital firms, new technology companies, and accelerators. Our market share for startups receiving investment is about 50%, and on the LP side, most leading Korea Fund of Funds (fund of funds) operators and policy finance institutions are our clients."

Since its founding in 2019, Quantalab's cumulative investment amount is about 45 billion won. Around 30 to 40 domestic and international institutions, including Y Combinator, a leading U.S. accelerator, have participated as investors. The combined revenue of Quantalbook and Logos System expanded from 3.9 billion won in 2020 to 7.8 billion won last year. The revenue target for this year is between 8 billion and 10 billion won.

They are also challenging global expansion. Choi said, "When receiving business reports from foreign companies invested in by domestic VCs, they will be able to use Quantalab's services." He added, "We are increasing contacts with companies in Southeast Asian countries and India." He further explained, "Although local markets are gaining attention, solid infrastructure is necessary to support assets for full-scale investment to occur. Regions where financial infrastructure markets are in their infancy have concerns about errors, loss, and manipulation of securities information, similar to Korea's past. Once systems are established, transparency in capital flows will be achieved."

He said, "There are currently many unlisted venture startups with high corporate value. The faster the digitalization of financial infrastructure takes hold, the more rapidly startups, ventures, and related investment industries can grow as capital markets." He added, "We will continue efforts to enhance our systems to provide services in various financial and securities fields, including the anticipated introduction of electronic shareholders' meetings."