[VC Now]⑨ SV Inve "Leading 'Sector Selection'... Focus on Global Super-Gap Companies"

Hong Won-ho SV Investment CEO Interview
"Always Lead in Sector Selection"
Focus on Overseas Markets Including Indonesia

Editor's NoteVenture capital (VC) nurtures early-stage companies that will become the pillars of future industries at the forefront of the capital market. Although the VC industry is experiencing a downturn due to the global economic recession and high interest rates, efforts to identify and cultivate promising companies continue unabated. Asia Economy meets with a variety of investment firms, from large-scale VCs with accumulated experience and know-how to emerging VCs, to hear about their investment strategies and stories.

"We proactively target sectors that will lead future innovation and invest in startups with 'global competitiveness' within those sectors." This is one of the main investment strategies of SV Investment, which is celebrating its 18th year since establishment.

Despite the prolonged high interest rates and frozen investment sentiment, SV Investment has actively invested over 100 billion KRW annually. Through this, it recently achieved an asset under management (AUM) scale of about 1.7 trillion KRW, rapidly becoming a top-tier domestic venture capital (VC). It is also famous as the early investor in HYBE before BTS's debut in 2011-2012 (with an investment of 4 billion KRW), recovering about 108 billion KRW in approximately seven years.

On the 30th of last month, we met Hong Won-ho, CEO of SV Investment, at their office in IFC (International Finance Center), Yeouido, Seoul, to ask about their investment secrets and market outlook.

Hong Won-ho, CEO of SV Investment [Photo by SV Investment]

"Proactive Preparation for Deep Tech Investment Including Securing Dedicated Analysts"

CEO Hong joined a long-term credit bank after graduating from university and was in charge of international finance in London and other locations. After the 1997 Asian financial crisis, he moved to KTB Network in 2000 and officially entered the VC industry. From 2006 to 2019, while working in Shanghai, he led investments in about ten unicorn companies (unlisted startups valued at over 1 trillion KRW), including streaming company Youku Tudou and private education company TAL Education. His recognition for the value of the rich portfolio accumulated overseas was the reason he joined SV Investment in 2019 as co-CEO alongside founder Park Sung-ho, after serving as head of KTB Network's Shanghai office (vice president).

Recently, SV Investment has stood out in the deep tech sector. To this end, they have been recruiting talent from major semiconductor and automotive companies as analysts for the past three years. CEO Hong explained, "The AI field, which is currently a global hot topic, is in a situation similar to when the internet first emerged in the 1990s, with no specific direction yet. However, for AI to be activated, massive computing speed and power issues must be solved, and semiconductor chips are necessary for this." Accordingly, they brought in deep tech personnel early to familiarize them with analyst duties.

Representative companies they invested in include 'Rebellion,' which specializes in AI inference-focused NPUs (Neural Processing Units), and 'SemiFive,' a semiconductor design platform company. SV Investment's cumulative investments amount to approximately 20 billion KRW and 14.5 billion KRW, respectively. Additionally, they recently made large-scale investments in semiconductor design solution company 'MetisX' and Singapore-based semiconductor chiplet packaging specialist 'Silicon Box.'

Regarding sectors expected in the future, he said, "We are interested not only in AI-related startups but also in sectors specialized in 'ESG (Environmental, Social, and Governance),' such as energy and battery recycling."

Global Competitiveness Evaluated by 'Investment ESG' Criteria

"VCs must look 2-3 years ahead and invest. We try to carefully select companies that have fundamental competitiveness and can make money in the long term, not sectors that are already receiving a lot of investment and doing well."

SV Investment's VC division analysts operate in five teams. CEO Hong said, "Internally, instead of 'teams,' we use the term 'pride.' Pride refers to a pride of lions that hunt. This was changed along with organizational restructuring immediately after my appointment to emphasize autonomy and expertise," adding, "They are organized by investment sector, stage, and unit."

He emphasized, "I don't think SV Investment is specialized in any particular sector. Hardware sectors like semiconductors and displays, which saw large-scale VC investments in the 2000s, had a period of little investment but recently have seen many investments again. Cycles continue to change in any field, including bio, entertainment, and content. Ultimately, since sectors must always be selected ahead, a VC that quickly reads the flow of change is necessary."

For overseas markets, they have been investing mainly through their Boston local office in the US, the home of venture capital. The market they are currently paying attention to is Southeast Asia. CEO Hong said, "We established a local office and created a fund three years ago. Indonesia, in particular, shows the fastest growth potential and rapid social changes," adding, "We are preparing the 'KABA EV SV Fund,' a 50 million USD fund to invest jointly in Southeast Asia and Korea, targeting the first half of this year."

He also said, "There are not many opportunities for exits through listings in Southeast Asia yet. However, since startup investments are made with a 5-10 year outlook, I don't think this is a problem to consider now," and added, "We also expect M&A opportunities in various ways. We are focusing on local companies in platform, fintech, and logistics/distribution sectors."

Inside the employee lounge at the SV Investment headquarters in Yeouido IFC, Seoul. The Yeouido skyline is visible through the glass window. Photo by Daehyun Kim kdh@

When asked how they select companies with global competitiveness, CEO Hong replied, "The standard we created to find startups that will succeed overseas is 'Investment ESG.' 'E (Early Initiative)' means becoming a major VC with fast leadership so that competitive startups come to us first for investment. 'S (Super Gap)' is about discovering early startups that can create overwhelming super gaps based on their technology, personnel, and direction. 'G (Global)' looks at the will and capability to expand overseas."

He added, "The capabilities of our analysts are also important to discuss and invest with excellent startups. We are increasing our expertise to be partners we can work with. Rather than simply increasing the number of investments, we invest with a strategy of selection and concentration to follow up on funds."