[VC Now]⑮ Gyeongnam Venture Investment "A Regional VC Connecting Follow-up Investments... Will Attract Entrepreneurs Nationwide"

Interview with Cho Guk-hyung, CEO of Gyeongnam Venture Investment
The only VC in Gyeongnam area... "Follow-up investment inquiries continue from outside"
"Gyeongnam region has infrastructure and future industry competitiveness"

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 various investment firms, from large-scale VCs with accumulated experience and know-how to emerging VCs, to hear about their investment strategies and stories.

"Activating the local ecosystem is like farming, and venture capitalists (VCs) are the farmers. They must continuously supply startups with the 'water' called funds and arrange follow-up investments, strategic alliances, and mergers and acquisitions (M&A) as if pulling weeds and managing crops daily. Venture investing is impossible with a weekend-farming mindset. As a VC specialized in the local area, sustainability must be considered."

Cho Guk-hyung, CEO of Gyeongnam Venture Investment, is explaining startup and venture investment strategies in an interview with Asia Economy. Photo by Kim Dae-hyun

The issue of regional extinction is a major topic today. On the 6th, the government announced a plan to create a 'Regional Era Venture Fund' to double venture investments outside the metropolitan area to 2 trillion won by 2027. Over the next three years (2025?2027), a new regional fund worth 1 trillion won will be established, and the share of non-metropolitan areas in total venture investments will be expanded to 30%.

The awareness of the only VC in the Gyeongnam region, Gyeongnam Venture Investment, was earlier than this. It was launched in September 2019 as the first case in Korea where the private sector, government, and financial sector jointly selected a VC through a public offering. Currently, its assets under management (AUM) have grown to 113.5 billion won (115 billion won including subsidiaries). Recently, we met CEO Jo Guk-hyung at the Gyeongnam Venture Investment headquarters in Changwon Special City to discuss the success strategies of regional VCs and the achievements in fostering local ventures and startups.

Public-Private-Financial Cooperation Model: "Follow-up investment inquiries from other regions for promising startups discovered"

CEO Jo started his career in 1996 at a leasing company (now a capital company) and entered the VC industry in 2000 after experiencing the IMF foreign exchange crisis. Compared to his previous loan-centered work, VC investment activities were, in his words, "a completely different world." This coincided with the venture boom when startups and IPOs were flooding the market. He later gained experience at eCapital, Muhan Investment, Hanmi Investment Partners, Meritz Capital, and Daehan Investment Partners.

What was the reason for establishing a VC in Gyeongnam, where he had no special ties? CEO Jo said, "Hundreds of VCs are concentrated in Seoul competing, mostly investing in software. But our country cannot survive on just one industry," adding, "Offline industries are definitely necessary, and new industries and venture companies related to them must continue to be created."

The problem was physical limitations. He said, "Investment roadshows (IR) are held nationwide to bring Seoul-based analysts to connect with local venture companies, but actual investments are very rare," adding, "A whole day is spent just on round trips. This is the same when managing invested companies later. If two companies in similar businesses have the same capabilities, investors tend to invest more in companies closer to them."

The breakthrough was found in the public-private-financial cooperation model. CEO Jo explained, "In 2018?2019, a policy emerged in Gyeongnam to create local investment companies and funds, and we judged that fund formation could be easier through mutual cooperation than in Seoul," adding, "So, after selling the existing company in Seoul, we came to Gyeongnam while retaining the major shareholder (Daehan Steel)." Additionally, major shareholders such as ▲NongHyup Bank ▲Gyeongnam Bank ▲Gyeongnam Creative Economy Innovation Center ▲Changwon Chamber of Commerce and Industry ▲Central ▲Beomhan Industry ▲Samcheon Industry also participated and supported fund contributions, creating a unique investment model for Gyeongnam Venture Investment.

"Investment ratio in Gyeongnam region companies approaches 70% of fund formation amount"

Cho Guk-hyung, CEO of Gyeongnam Venture Investment, posed for a photo in front of the company logo at the Gyeongnam Changwon headquarters before an interview. Photo by Kim Dae-hyun

CEO Jo said, "Of course, at first, there was concern about whether there would be companies here that could generate profits. I worried that only health functional food companies promoting local specialties would gather at investment roadshows (IR)," adding, "But after creating the fund, we were able to discover several companies with promising technologies, and other regional VCs have since contacted us for follow-up investments."

He also emphasized, "Ultimately, there must be investment firms and management companies nearby to activate the local ecosystem," adding, "Other VCs' 'regional funds' are designed so that only about 30% of the total fund amount needs to be invested in the region, but Gyeongnam Venture Investment's investment ratio in Gyeongnam region companies approaches 70%."

Regarding the industrial characteristics of the Gyeongnam region, he said, "Changwon has many machine tools (machines that make machines), and Sacheon is home to many aviation-related companies," adding, "From the globally recognized K-defense industry to the aerospace industry, Gyeongnam's infrastructure has definite strengths." Especially, the newly established Aerospace Administration opened its office in Sacheon this year, and it is the first time a government agency at the bureau level has relocated to a local area below Daejeon.

Currently, Gyeongnam Venture Investment operates a total of eight funds, including ▲Southeast Regional Innovation Investment Association ▲Next-generation Regional New Deal & Bio Investment Association ▲Gyeongnam Reverse Innovation Investment Association, each with about 20 billion won. So far, the investment portfolio has been created according to the main investment objectives of the formed funds, but in the future, there are plans to diversify investment fields into aerospace, content, and tourism sectors.

CEO Jo said, "Given the proximity to the Aerospace Administration and the ample land, conditions are favorable for attracting related companies, so we plan to focus more on the aerospace sector in future fund formations," adding, "The aerospace sector requires not only private capital investment but also government and local government cooperation, so Gyeongnam Venture Investment can become a specialized house." He continued, "We also see high development potential in the content and tourism sectors. The transportation infrastructure, including airports, is well established, and around Namhae, existing historical and literary content can be excellently combined to enable various businesses."

Furthermore, he added, "The primary goal was to create an environment where startups can continue to grow in their founding region, and the secondary goal is to attract venture entrepreneurs who started businesses elsewhere to this area," adding, "With support from local governments and others, we will create distinctive funds and investment environments."

Gyeongnam Venture Investment office, Changwon-si, Gyeongnam. Most employees had already left the country for a Japanese investment briefing (IR) on the day of the interview. Photo by Kim Daehyun