"Luxury Platforms on the Brink: Tension Spreads in the VC Industry"

Balan Files for Corporate Rehabilitation
Concerns Rise Over Vendor Exodus at Trenbe and Mustit
Hundreds of Billions in VC Investments at Risk, Recovery Uncertain

The venture capital (VC) industry is on edge as Balan, a luxury goods distribution platform, has entered corporate rehabilitation proceedings. Concerns of a domino crisis among luxury goods distribution platforms have emerged, starting with Balan, as it has become difficult for VCs who invested in these companies to recover their investments.

According to industry sources on April 2, Balan filed for corporate rehabilitation with the court on March 31, making it inevitable that the entire investment of over 73.5 billion KRW will be written off as a loss.

Choi Hyungrok, CEO of Balan, stated in an official announcement, "This decision aims to rapidly enhance the stability and growth potential of the business by significantly improving future cash flow through attracting an external acquirer before the rehabilitation plan is approved."

Balan, founded in 2015, is known to have raised more than 73.5 billion KRW in cumulative investment. The company experienced rapid growth during the COVID-19 pandemic and was valued at 300 billion KRW during its Series C funding round in 2022. However, its corporate value has recently plummeted to around 30 billion KRW.

Balan's major investors include SparkLabs, Mirae Asset Venture Investment, Lee & Han, Company K Partners, Shinhan Capital, Woori Venture Partners, Korea Growth Investment Corporation, Kolon Investment, SBI Investment, JB Investment, We Ventures, JB Asset Management, and Q Capital Partners.

These VCs converted their redeemable convertible preferred shares (RCPS) into common shares last year, making it inevitable that the entire investment will be written off as a loss. After the commencement of corporate rehabilitation, the order of repayment rights is: secured creditors, unsecured creditors, preferred shareholders, and then common shareholders. Silicon Two, which invested 7.5 billion KRW in Balan through the acquisition of convertible bonds on March 28, also faces imminent losses.

Meanwhile, Balan's corporate rehabilitation has sparked concerns about a crisis at competing luxury platforms, causing further anxiety in the VC industry. As Balan, Trenbe, and Mustit were considered the top three luxury platforms, it is expected that the outflow of vendors and consumers from Trenbe and Mustit will accelerate as well.

The VC industry rushed to invest as luxury platforms experienced rapid growth during the COVID-19 boom. However, profitability deteriorated due to cutthroat competition, and the economic downturn further compounded the situation, causing the growth of luxury platforms to stall abruptly.

Trenbe's corporate value was estimated at 107 billion KRW last year, which is only one-third of its value two years ago. The company has continued to post operating losses, recording an operating loss of 3.2 billion KRW in 2023. The situation is similar for Mustit, which posted an operating loss of 7.9 billion KRW in 2023. Mustit officially launched its Series C round this year but failed to attract investment in the frozen market.

As a result, VCs that invested in these companies now face bleak prospects for investment recovery (exit). Trenbe's cumulative investment stands at 75 billion KRW, with major investors including IMM Investment, Korea Investment Partners, and Atinum Investment. Mustit's cumulative investment is 48 billion KRW, with Kakao Investment, K2 Investment Partners, IMM Investment, and SBVA as key investors.

An industry insider commented, "New investment is desperately needed for luxury platforms to survive, but at this point, it is virtually impossible to secure funding. VCs that invested in these companies are finding it difficult to exit, so the entire industry is closely monitoring the situation."