Companies Tighten Venture Investment... Startup Funding Cliff Approaches

Corporate Venture Investment Drops by 1.6 Trillion Won in Three Years
Trump's Tariff Policies and Economic Downturn to Further Shrink Investment This Year

Major companies that have played a significant role in the growth of domestic startups have begun to tighten their wallets. As economic uncertainty increases, they are either reducing or withdrawing their venture investments. A cold spell is expected in the startup industry this year.

According to the venture investment industry on May 13, the proportion of general corporations in newly established venture investment funds as of February this year was only 7.1%. A venture investment fund refers to a fund primarily established to invest in venture companies. In other words, this figure indicates how actively companies are participating in venture investments.

When forming venture investment funds, general corporations have consistently accounted for around 15%, serving as one of the pillars of the startup ecosystem. As of February last year, general corporations made up 12.1% of the total. Although this year's survey covers only two months, the proportion of general corporations has never dropped below 10% before, leading the industry to worry about a potential investment freeze this year.

Venture investments by general corporations have been steadily declining. The amount invested by general corporations in venture capital rose from 1.8243 trillion won in 2020 to 3.9955 trillion won in 2021, more than doubling. However, it decreased to 3.6582 trillion won in 2022, then dropped further to 2.7225 trillion won in 2023 and 2.3152 trillion won in 2024. There are now projections that this year’s figure will fall to the 2020 level, when companies closed their wallets due to the impact of COVID-19.

The reasons companies are reducing their venture investments are the domestic economic downturn and the expansion of global uncertainty. Following the inauguration of U.S. President Donald Trump, months of tariff wars have prompted companies to adopt conservative budget management, which has led to reductions or suspensions in venture investments. Earlier this year, Hanwha TotalEnergies, a private investor in the Startup Korea Fund, withdrew its investment plans.

Hyundai Motor Group also planned to establish a venture fund worth about 300 billion won, but has temporarily suspended the process. Last year, Hyundai Motor Group planned to invest 300 billion won, with some funds raised by domestic venture capital (VC) firms, to form a fund. The aim was to invest in promising startups both domestically and overseas, but this plan is now on hold.

A Hyundai Motor Group official explained, "The selection of domestic VC partners is currently on hold, considering regional and sectoral investment priorities and strategic effectiveness." However, industry observers believe that, given the pressure from the Trump administration's tariff policies and the group's large-scale investments in the United States worth tens of trillions of won, it is difficult for the company to also focus on venture investments at this time.

A VC industry insider said, "Due to the reduction in venture investments by companies, it will become extremely difficult for startups to attract investment this year," adding, "Although companies may open their wallets after the domestic presidential election in June, it will still take considerable time for actual investments to materialize, so the industry must prepare for an investment freeze."