[Listed VC In-Depth] ⑩ Daesung Startup's Successful Portfolio Restructuring: Why Next Year Looks Promising

Successful Exits: Shift Up Last Year, Dalba Global This Year
Balancehero, Indian Microloan Startup, Targets IPO in Second Half
MakinaRocks, Customized AI Solutions Provider, Also Preparing for Listing

Editor's Note
The Lee Jaemyung administration is demonstrating a strong commitment to fostering the venture sector. Major deregulation and budget expansion are anticipated. Venture capital (VC) is drawing attention, as it is expected to play a pivotal role in the upcoming process of nurturing ventures. In particular, listed VCs are in the spotlight. These listed VCs previously garnered significant investor interest, hitting all-time highs in 2021 when the venture budget surged. In this context, Asia Economy is publishing a series that closely analyzes the strengths and core investment portfolios of major listed VCs.

Daesung Startup Investment (hereafter Daesung Startup) is making a comeback through bold portfolio restructuring. Following last year's successful IPO of game developer Shift Up, the company also succeeded in exiting its investment with the IPO of beauty brand Dalba Global this year. With several portfolio companies aiming for IPOs in the second half of this year and next year, expectations are rising for Daesung Startup's continued rebound.

Record-High Operating Profit Achieved Last Year

Daesung Startup achieved its highest-ever operating profit last year, recording 20.1 billion KRW in operating revenue, 10.2 billion KRW in operating profit, and 13.8 billion KRW in net profit. Compared to the previous year, operating profit increased by about 400%, and net profit jumped by 535%. The company's strategy of shifting its investment focus from films to deep tech sectors such as artificial intelligence (AI), quantum computing, and secondary batteries proved effective.

In particular, last year's results were significantly influenced by Shift Up's successful IPO in July. Daesung Startup invested a total of 4 billion KRW in redeemable convertible preferred shares (RCPS) in Shift Up during the Series B round in 2018 and the Series C round in 2020. At the time of investment, Shift Up's valuation was approximately 230 billion KRW during the Series B round and about 300 billion KRW in the Series C round. Entering the KOSPI at an offering price of 60,000 KRW per share, Shift Up surpassed 80,000 KRW within just over a month after listing.

This year, the company successfully exited its investment in Dalba Global. Daesung Startup acquired existing shares of Dalba Global last year. Although the investment timing was somewhat later than competing VCs, Dalba Global has continued its explosive growth, and a return of several times the principal is expected. Dalba Global, which went public on the KOSPI in May at an offering price of 66,300 KRW per share, has been hitting new highs daily. As of June 26, the stock closed at 185,000 KRW, marking a 180% increase over the IPO price.

Exits Expected for Kmong, Codeit, and Others

There are also several portfolio companies expected to achieve exits in the second half of this year and next year. Balancehero, a micro-loan service company that has captured the Indian market, is aiming for a domestic IPO in the second half of the year. Daesung Startup participated in Balancehero's Series B round in 2018 and Series D round in 2020, continuing its investment.

Balancehero made a breakthrough by launching a smartphone-based micro short-term loan service through its prepaid phone balance app, 'True Balance.' By lending about 200,000 KRW for periods of three to six months to India's middle class, who have difficulty accessing bank loans, the company has secured 100 million users.

MakinaRocks, a customized AI solutions company, is also preparing for an IPO in the second half of this year. Daesung Startup participated in MakinaRocks' Series A round in 2020. In December last year, MakinaRocks conducted a third-party allocation capital increase worth 19 billion KRW, at which time it was valued at approximately 120 billion KRW. The company now counts over 60 clients, including major Korean conglomerates such as Samsung affiliates, SK affiliates, and Hyundai Motor Company.

In addition, the freelancer platform Kmong and edtech company Codeit are considered portfolios likely to achieve exits as early as this year or next year. Kmong is preparing to apply for a preliminary listing review with the exchange in the third quarter. Codeit, which has achieved balanced growth in its main business areas such as corporate training and employment bootcamps, succeeded in turning a profit last year.

Portfolio Restructuring... Investments in AI, Quantum Computing, and Secondary Batteries

Daesung Startup's portfolio is rapidly shifting from a film-centered focus to deep tech sectors. At the center of this portfolio transition is the 'Daesung Metaverse Scale-up Investment Fund,' established at the end of 2022. This fund was created with a size of 110 billion KRW, making it the largest fund since Daesung Startup's founding.

Looking at the companies invested in since 2023, it is clear that the focus is on deep tech. Investments have been made in quantum computing software developer Qunova, smart farm company IOCrops, small space launch vehicle developer Perigee Aerospace, AI chatbot company Scatter Lab, and VR game company Com2uS Roca, among others.

Daesung Startup plans to begin fundraising in the second half of this year for the first time in about two years. The company has identified games, beauty, and entertech as target sectors for future funds. The company explains that it has both a track record of investing in these areas and in-house expertise. Its goal is to solidify its position as a VC through aggressive investment.

Currently, Daesung Startup has ended its co-CEO system as of 2024 and has transitioned to a sole representative system under Daesung Group Chairman Kim Younghun. The scale of future funds and investment results are expected to determine Chairman Kim's management performance.

Kim Daehyun, CFO of Daesung Startup, explained, "Thanks to support from the Korea Fund of Funds and strong performance in secondary fund investments, we are planning a second fund and preparing in various sectors," adding, "We see opportunities in deep tech and plan to increase our investments in that area going forward."

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