[VC Now] Oracle Venture Investment: "Early-Stage Investment Is the Essence of Venture... Focusing on Tech-Based Companies"

"Focusing on Tech-Based Early-Stage Companies"
"Regulations on Business Age of Investment Targets Must Be Improved"

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

"Venture capital (VC) and accelerators (AC) can be considered the only 'good finance' in the financial sector. Even if a startup has not yet been fully validated in the market, if we believe its technology will contribute to societal progress, we decide to invest and encourage others to join us."

In a recent interview at the Oracle Venture Investment office in Gangnam-gu, Seoul, President Bae Junhak expressed his strong affection for the VC industry, stating, "Unlike other financial sectors, VC is a field that can make a tangible contribution to industrial development."

Oracle Venture Investment was founded in 2021 by CEO Kim Sehyun, who previously served as CEO at Magna Investment and Korea Technology Investment. The company operates as a partnership in which most employees are also shareholders. Its assets under management (AUM) currently total 72 billion won, and it is expected to expand to 90 billion won after recently being selected as the general partner (GP) for the 'Gyeongbuk-Jeonnam Regional Innovation Venture Fund.'

President Bae stated, "Oracle Venture Investment is an investment firm that loves tech-based early-stage companies," and added, "While investing in Series B or C and exiting within two years may be statistically safer, startups are actually most in need of funding at even earlier stages. Rather than only pursuing strategic success, the entire venture industry can grow only if we trust and invest in startups at the earlier stages."

Joonhak Bae, President of Venture Investment Division at Oracle Ventures, is being interviewed at the Oracle Ventures office in Gangnam-gu, Seoul on the 18th. Photo by Jinhyung Kang

"Pricing, Risk Management, and Communication Are Key"

President Bae graduated from Yonsei University and Columbia Business School in the United States (MBA), and is currently pursuing a doctorate in pharmacy at Kangwon National University. After a 30-year career in securities firms, hedge funds, and asset management companies, he fully entered the VC industry in 2016 when he joined Magna Investment as vice president.

He shared, "Since I entered the industry in my 50s, which is relatively late, I felt I had less time than others and worked 60 to 80 hours a week." During this time, President Bae built a significant investment track record, including D&D Pharmatech, 3billion, and Abion. Last year, he joined Oracle Venture Investment at the invitation of CEO Kim, with whom he previously worked at Magna Investment.

Regarding specific investment strategies, President Bae said, "All investment is a battle of pricing. Just as there is a difference between buying Samsung Electronics at 90,000 won and at 50,000 won, valuation-meaning the price relative to the company's value-is crucial."

He continued, "Next is risk management. Many venture companies lack proper organizational systems, making them vulnerable to risks. We strive not just to make simple investments, but to instill a culture that enables companies to succeed. In that sense, ongoing communication between investors and venture companies is also important."

"Outdated Regulations Hinder Early-Stage Investment"

In his assessment of the venture investment market, President Bae said, "During the Park Geun-hye administration, the groundwork was laid for the creative economy, and the Moon Jae-in administration continued the boom by injecting large-scale funding into the sector. However, under the Yoon Suk-yeol administration, cuts to research and development (R&D) funding have led to postdoctoral researchers in their 30s leaving for overseas, and research recognized internationally has had to be discontinued. The Lee Jae-myung administration faces the difficult task of turning the rocky ground back into fertile soil."

Junhak Bae, Head of Venture Investment at Oracle Venture Investment, emphasized in an interview with Asia Economy on the 18th that "proactive investment in early-stage companies based on tech firms is important." Photo by Jinhyung Kang

He also pointed out, "If you look at Korean unicorns (unlisted companies valued at over 1 trillion won), there are no tech companies; most are distribution or service companies. For new businesses to be built, fundamental technologies must advance, but in Korea, as fundamental technologies disappear, most startups are based on business models (BM) that combine existing technologies or services."

As a task for the development of the venture industry, he cited the need to improve regulations on the operating period of investment targets. He emphasized, "On average, it takes about 12 years for companies to go public after being founded. However, by limiting early-stage companies to three years and venture companies to seven years, VCs have no way to make follow-up investments after seven years. The 3·7-year regulation should be changed to 5·10 years, abolished altogether, or at least include a clause allowing follow-up investments in portfolios already invested in by the management company."

He further stated, "To revitalize early-stage investment, it is better to create more funds under 20 to 30 billion won, rather than larger funds. In other words, having fifty 20-billion-won funds is better than ten 100-billion-won funds. With more investors, more promising startups can be discovered."

Additionally, President Bae noted, "For the venture investment market to recover, it is also necessary to improve the overall system, including easing the major shareholder stake requirements for IPOs, providing tax benefits for private limited partners (LPs), and revitalizing regional centers for creative economy and innovation. It is not about one or two VCs or companies doing well, but about creating a sustainable system, so that government intervention can be reduced and the scale of private investment can be further expanded."