Invest KOREA

Venture capital creation and investment have been breaking records for several years in a row, and venture investment has been very active even amid the COVID-19 crisis.
Korea's venture ecosystem continues to grow and mature, thanks to the private sector's efforts to generate appropriate returns on investment as well as the government's commitment to using venture businesses as a driving force for the growth of the Korean economy and job creation.

In 2021, Korea ranked first in the Bloomberg Innovation Index and fifth (No. 1 in Asia) in WIPO's Global Innovation Index. Korea has taken the top spot for several years in various innovation-related evaluations. Korea is a very attractive place for investment with its well-established innovation ecosystem.

The government is continuously developing policies for venture businesses and venture capital promotion, and institutional improvements, such as deregulation of PEFs, are also being made continuously.

The government announced a policy to become one of the four global venture powerhouses in August 2021. The PEF system has been updated, and regulations on PEF asset management have been eased since October 2021, continuously improving the investment conditions for venture capital and PEF.

Even in the midst of the COVID-19 crisis in 2020, the formation of venture funds and venture capital investment continued to rise and hit new all-time highs.
The formation of venture funds in 2020 reached KRW 6.56 trillion, an increase of 54.8% compared to 2019, and an all-time high of 206 newly formed associations were recorded.
The formation of venture funds in 2020 broke the previous record of KRW 4.84 trillion in 2018 and exceeded KRW 6 trillion for the first time.

Investment in venture companies in 2020 reached a record high of KRW 4.30 trillion, although the growth rate decreased compared to the previous year.
Venture investment in 2020 increased by 0.6% compared to the previous year, slowing down compared to the 24.9% growth rate in 2019, but the number of investments (4,231 cases) and the number of investing companies (2,130 companies) also exceeded the first 4,000 cases and 2,000 companies, respectively, posting highest records.

Management-participatory PEFs (Buyout PEFs) reached 855 as of the end of 2020, an increase of 134 from the previous year. The contracted amount to be invested by investors in PEFs was KRW 97.1 trillion, up 15.2% from KRW 84.3 trillion in the previous year, and the amount invested by investors in PEFs was KRW 70.6 trillion, up 12.6% from KRW 61.7 trillion in the previous year.

The number of new PEFs established in 2020 totaled 218, an increase of 12 from the previous year (206). The amount of new funds raised by PEFs (contracted amount of new PEFs) in 2020 was KRW 17.9 trillion, an increase of KRW 2.3 trillion from the previous year (KRW 15.6 trillion). The amount of PEF investment in 2020 was KRW 18.1 trillion, an increase of KRW 2.1 trillion from the previous year (KRW 16 trillion).

PEF investments were made to 565 domestic and foreign companies in 2020, of which 488 were domestic (86.4%) showing a fairly high degree of concentration on investment. In terms of investment amount, domestic investment recorded KRW 12.6 trillion and overseas investment recorded KRW 5.5 trillion.

The scale of venture capital in Korea has recently reached its highest level for several years in a row. Venture capital is enjoying a second boom. Structural changes, caused by the emergence of new industries related to the 4th industrial revolution, have provided new opportunities. The government has shown strong commitment to fostering venture companies related to the 4th industrial revolution as the driving force of the Korean economy.

Management-participation PEFs (Buyout PEF) have shown a steady growth. If the economic downturn is prolonged into the future, investment opportunities are expected to increase for PEFs. As Korean companies have a stronger tendency to preemptively pursue restructuring compared to the past, the number of high-quality stocks increases during the economic downturn, and PEF investment profitability is expected to improve significantly.

Global venture investment institutions (PEF, VC, Accelerator) have been actively investing in Korean companies recently. If more successful cases accumulate in the future, the more mature the venture ecosystem and the more dynamic the market will be. The following are the cases of recent venture companies attracting investment from global venture funds.

The Venture Investment Promotion Act (hereinafter Venture Investment Act) was enacted in February 2020 and has been in effect since July of the same year. The Venture Investment Act integrated the venture investment systems that were scattered and created a consistent venture investment ecosystem. Regulations were also eased, for example, facilitation of private venture capital investment and angel investment by individuals.
For example, startup planners (accelerators) who discover promising companies, supply initial investment, and incubate them are allowed to form venture investment associations (investment funds) if certain conditions were met, such as professional manpower and capital. Deregulation was implemented by lowering the minimum investment required to establish a fund by KRW 2 billion to KRW 3 billion.

The government is promoting a variety of initiatives, including the relaxation of issuance requirements, such as grant targets, so that venture companies can issue and utilize stock options widely; the promotion of the expansion of global venture funds and overseas VC networking that support venture companies' overseas investment and expansion; the introduction of a Silicon Valley-style venture fund governance structure to enhance inflow of foreign capital and accountability; new technology innovation M&A guarantees to raise funds for company acquisitions; and expansion of M&A funds to supply liquidity.