S.Korea’s VC fundraising hits all-time high in 2020

Venture capital funds in South Korea have raised their largest-ever amount of 6.6 trillion won ($6 billion) last year, supported by government policy efforts that encouraged domestic pension funds and financial services firms to sharply increase their allocations to the startup funds.

Their total fundraising increased by 55% from the previous year’s 4.2 trillion won, with the number of newly launched VC funds rising to a record-high 206 from 170 in 2019, according to the Ministry of SMEs and Startups on Jan. 14.

“Their fundraising accelerated in the third and fourth quarters after the funds sponsored by the 200 billion won from the government’s supplementary budget were launched from the third quarter,” the ministry said in a statement.

The total amount of VC funds raised in the final quarter of 2020 represented slightly more than half the whole-year tally at 3.7 trillion won.

Policy institutions, including Korea Development Bank, bumped up investments in Korean VC funds by 60% to 2.25 trillion won last year. The remaining 4.32 trillion won came from the private sector, including from pension funds and mutual aid associations.

In contrast, foreign and individual investors curtailed investments in Korean VC funds last year. Foreign investors reduced their allocations by over two-thirds to 58.1 billion won, whereas commitments from Korean pension and retirement funds more than trebled versus a year earlier, according to the statement.

GROWING FUND SIZE

Backed by the policy money, domestic VC funds have grown in size over the past few years.

Among the 206 new VC funds launched last year, 15 funds attracted more than 100 billion won in capital, with the 10 larget funds representing 34% of the total fundraising, or 2.2 trillin won.

In 2019, only six VC funds raised more than 100 billion won.

Atinum Investment, known for concentrating on only one fund, was the biggest-ever fundraiser by a domestic VC fund, pulling in 467 billion won for its new fund. Korea Investment Partners’ Bio Global Fund came second with a fundraising amount of 342 billion won.

Going forward, the South Korean government will back 20 trillion won ($18 billion) worth of homegrown VC funds by 2025 to invest in contactless, digital and environmentally friendly businesses.

As part of the first injection of the five-year government plan announced last month, the government will inject 1 trillion won into homegrown venture capital funds this year.

Their growing size is expected to lead them to venture into broader stages of VC investments, including late-stage deals, pre-IPO investments and secondary transactions dominated by global rivals.

Their growth, however, could intensify competition for the limited number of targets and push startup valuations higher, industry watchers said.

Write to Chang Jae Yoo at yoocool@hankyung.com
Yeonhee Kim edited this article.