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Startup valuations surge; driven by Coupang effect and VC boom

Apr 23, 2021 (Gmt+09:00)

Danggeun Market is the country's No. 2 e-commerce platform, after Softbank-backed Coupang
Danggeun Market is the country's No. 2 e-commerce platform, after Softbank-backed Coupang

In September 2019, South Korea-based mobile marketplace platform Danggeun Market received 40 billion won ($36 million) from venture capital firms with a valuation of 200 billion won. At the time, the investment industry was a bit skeptical of the high valuation given that it was a local marketplace app for secondhand goods.

To their surprise, the company's valuation continued to soar. Now, Danggeun Market is currently in the process of raising around 100 billion won ($89.4 million) from VC firms with its valuation set near 2 trillion won -- surging almost tenfold in just one year and six months.

Also, Kurly Inc., operator of premium grocery delivery platform Market Kurly, has recently received a 3 trillion won valuation in the process of raising hundreds of millions of dollars. Just a year ago, the firm was valued at around 1 trillion won when it raised 200 billion won, but the market has changed drastically since e-commerce platform Coupang Corp.'s successful listing in the US last month.

Coupang Corp. shares soared 41% from their opening price on the company's NYSE debut last month.
Coupang Corp. shares soared 41% from their opening price on the company's NYSE debut last month.


Korean e-commerce companies are seeing their valuations skyrocket, fueling hype over a venture boom. 

According to the Korea Venture Capital Association, the number of domestic VC funds reached 1,076 last year -- exceeding 1,000 for the first time, while commitments topped 30 trillion won. This year, the VC industry projects commitments to surpass 40 trillion won and actual investments to reach 5 trillion won, up by 16% compared to last year.

Ample liquidity in the VC industry is also driving up valuations. For example, Dunamu, the operator of Korea's largest cryptocurrency exchange Upbit, saw its valuations jump fourfold in just two months -- from 1.5 trillion won in February to 6 trillion won this month when it raised 40 billion won from DSC Investment. Dunamu's early stage investors are projected to have logged around 1,000% in returns.

In 2016, there were only three unicorns, or startups valued at over 1 trillion won, in Korea, but now there are over 20.


Talented workers are flocking to the startup scene due to the widening gap between the traditional industry and the startup industry, which is in the lead in terms of investment returns and employee incentives.

"A VC firm that made an early stage investment in a game company like Krafton will probably receive an incentive of around 200 billion won when the company goes public," said a VC industry official, adding that some individuals would pocket billions of won even if the incentive is split with the VC firm.

There are also many instances of high-paid startup employees receiving stock options and employee shares as part of their salary package. For example, initial SK Biopharmaceuticals Co. employees each received around 900 million won when the company went public last year.

Such lucrative incentives have been effective in luring new talent, while employees in the traditional sector express a sense of deprivation. 


Industry watchers say that the recent venture boom is different from two decades ago, when internet-related firms received massive funding but eventually crashed with the dot-com bubble, ushering in a dark age for startups.

Unlike in the past, fraudulent companies are seldom found among firms that have been fundraising and increasing valuations as of late. Over the last two decades, the investment market has become more refined in terms of quality as an increased number of institutional investors enter the market.

But some concerns are still being voiced over startups' excessive valuations. At the beginning of this year, e-commerce platforms' valuation was set at 1 to 1.2 times the annual GMV.

Zigzag is among the big five online fashion startups in South Korea.
Zigzag is among the big five online fashion startups in South Korea.

Last month, Kakao Corp. dropped its bid for eBay Korea to instead acquire Croquis Inc., the operator of online fashion platform Zigzag, with the valuation set at 1.3 times the GMV. Similarly, Shinsegae Group acquired a leading online fashion platform W Concept, which was valued at 1.1 times the GMV.

But firms that have recently raised funds are applying a GMV multiple of 2 to 3 times.

"There's been some talk in the VC industry that the valuations proposed by startups recently are excessive," said an institutional investor.

Some market watchers also say that the domestic VC investment market, which has been thriving due to large-scale policy funding and an extremely low-interest environment, may fizzle rapidly if interest rates increase.

Write to Jong-woo Kim, Jun-ho Cha, Jung-hwan Hwang at

Danbee Lee edited this article.

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