Market boom drives more S.Koreans to become angel investors

Angel investing has become widely prevalent among South Koreans. The practice of providing capital for new and small business ventures, which were typically done by a limited number of wealthy individuals, is now joined by average citizens in the country.

According to the Korea Business Angels Association (KBAN) on Sept. 23, the number of active members at its Angel Investment Support Center has doubled from about 12,500 in 2016 to more than 25,000 this year. The industry projects the total number of angel investors in South Korea to be more than 30,000 including those who are not members of the center and those who invest in the ventures owned by friends and family members.

The number of private investment funds that engage in angel investing has also multiplied sharply from 211 in 2016 to 1,743 this year. The total amount of investment managed by these funds has increased tenfold during the same period from 113 billion won ($96 million) to 1.16 trillion won ($985 million). A private investment fund is a form of indirect investment where 49 or fewer individuals can each put a sum of money between 1 million won ($850) and 100 million won ($85,000).

KBAN said that direct angel investment is also becoming more popular. Direct investing can be done by contacting the companies personally or through so-called angel clubs, essentially social clubs with angel investment purposes. The association noted that the number of registered angel clubs has also grown from 76 in 2016 to 246 this year.

About four to five years ago, angel investing was thought to be something exclusive to retired fund managers or startup CEOs like Krafton Inc. founder Chang Byung-gyu. Chang in 2011 invested 300 million won ($255,000) in Woowa Brothers Corp., the owner of the food delivery app Baedal Minjok. The valuation of his shares increased by one thousand times to 300 billion won ($255 million) by 2019 when the company was acquired by Germany’s Delivery Hero SE.

Angel investing has become a popular practice among a wider group of citizens from about two to three years ago, says industry officials, and is drawing more investors with the ongoing stock market boom.

“You can make a jackpot of 20-100 times in investment return if the company you invested in goes public. Another advantage of angel investing is that unlike typical stocks where you often have to make portfolio changes according to market dynamics, you can simply wait for about 3-7 years without making such frequent changes,” said an investor who has been putting his salary in angel investing over the last two years.

Mobile platforms that specialize in over-the-counter (OTC) trading are also thriving. Kakao-invested Dunamu Inc.’s OTC trading app Stock Plus has been downloaded by over 1 million people and currently boasts a user base of 650,000.

Another OTC trading platform Angel League said that 56% of its users are millenials in their 20s and 30s. Angel League added that its users invest 3.7 million won ($3,142) on average.

Tax breaks are also drawing the investors. In 2018, the government has made angel investing 100% tax-free for investments up to 30 million won ($25,500) from the previous amount of 15 million won ($12,750). 70% tax deductions are also offered for amounts up to 50 million won ($42,500), and 30% deductions for those over 50 million won.

Write to Jong-woo Kim at jongwoo@hankyung.com
Daniel Cho edited this article.