Korea Venture Investment creates global fund worth $2 billion

Korea’s government-backed fund of funds (FOF) management institution announced its latest selection of funds late last month, which would benefit from the second around of this year’s global funding program.

Through the second round, Korea Venture Investment Corp. plans to inject 69 billion won ($58.2 million) to 10 funds around the globe. A total of 23 venture capital firms across the globe have applied for the fund, a 3:1 competition rate, requesting around 200 billion won. 

The total amount, which will be a combination of the funding from KVIC and the selected venture capital firms' contributions, is expected to hover above 1.04 trillion won.

The purpose of the global fund program is directing foreign investment to specific types of startups that benefit the country's business climate. 

In this regard, the selected VCs must invest more than the amount it received from KVIC to Korean startups, overseas affiliates of Korean companies, joint ventures created in conjunction with Korean companies or startups founded by foreign nationals of Korean heritage. This condition is in line with the corporation's catchphrase, "Making Virtuous Cycle of Venture Ecosystem."

BULLISH SENTIMENT ON K-STARTUPS

In this round, the combined total of the minimum amount from the venture capital firms will reach $869 million.

By region, there are four funds located in the United States, two in China and Southeast Asia respectively; and the rest two in other regions. 

Four venture capital firms in the US, California-based Big Basin Capital and Goodwin Ventures, Collaborative Fund, and Northgate Capital will receive $21.5 million together.

In China, Legend Capital and Fosun International will receive $11.5 million.

In Southeast Asia, $13 million will go to Altara Ventures and a joint venture by Korea's KB Investment and RHL Ventures; leaving $12.2 million to France-based Eurazeo and Singapore's Antler, which were categorised as being located in the "other" regions. 

Together with the first round conducted back in June, the total funding for this year's overseas investment program would surpass 2.3 trillion won. 

Initially, KVIC expected its original funding to makeup some 40% of the raised target of 400 billion won. The investment amount at present is almost a six fold jump from the target. 

The higer than expected investment reflects foreign venture capital firms' rising appetite for startups here.

The KVIC has been running the Foreign VC Investment Fund since 2013, infusing 412 billion won to create a total investment amount of 3.67 trillion won. Of that amount, 2.73 trillion won are foreign capital, a whopping 74.4%. 

FOLLOW UP INVESTMENTS CREATE UNICORNS
 
Until now, some 380 Korean startups received a total of 801.6 billion won through the Foreign VC Investment Fund; of which 51 were able to score follow up investments from top tier investors such as New York-based Goldman Sachs and Beijing's Legend Capital.

Korea's recent unicorns, namely IT service management company Viva Republica which owns mobile banking provider Toss;  grocery shopping app Kurly; and real estate app Zigbang, are all beneficiaries of such infusion of capital through the global fund. 

Apart from the obvious financial perks, the broadened network has also expanded the Korean startups' potential.

Healing Paper Corp., a medical beauty startup that received funding from Legend Capital, said it is working on entering the Chinese market through the VC's support.

Other companies like Woowa Brothers Corp. and Hyperconnect Inc., for their parts, have been acquired by overseas VCs at 4 trillion and 2 trillion won respectively.

A high level KVIC official said he hopes the cycle of fresh infusion of foreign capital energizing the domestic startup scene will continue to benefit the overall economy.

Write to Jee Abbey Lee at jal@hankyung.com
Jee Abbey Lee edited this article