Profitable Korean startups attract funds despite downturn

Profitable South Korean startups succeeded in fundraising despite an economic downturn as investors sought stable earnings from companies with clear models to make money.

Investors are expected to focus on such profitable startups as the local venture capital industry became pickier, given the slowing economies at home and abroad.

“More venture capitalists with enough money for investments are seeking startups that can cope with worries about the potential economic recession in the next two to three years rather than betting a jackpot from investments in companies with future growth potential,” said an investment industry source in Seoul.

Backpackr, the operator of Idus, an online marketplace for handcraft products, and Tumblebug, a crowdfunding platform, said on Tuesday it raised 20 billion won ($16.1 million) in its Series C funding round, from investors including local and foreign private equity firm Axiom Asia Private Capital Pte. Ltd., Altos Ventures Management Inc. and Stonebridge Ventures Inc.

Accumulated transaction values of the eight-year-old Idus and the 11-year-old Tumblebug topped 1 trillion won with the number of creators on those platforms totaling some 35,000 and about 26,000, respectively.

TO FOCUS ON PROFITABILITIES

Backpackr, which logged an annual loss in 2021, has been reporting monthly profits since July last year. The startup plans to expand its businesses to overseas markets including Southeast Asia, Japan and the US in the first half of this year.

The Grimm Entertainment, a webtoon producer famous for Lookism, has recently secured 14 billion won through its Series C round from Naver Webtoon Corp., the world’s top digital comics provider, and other investors such as Korea Investment Partners and Korea Credit Guarantee Fund.

The startup founded in 2017 was known to have reported an annual profit in 2022 for a third straight year as sales more than doubled to 15 billion won last year from 6 billion in 2021.

GFFG, which operates popular restaurant chains in the country, received 30 billion won of investment from Altos and QUAD Investment Management last month. The owner of the famous donut brand Knotted reported sales of 70 billion in 2021, having doubled annual sales since its foundation in 2015.

Print Bakery, an artworks platform operator, raised 10 billion won in December from a private equity firm. Its sales reportedly exceeded 35 billion won last year from 31.1 billion won in 2021. The startup logged an operating profit of 3.5 billion won in that year.

Write to Joo-Wan Kim at kjwan@hankyung.com
Jongwoo Cheon edited this article.