Lotte to open Silicon Valley corporate venture capital unit

Lotte Group, a South Korean retail-to-chemical conglomerate, is set to launch a corporate venture capital (CVC) business in Silicon Valley, the global center for most advanced technology and innovation, for investments in innovative startups there.

Lotte Ventures Corp., the group’s CVC affiliate, is scheduled to open a Silicon Valley unit later this month, according to the company and venture capital industry sources in Seoul on Friday. The unit, which will be managed by a small number of staff, will gradually increase employees.

“Starting from (planned) support for the entry of 10 Korean startups into the US, we will actively proceed with investments in prominent startups in Silicon Valley,” a Lotte Venture official said.

The South Korean venture capital industry has been aiming to enter Silicon Valley, home to many Big Tech names including Apple Inc. and Meta Platforms Inc., as well as thousands of startups. But only CVC units of major conglomerates such as Samsung Group and Hyundai Motor Group, maintained the business there as distinguished startups were reluctant to receive investments from unknown South Korean venture capitalists, industry sources said.

“Most startups there want investments from famous names such as Sequoia Capital with a history of some 60 years or CVCs of Google and Apple,” said a CEO of a South Korean venture capital firm in Seoul.

“South Korean venture capitalists without big money and reputation found it difficult to compete with major investment firms with strong track records and experiences. So most venture capital companies that entered Silicon Valley in the early 2000s failed to settle in the US and returned to Korea as they could not keep up with the operating costs.”

NETWORKS IN S.KOREA, JAPAN, VIETNAM

Lotte Venture aims to focus on US startups that plan business in Asia instead of looking for unicorns, privately held startups valued at over $1 billion, from the beginning, as the company has networks in South Korea, Japan and Vietnam.

The CVC company plans to connect investors in those countries with startups in Silicon Valley located in Northern California while making its own investments. It will invest in startups based on innovative technology in the food tech, e-commerce, healthcare and other sectors, which are expected to create synergy with Lotte Group.

The group established Lotte Ventures Japan Co. last year with an aim to invest in local startups in cooperation with Mizuho Bank, one of the country’s three megabanks. In 2021, the conglomerate set up a CVC unit in Vietnam.

Lotte aims to strengthen investments in overseas startups through its US, Japanese and Vietnamese CVC units.

“Given the nature of the CVC business, they are focusing more on mergers and acquisitions -- as well as technology cooperation -- than return on investments,” said a group official.

Lotte Group Chairman Shin Dong-bin is so interested in startup investments that he injected his own money into Lotte Ventures. Shin holds a 19.99% stake in the CVC unit, whose largest shareholder is Hotel Lotte Co. with 39.97%. KB Securities Co. and Hana Securities Co. own 19.98% and 19.9%, respectively.

Lotte Ventures, formerly Lotte Accelerator founded in 2016, has raised some 300 billion won in funds for startup investments and spent about 200 billion won on the manufacturing, chemical, retail, food and tourism sectors.

Write to Jeong-Cheol Bae at bjc@hankyung.com
 
Jongwoo Cheon edited this article.