VC firm DSC Investment forms Korea's largest secondary fund

South Korean asset manager DSC Investment has formed the country’s largest-ever fund for venture capital secondaries to explore opportunities for undervalued startup stocks.  

The leading VC firm, which has invested in game publisher Kakao Games Corp., grocery shopping app operator Kurly Inc. and fashion platform Musinsa Co., said on Wednesday it has created a 300 billion won ($218.9 million) secondary fund with a six-year maturity and target return of 8%.

Secondary funds buy existing assets from primary private equity markets. Through transactions of mature assets, the funds can provide sellers returns on capital and offer buyers a discount on the purchase price. 

The secondary fund of DSC will use a package deal strategy as a key transaction method, which trades multiple assets together at the same time, said the VC firm’s Director Lee Sung-Hoon. DSC looks to garner attention from many investors looking for selling opportunities, Lee added.

LIQUIDITY IN FROZEN VC MARKET

Founded in 2012, the Seoul-based asset manager has been focusing on fast-growing domestic tech startups. The VC firm has expanded investments in secondaries since 2021, targeting undervalued companies with robust earnings.  

DSC sees rising demand for domestic VC secondary funds amid the slowdown in the IPO market and tougher investment environment with elevated interest rates.

Local startups, particularly those that have completed Series B funding rounds, are significantly undervalued today and increase the need for VC secondaries, a DSC official said.

As more and more local startups are accepting devaluation, or cutting their enterprise value, to attract investment, DSC’s secondary funds can provide liquidity to the venture capital ecosystem and accelerate capital returns, the official added.

Write to Joo-Wan Kim at kjwan@hankyung.com

Jihyun Kim edited this article.