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Venture capital firms reap record-high profits with successful IPO exits
By Anna J. Park
Most venture capital firms in Korea achieved record-high earnings as well as impressive year-on-year growth last year thanks to bullish stock markets and an IPO boom. The stellar performance was seen in both major players like Korea Investment Partners ― a venture capital subsidiary of Korea Investment Holdings ― and much smaller ones as well.
Fueling the growth of venture capital firms in Korea was the meteoric rise of many startups to unicorn status in recent years. Startup companies used to have only a limited role in the Korean economy, helping pioneer new technologies or create jobs to augment big conglomerates known as "chaebol." But they have now become the leaders of new growth industries.
Korea Investment Partners, the country's largest venture capital firm with operating assets of over 3.3 trillion won ($2.94 billion) and more than three decades of experience, saw its annual revenue surge 79 percent year-on-year to 88.6 billion won last year. Operating and net profits more than tripled to 45.7 billion won and 34.9 billion won, respectively, over the same period.
Aju IB Investment, one of the top three venture capital firms in Korea, achieved record-high earnings last year, based on successful IPOs by its previously-invested companies. Nine companies altogether, including Vaxcell Bio, YoungLimWon Soft Lab, and KoBioLabs, debuted on the tech-heavy KOSDAQ market in 2020, helping the investment firm log a record-high annual revenue of 146.2 billion won, up 128-percent year-on-year, while operating profit soared 128 percent over the same period to 63.1 billion won. The firm's U.S. subsidiary, Solasta Ventures, is also contributing to the firm's increased profitability, making new investments in 29 businesses so far.
Aju IB is also expecting another record-setting performance in 2021, as about 20 companies in its investment portfolio are scheduled to go public this year or in 2022. Global online game publisher, Krafton, leisure reservation app, Yanolja, online education platform, Yanadoo, and e-book platform, Ridibooks, are some of their highly-anticipated unicorn companies facing IPOs.
"More than 30 percent of the firm's investment profit comes from overseas investments. The firm plans to continue maintaining the current growth momentum by solidly building stable profit structures in both domestic and overseas markets," Aju IB's CEO Kim Ji-won said.
Another major venture capital firm, KB Investment, which operates about 1.7 trillion won worth of assets, also achieved record-high performance last year. The firm was founded back in 1990 and logged an annual revenue of 74.3 billion won in 2020, which is a whopping 165 percent year-on-year hike. The firm's operating profit as well as net profit also rose to 34.2 billion won and 27.9 billion won, respectively, as the company's investment funds all yielded sound profits last year.
"KB Investment will continue to seek social responsibility by efficiently financing startup companies, while pursuing ESG management principles," an official from KB Investment said.
KTB Network, which seeks to go public within this year, also achieved an all-time high revenue of 66.9 billion won last year, which is a 129 percent jump from the previous year. Founded in 1981 as the nation's first venture capital firm, KTB Network's operating and net profit for this year are already drawing expectations. The firm retrieved over 62.5 billion won by selling its investment stake in Woowa Brothers ― the operator of Korea's largest food delivery app service, Baedal Minjok ― last month, which was more than a 26-fold profit compared to its original investment made in 2014.
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Mirae Asset Venture Investment logged 52.1 billion won in annual revenue last year, which is nearly a 50 percent increase from 2019. While the firm's operating profit of 34.4 billion won is a 132 percent jump year-on-year, the company's revenue and profit for this year are expected to be bigger than those of last year. The company's investment portfolio includes some of the most anticipated unicorns, including grocery delivery e-commerce company, Market Kurly, fashion portal, Musinsa, as well as Bucketplace, the operator of the country's largest interior decoration supply market application.
Atinum investment, which logged 32.1 billion won in annual revenue and an operating profit of 17.1 billion won, is also expecting another lucrative year. The firm invested early in Dunamu, the operator of Korea's biggest cryptocurrency exchange, and holds around a 6.3 percent stake in the blockchain fintech company. The venture capital firm also sold 100,000 shares of Dunamu to DSC Investment fund in February, reaping partial profits from the sale. If Dunamu succeeds in its U.S. IPO next year, as widely expected in the market, the venture capital firm is expected to achieve new record-high revenue growth.
Other venture capital companies, such as DSC Investment, TS Investment, LB Investment, and SBI Investment, all achieved handsome revenues and profits, based on the IPO boom on the stock markets.
More money continues to flow into venture capital market
According to the Korean Venture Capital Association, venture capital firms collected more than 620 billion won last year through successful IPOs of startup companies. This figure has climbed by more than three times over the past few years.
Market insiders expect local venture capital firms to continue achieving the current growth momentum in the near future, as the amount of money flowing into the market through various types of funds or investments is growing at a faster rate.
The total amount of money invested into startups during the first quarter of this year stood at 2.24 trillion won, which is up about 50 percent year-on-year. A global pandemic-led industrial reshaping taking place in various sectors is also stimulating the birth of innovative startup companies, which in turn is expected to fuel the further growth of the venture capital market.
