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| Image captured from DearU's official website / Courtesy of DearU |
By Anna J. Park
DearU, a fan communication platform business, is scheduled to be listed on the Kosdaq early next month, and local venture capital firms that have bet on the company's success are expected to garner handsome returns on their investments.
A second-tier subsidiary of SM Entertainment ― DearU is a subsidiary of SM Studios, a subsidiary of SM Entertainment ― DearU's IPO will be Nov. 10 with 3.3 million shares on offer. As the price band of the offered stock is between 18,000 won and 24,000 won ($15-$20), the company could raise as much as 79.2 billion won through the listing.
Diverse venture capital firms, including Albatross Investment, SBI Investment, Union Investment, BOKWANG Venture Capital and BSK Investment, currently have stakes in DearU either as stocks, convertible bonds or convertible preferred stock. On average, they're expected to triple their original investment through the listing.
The fan platform market is growing rapidly as the popularity of K-pop and K-dramas continues to increase worldwide. DearU is now competing with "Weverse" ― a similar mobile-based fan platform app operated by HYBE, the management company of BTS ― for the lead in the market.
Launched in July 2017 with an initial capital of 6 billion won, DearU's first line of business was "Everysing," a mobile-based karaoke service. But that was not as lucrative as the firm had hoped.
In 2019, the company transformed itself into a digital platform by acquiring Brinicle, a local software business which previously developed mobile messenger programs for applications.
From 2020, the company achieved substantial growth in the entertainment platform business area and launched "DearU bubble," a private, one-on-one messaging platform, through which K-pop or K-drama fans could exchange messages, ranging from photos and videos, with their favorite stars for a monthly subscription of 4,500 won.
DearU bubble has partnered with 23 entertainment companies in Korea so far and the messaging platform now has 1 million subscribers.
The one-on-one messaging platform has now grown to become the company's core business accounting for more than 93 percent of its annual revenue. The firm posted revenue of 10.7 billion won in 2020; while sales reached 17.1 billion won in just the first half of this year.
As Google decided to lower its app store commission fees by 15 percent from the current 30 percent, DearU's profitability is expected to improve further next year.
The largest shareholder of DearU is SM Studios, which is a key subsidiary of SM Entertainment. Another music label, JYP Entertainment, also acquired a 23.3 percent stake in DearU earlier this year. JYP acquired a 9.1 percent stake of DearU in May for 8.4 billion won, followed by the purchase of another 14.1 percent stake in June.
