According to the South Korean Ministry of SMEs and Startups, venture capital investment in South Korea was reported at KRW 6,764 billion in 2022, down 11.9% from the previous year.
Despite the decline, this is the second largest amount after 2021, the largest ever.
This decrease is relatively small compared to the 30.9% decrease in venture capital investment in the United States and the 40.7% decrease in Israel in 2022 due to the complex crisis of high-interest rates, high prices, and high exchange rates.
The South Korean government attributes this to the active efforts of venture capitalists in South Korea to find investment targets and attract investors despite challenging economic conditions.
As for the quarterly trend in venture capital investment, investment was buoyant in the first and second quarters but has declined since the third quarter.
Investments totaled KRW 2,221.4 billion in the first quarter, up 68.5% from the same quarter in 2021. In the second quarter, they also increased by 1.4% to KRW 1,931.5 billion, breaking the record for the second quarter.
However, in the third quarter, venture capital investments amounted to KRW 1,284.3 billion, down 38.6% from the same quarter of 2021, and they also fell 43.9% in the fourth quarter.
This pattern is interpreted to mean that investment cases reviewed before the market crisis were executed in the year’s first half.
At the same time, high inflation and interest rates had a total impact on the risk investment market in the third quarter.
Looking at venture capital investment in 2022 by industry, 70.5% of total investment was concentrated in three sectors: ICT services, distribution/services, and bio/medical.
Most of the investment of KRW 2.3518 trillion (34.8%) was invested in the ICT services industry, but it was found to have decreased by 3.2% compared to 2021 due to the recent market crisis.
Investment in biomedicine amounted to KRW 1,105.8 billion, which is still an attractive sector after ICT services and sales/services.
The video, performance, and music industry recorded KRW 460.4 billion, up 10.6% from 2021.
In terms of company history, investments in startups (with a company history of 3 years or less) were the only ones that increased. As a result, initial corporate investment increased 7.8% year-on-year to KRW 2.05 trillion, exceeding KRW 2 trillion for the first time.
Corporate investment decreased in the middle (3-7 years of business activity) and late stages (more than seven years of business activity).
In response to the market crisis, the Ministry of SMEs and Startups has taken measures to promote investment, announcing, for example, steps to create a dynamic ecosystem for venture capital.
The Ministry plans to introduce incentives for early venture investment, such as paying additional management fees to the fund management company that has reached the target investment quota and awarding extra points when selecting a fund investment project for the following year.
The fund’s preferred loss provision rate will also be raised to encourage venture capitalists to continue their active investments.
Note: The Ministry of SMEs and Startups aggregates and analyzes these statistics to identify trends in venture capital investment in 2022. They are not nationally recognized statistics under the Statistics Law.