[StartupRecipe] The second largest M&A deal in Korean startup history : Hyperconnect

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#Weekly Funding Overview

[Fab. 8~ Fab. 12]

The total funds raised by Korean startups of this week is KRW 10.55 billion.

Company	Industry	Amount	Round	Investors
Makestar	kpop	6 billion		Korea Development Bank, Altos Ventures, SangSang Ventures, ES Investor
KB-ELEMENT		-		Lotte chemical corporation
Yournamehere	Women clothing	-		MUSINSA, AmorePacific
Spector	HR	250 million	Seed	Bass Investment, Sparklab
Bnctech	Mobility	-	Seed	CNTTECH
Codestates	Coding School	2.5 billion	Pre-Series A	Hashed, Strong Ventures
ForestN	Matching Platform	-	Seed	CNTTECH
Stari	kpop	1.2 billion	Seed	Mirae Asset Venture Investment, etc.
Virtual Lab		-	Pre-Series A	DSC Investment
Thisisneverthat	Fashion	-		Musinsa
Deer Corporation	E-scooter	-		Coolidge Corner Investment, Openwaterinvestment
The local project	Agriculture	-	Seed	MYSC
Hyperconnect	social network	1.933 trillion	M&A	Match Group
HayanMind	Education	-	Seed	CNTTECH
Learning Spoons	Education	600 million

Major Funding

• K-pop entertainment platform Makestar raised KRW 6 billion. The company, founded by one of FNC entertainment founding members in 2015, offers crowdfunding projects and contents in kpop, drama, movies, and publishing. Makestar has partnered with more than 200 entertainment companies including CJ, CUBE, RBW and Wollim and carried out more than 500 projects with K-Pop artists such as IZ*ONE, MAMAMOO and Seventeen. The company generated more than KRW 11billion in revenue in 2020, with 70% of revenue coming from overseas. 
• Codestates, which runs on/offline coding bootcamp raised KRW 2.5 billion in a Pre-Series A funding round led by Hashed. Codestates first introduced an income sharing system in Korea where students don’t have to pay upfront tuition, students pay after they get a job. In 2020, the number of codestates’ students grew 5 times compared to the previous year and the revenue also doubled. 

More Funding

• Global entertainment technology platform Starry has raised KRW1.2 billion in seed investments. Starry operates a service that sends a video of a star’s reply when a user sends a message.
• EduTech startup Running Spoons raised KRW 600 million to grow into a total career platform that offers education, community and recruitment.
• Spector, a reputation inquiry service for job applicants, raised KRW 250 billion. Specter provides information on the reputation of applicants written by their previous employers. It allows HR to easily search and view applicants’ information with just their names and phone number.

Undisclosed funding

• Women’s clothing brand Your name here raised strategic investment from Musinsa and Amorepacific.
• Personal mobility startup BNC Tech raised seed investment from CNT Tech.
• ForestN, which runs artificial intelligence marriage brokerage service Darling, raised seed investment from CNT Tech.
• VirtualLab, a company specializing in material simulation platforms raised investments from DSC Investment 
• Hayan Mind, an AI-based foreign language learning software company, raised seed investment from CNTTech.

#Trend Analysis

The second largest M&A deal in Korean startup history : Hyperconnect 

HyperConnect, the developer of the video social networking app Azar, announced that it has been acquired by the Match Group. Match Group, which runs 40 social apps including Tinder, OK cupid will acquire HyperConnect for a combined cash and stock deal valued at $1.72 billion. The deal is expected to close in the second quarter of this year. 

This acquisition is the second biggest deal for a Korean startup after the food delivery service Woowa brothers was acquired by the German company Delivery Hero for $4 billion in 2019. The acquisition is recognized as a good example of how a korean-born tech startup can succeed in the global market. Hyperconnect is profitable and generated more than $200 million in revenue in 2020, a 50% increase from 2019. 

Founded in 2014, HyperConnect is more popular in the global market than in Korea. The company operates two flagship apps:Azar and Hakuna Live. Azar is the highest grossing 1 on 1 live video and audio chat app globally. It allows users to connect seamlessly with others from around the world, instantly translating voice and text. According to the company, its global popularity began by mistake. They were going to launch the service only in New Zealand first to see the global market response. However due to the employee’s mistake, the service was accidently released all over the world, which immediately led to an explosive response leading to its success as a global service. Since its launch in 2014, Azar has tallied over 540 million cumulative downloads and more than 95% of users come from the global market. In particular, it has grown rapidly with great success in the Middle East market.

How it was started= Sang-il Ahn, CEO of Hyperconnect, is a serial entrepreneur. He founded his first company in 2007 but failed. After tapping several businesses for a few years, he established Hyperconnect and succeeded selling the company in 8 years. Ahn predicted that the era of video platforms will come and developed mobile WebRTC (Real-Time Communication) for the first time in the world. This low-cost video technology has cultivated highly engaged audiences across Hyperconnect’s products. Hyperconnect’s video  technology is regarded as world-class technology in the field.

How the deal was made=HyperConnect originally planned to raise $300 to $400 million through an initial public offering (IPO), but the acquisition was made after Match Group showed an active intention to invest. Match Group was a perfect partner for HyperConnect, they wanted strategic investments from companies rather than money from private equity. “Match Group has shown interest for many years and has been most active in their investment proposal” a Hyperconnect official said. “The discussions have gained momentum as Match Group proposed that it allows independent operation of Hyperconnect even after the takeover.” 

Winners in the acquisition=Following the acquisition, Altos Ventures and Softbank Ventures, which have invested in HyperConnect, are also expected to make big profits. A Silicon Valley based Altos Ventures participated as a Series A investor in 2012 and invested $2 million by purchasing 833,330 shares (RCPS). Altos Ventures is one of the most active investors in Korea who has led growth rounds in Korean Unicorns including Coupang and Woowa Brothers and Toss. Softbank Ventures invested about $10 million in HyperConnect with Altos Ventures in November 2015 to acquire 2,102,740 preferred shares. Its current stake value is estimated to be around $35 million.

MORE NEWS

South Korean E-commerce company Coupang filed for an initial public offering in the U.S, showing rapid revenue growth and narrowing losses as it gears up for a stock market debut in the United States. Founded in 2010, Coupang has grown fast in Korea with its ‘Rocket Delivery’ service that promises delivery within 24 hours. According to its first S-1 filing, The company generated $12 billion in revenue in 2020, up from $6.3 billion in 2019, while its loss narrowed to $475 million from $699 million. Coupang will raise capital in the range of $1 billion. Coupang’s debut was expected to be the largest by foreign company since Alibaba in 2014. 

Kim Beom-su, founder of Kakao pledged to donate over half of his wealth. His assets are estimated to be over 10 trillion won ($892.9 million), including 12.5 million shares of Kakao, valued at over 5.7 trillion won. Kakao is the Korea’s top messaging application installed on more than 90 percent of the country’s smartphones.