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[StartupRecipe] VCs recap 2023 and their forecast for 2024

#Weekly Funding Overview

[Jan.15 ~ Jan. 19]

The total funds raised by Korean startups of this week is KRW 134.6 Billion.

GhostpassSecurity-Pre-Series AKODIT, Oracle Venture Investment
WorkationPremium tent-SeedSeries Ventuers
GenecraftBio10 billionSeries ASeoul Techno Holdings, Infobank, Cosine Investments
AdusAutonomous mobility-Seed BridgeAventures, Futureplay
BeobleWeb3 social messenger-DWF labs
Four PillarsBlockchain700 millionSeedKakao Ventures, Hashed, Bass Investments
DropthebitGen AI-M&AGoodnote
EK GamesGame-M&ANeptune
Elice groupEdutech20 billionVertex
OrangesquareFintech10 billionSeries BMirae Asset Venture Investments, IMM Investments, Nau IB
OptimizeraiGame1 billionPre-SeedA16Z
HMC NetworksSenior care4 billionSamsung Ventures
RANKINGFISHFishing service-SeedKangssen
BioceanBio-SeedYuhan Kimberly Green Impact Fund
My Real TripTravel75.6 billionBRV Capital Management, Korelya Capital, Partek Partners, Vanderbilt University, SV Investments, Samsung Securities, IMM Investments, Altos Ventures, Smilegate Investments
GrooPlant Platform-Pre-Series ANudge Healthcare, Bon Angel Venture Partners
FluentAI Avatar-Pre-Series AKorea Investment Accelerator, Sparklab
FunbleFintech-M&ASGA Solutions
ABICConsulting-PG Ventures
MISULLOArt platform-SeedPG Ventures
PionelelctricEnergy11.8 billionSeries AKorea Development Bank, L&S Venture Capital, KDB Capital, Hyorim
Dynamic drug discoveryBio1.5 billionPre-Series AVine Ventures

#Major Funding

  • Travel startup MyRealTrip secured a total of KRW 75.6 billion in investment. After breaking the monthly breakeven point (BEP) last summer, MyRealTrip now has KRW 1 trillion in annualized transaction volume.
  • Elice Group, an educational practice platform, secured 20 billion won in investment. The company plans to become an AI solution company by leveraging its educational data and AI technology.

#Trend Analysis

VCs recap 2023 and their forecast for 2024

StartupRecipes spoke to more than 15 leading Korean investors (some anonymous) and asked for their views on investment in 2023 and 2024.

2023 witnessed a continuation of the conservative investment market that had commenced in the second half of 2022. A majority of investors, irrespective of their investment stage, deemed the investment market in 2023 as very bad, even worse than the previous year when they rated it poorly.

On the flip side, there were also many who remained positive, anticipating a return to normalcy from the overheated atmosphere of the past.”2023 was the year when everyone realized that the investment ecosystem was overvalued,” remarked Yang Sang-hwan, leader of NAVER D2SF. He added, “If you look at the past abnormal highs as an average, this year’s cold snap is correct, but it is a process of normalization.” Deokjoon Lee, CEO of D3Jubilee, concurred, stating, “Inflation and high-interest rates have dampened venture capital and reduced startup valuations, but in a way, it’s a process of normalization from an abnormal overheated state.”

For investors, there were pros and cons. “It was one of the most challenging years ever for the investment environment, and many investors changed their strategy to follow-up investments in their existing portfolios rather than looking for new companies to invest in,” said Homin Kim, CEO of SparkLab.

“It’s a positive for investors that valuations have adjusted to a reasonable level, but in Europe, it was difficult to source deals because many startups held out for a good investment time, and in Korea, many startups were still under pressure to adjust their valuations,” noted Pierre Joo, CEO of Korelya Capital Korea.

Similar to the previous year, investors are now seeking profitability rather than growth when making investment decisions. In the past, during times of abundant liquidity, growth-based investments were favored, but this strategy is no longer viable. Investors are now looking for teams with good fundamentals. While numbers have become crucial for conservative valuations, many investors prioritize the commitment of the founding team over immediate revenue or operating profit.

To overcome the downturn in the investment market, the role of the government has become crucial. The government has announced plans to support the investment market by creating a private fund of funds and providing incentives from 2022. Investors’ views on this range from positive to negative. Some see it as a positive step in revitalizing the investment climate during challenging times, while others express concerns about the excessive funding of equity funds.

There were signs of recovery in the second half of the year, with investments on the rise. However, investors do not consider this to be significant. They perceive it as dry powder running out, and the funds going to the frontrunners.

AI startups are the most likely to continue receiving investments, with more than 90% of investors choosing AI startups. Generative AI garnered a lot of attention in 2023 with the advent of OpenAI. Nevertheless, opinions on the competitiveness of Korean AI companies, especially in generative AI, were divided. Unlike other technology areas, the gap between Korea and overseas in terms of technological competitiveness is growing at a very fast pace. AI startups are considered potentially competitive, but their business performance is somewhat lacking. Despite this, there are predictions of opportunities for startups. It is mentioned that there is an opportunity for Korean startups because generative AI is a crucial field for large Korean companies to maintain global competitiveness.

Outside of AI, the outlook for investment in the environmental (climate, energy, ESG) sector is bright, with digital healthcare, manufacturing, and content/media also ranked as promising.The M&A and IPO markets are expected to remain challenging in 2024.

Little activity has been observed in the IPO market since 2022. The stock price decline after Padoo’s IPO is anticipated to have a negative impact on startups looking to go public with their technology.

Fortunately, investment in 2024 is expected to be better than in 2023. More than half of investors said they would increase their investments, and none said they would decrease. Most investors expect the second half of 2024 and the first half of 2025 to be a recovery period.

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