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[StartupRecipe] Why Startups Acquire Startups

#Weekly Funding Overview

[Nov. 01~ Nov. 05]

The total funds raised by Korean startups of this week is KRW 197.4 billion.

BabygoKids activity-Pre-Series AKyowon, Megastudy, Yoonmin, Crypton
CoffeechatCareer Platform2 billionPre-Series AWe Ventures, Shinhan Venture Investment
DodamindContent300 millionSeedKB Investment
HeadquarterBrand building-SeedHite Jinro
42dotMobility104 billionSeries AShinhan Financial Group, Lotte Rental, Lotte Ventures, Stic Ventures, We Ventures, DA Value Investment, Winvest Venture Capital
IKOOBDigital Healthcare-i SENS
DawinProphtech3 billionPre-Series ASoftbank Ventures, Fast Ventures
Treefarm-SeedAwesome Ventures
Animal Industry Data Korea20 billionSeries BTimefolio Asset Management, Shinhan Venture Investment, Tgris Investment, Sejong Venture Partners, Daesung Venture Capital, Yukyung PSG Asset Management, Timewise Investment, Wonik Investment Partners
FeeeldEducation-SeedDohe Korea
ContactusProphtech500 millionSeedHB Invest Group
AlicornCoworking space4 billionSeries BHi Investment Partners, Korea Development Bank
CloudstoneFood delivery1.1 billionPre-Series ANice Investment, Nice DWR, Kwangju ICCE
Action PowerAI13.3 billionSeries AHana Ventures, Spring Camp
WAUGTravel12 billionSeries COpenwater Investment, Enlight Ventures, Tony Investment, K Bridge, Hana Ventures, Kywon Group
URBANPLAYLocal content8.5 billionPre-Series BMurex Partners, SL Investment, Coolidge Corner Investment,Lotte Shopping, Lotte Ventures
WelloGovernment Info-SeedENSL Partners, SID Partners
IVWORKSSemiconductor20.5 billionSeries CKorea Investment & Securities, Wonik Investment Partners, HYUNDAI Technology Investment
StoneiFitness3.2 billionSeries AHYK Partners, NBH Capital, Hite, Strong Ventures
MicroprotectInsurance5 billionSeries AIntervestor,D3 jubilee Partners, Vision Creator
CISHealthcare-SeedSeries Ventures
EmmentalBusiness management-Naver, Naver Financial

Major Funding

  • Autonomous driving startup 42dot raised 104 billion won in a Series A round of funding, which was the largest Series A investment in Korea. The company has raised 153 billion won in total. It plans to use the funds for upgrading technology, increasing investment in technology, M&A, accelerating business, and securing key talents.
  • Livestock digital healthcare solution Animal Industry Data Korea secured 20 billion won investment. It provides Farmsplan, a solution that analyzes livestock movements with AI through CCTVs installed in the barn and collects immunity data from blood to diagnose the health condition of livestock. The team will increase livestock breeds other than pigs, expand the workforce, and advance into the global market with the investment.
  • Travel startup WAUG got a 12 billion won investment. The company plans to enter the non-face-to-face CMS and PMS markets for digital transformation in the domestic and overseas travel activity industry with the investment.
  • Urban Play, an urban culture content platform, raised 8.5 billion won. It plans to expand its business area to other regions and provide specialized services tailored to new lifestyle trends such as cultural complex retail experiences and hyperlocal.

#Trend Analysis

Why Startups Acquire Startups

Recently, Viva Republica, a fintech company operating Toss, acquired Tada operator VCNC. Many questioned the fact that a financial platform company acquired a mobility startup. As the number of startups acquiring startups is increasing in recent years, there are cases of acquiring companies in completely different industries. Startups are acquiring other startups, whether of the same field or not, as a strategic way to expand their business. It’s nothing new and a common phenomenon in unicorn startups.

What startups want to achieve through mergers and acquisitions can be largely seen as expanding business areas, securing talent and technology, keeping competitors in check, and preoccupying the market. This phenomenon is becoming more prominent this year as the number of startups that have received large-scale investments has increased.

Yanolja is one of the unicorns that have expanded their business through acquisitions. Yanolja has been actively investing in startups as well as acquiring startups since 2018 to rapidly expand its business area. Some say that it was to bulk up for an IPO. Last year, the company invested in Triple, NowBusking, Spring Onward, Lambda 256, and Frientrip to prepare a blueprint for becoming a comprehensive leisure platform. In October of this year, it also announced that it would buy Interpark, the first-generation e-commerce platform in Korea, for 294 billion won and target the overseas travel market in earnest. It is not new for startups to buy existing listed companies that are behind the times.

M&A among startups has been particularly active this year. Most of the companies that succeeded in attracting large-scale investments this year were enthusiastic about acquisitions. These are the representative startups that have been involved in M&A in addition to drawing investment: Viva Republica raising 460 billion won, Korea Credit Data raising 40 billion won, and H2O Hospitality raising 30 billion won.

It is common to acquire startups of the same field, but you can also see cross-industry acquisitions to quickly expand the business to other areas.

One example is Viva Republica (Toss), which acquired VCNC (Tada) this year. Finance and mobility seem to be two completely different areas, but that doesn’t mean there is no interface. The element of data binds the two companies together. Through the acquisition of Tada, Viva Republica plans to launch new services and increase the utilization of fintech, such as providing Toss payment for users. The combination of finance and mobility is not new overseas, such as in Southeast Asia. In the end, Toss acquired Tada in order to keep competitors like Kakao in check and to increase its size by expanding business areas and users.

Investment officials said that while existing large companies think they should develop new services internally, startups use fast-growing strategies to gain the upper hand in the market, earning time by acquiring external capabilities with money. They expected to see more M&As between startups in the future.

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