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[StartupRecipe] Korean conglomerates will be able to establish CVCs

#Weekly Funding Overview

[Nov. 08~ Nov. 12]

The total funds raised by Korean startups of this week is KRW 244.1 billion.

BrandyFashion31 billionAtinum Invetment, K2 Investment, Korea Investenet& Securities, DS Asset Management
kofplatformFish farm-SeedSopoong Ventures
We are theFashion-Pre-Series AKorea Credit Guarantee Fund
Luxury&allFashion-Pre-Series A BridgeLotte Ventures
BejewelJewelry9 billionNextG Investment, IMM Investment, Capstone Partners, Dunamoo&Partners
Deep FarmAnimal care-SeedSpring Ventures
Elephantconstruction-SeedSpring Ventures
YohemiteSports-SeedSpring Ventures
CoveringEco friendly-SeedSpring Ventures
KoreaspacedataProphtech2 billionPre-Series AFuture Play, Timewise investment, Bass Investment
CashmallowFintech500 millionGRANTTIPS
NeurophetHealthcare19 billionSeries BSBI Investment, Kolon Investment, The Wells Investment, ES Investor, Future Play, Prophet asset management, J Curve Investment
AIO&CO KoreaDigital Trade10 billionSeries BKB Investment, KB Securities, Korea Investment Partners, SJ Investment Partners, The Wells Investment, Crit Ventures, Shinhan Capital
CrowdworksAI20 billionPre-IPOMuirwoods Ventures, IMM Investment, Hana Financial Investment, DT&Investment, Samho Green Investment, Kiwoom Securities , eBEST Investment & Securities
PosicubeAI11 billionSeries BCapstone Partners, HB Investment, Winvest Venture Capital, BA Partners, Hana Bank, P&P Investment, Friend Investment Partners
BIGCCreator platform4.5 billionSeedBonAngels Venture Partners, Naver D2 Startup Factory, Korea Investment Partners, Bass Invesment
3JHealthcare-SeedQUAD Ventures
OkxeBike platform3.5 billionSeries APartners Investment, SBpartners, IMM Investment
MathpressoAI Education-Google
PartsgoEcommerce-Pre-Series Ae Globalsystem
tresc3Education-SeedSpace Jump
WadizCrowdfunding100 billionSeries DLotte, Korea Development Bank
OmniousFashion10 billionMirae Asset Capital, NH Investment & Securities
SurginexBIO4 billionSeries AK Net Venture Capital, Laguna Investment
CarangMobility-SK Rental Car
4by4Content-Echo marketing
Contents lab blueWetoon production10 billionLaguna Investment, Kona Venture Partners, We Ventures, Crit Ventures, Daegyeong Investment
JoinandjoinFood6.5 billionMYSC, BNK VENTURE CAPITAL, Nau IB Capital
EnergybalanceHealthcare-SeedSeoul Techno Holdings
Themomma5.3 billionSeries B Bridge
SummitsBeauty1.3 billionSeedCapstone Partners, Bluepointpartners, United Family Capital
GeunbonMealkit-Series AS Food
Treasure HunterMCN-SBI Investment Korea, Industrial bank of Korea, Cornerstone Investment, Yuanta Investment,
SoftsquaredEducation500 millionGRANTTIPS
ListlyWebdata500 millionGRANTTIPS
ConinnessCoin info-M&AAdena software

Major Funding

  • Crowdfunding company Wadiz secured 100 billion won in Series D funding. With 80 billion won invested from Lotte, the team plans to become a comprehensive funding platform for startups and small and medium-sized business owners with Lotte Group. 
  • Crowdworks raised 20 billion won in pre-IPO round. It has 300,000 members as a platform to collect and process data necessary for AI technology advancement.
  • Neurophet, an AI solution for brain diseases, secured 19 billion won investment. This funding will enable the company to expand partnerships with global companies and to lay the foundation for global clinical trials for standardizing dementia diagnosis.
  •  Jewelry tech startup Bejewel raised 9 billion won and expanded its overseas business. With turnover 5 times higher than the previous year, it opened an offline store specialized in jewelry and expanded its business area.

#Trend Analysis

Corporate venture capital (CVC) will be allowed from December 30 this year. 

In Korea, general holding companies were banned from holding shares in CVC, a financial company, under the principle of separation of financial and industrial capital under the Fair Trade Act. However, due to the revision last year, it was allowed to hold limited shares. As the need to promote venture investment as a way to revitalize the economy has increased due to changes in conditions such as the global economic downturn caused by COVID-19, the holding of CVC by a general holding company has been exceptionally allowed. This is because it has more room to invest than general VC and can also expect growth such as business diversification through open innovation with the parent company.

Until now, large corporations have established CVC outside the company, including Kakao Ventures and Shinsegae Signite Partners. 

If venture capital led by large corporations is allowed, it is expected that they will be incorporated into the holding system and be able to execute investments in line with the direction of the holding company.

Although the industry has released regulations in the desired direction, it is analyzed that large corporations are deeply concerned in terms of capital efficiency because of regulations such as 100% wholly-owned subsidiaries. Some say that restrictions on external investment of less than 40% can also be disadvantageous when competing with global mega-funds.

In addition, even if you borrow money from a financial company during the establishment process, CVC will be allowed up to 200% of the equity capital, while general VC can borrow up to 1,000%. Another factor that reduces the attractiveness is that they are allowed to invest in foreign companies only within 20% of their total assets when the scale of overseas investment is increasing. Due to these various regulations, large companies are pleased with the permission while weighing the pros and cons of establishing CVC.

Despite concerns, large companies are expected to seek new opportunities through CVC. Currently, SK and LG are considering establishing CVC. This is because the holding company of SK has been actively investing recently, and LG finds CVC highly useful due to its abundant cash reserves.

The Korean startup ecosystem is more active than ever. Amid growing interest in the Korean market among overseas VCs, the inflow of funds into the venture market is expected to increase further through the permission of CVC. 

However, it is time to improve considering the criticism that if legal restrictions on CVC are not lifted to the level of advanced countries abroad, large-scale funds such as Softbank Vision Fund cannot be created, and opportunities to invest in promising domestic startups may be lost due to investment competition with overseas VC.

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