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[StartupRecipe] Why are Startups Acquiring Other Startups?

#Weekly Funding Overview

[Jan. 2 ~ Jan. 6]

The total funds raised by Korean startups of this week is KRW 65.8 billion.

MothMarine startup-SeedCNTTech
Middle studioBeauty400 millionPre-Series AWishcompany, Krypton
FashionaideStyletech-SeedHanyang university Holdings
InteriorTeacherInterior3.6 billionSeries A bridgeHana Ventures, Strong Ventures, BSK Investment
H2ESS23 billionSeries CThe Turning Point, Envisioning partners, SKS PE, KT&G, Shinhan Asset Management, Hana Securities, POSCO
NetogreenSmart farm300 millionSeedKorea Investment Accelerator
Gosu plushousing rental1 billionPre-Series AHonest Ventures, Comax Ventures,GongMyeong Partners
MuniceSleeptech-Pre-Series ABluePoint Partners, Translink Investment, Digital Healthcare Partners
AnipenMetaverse5 billionSeries BThe Wells Investment, Clairvoyant Ventures
GloudDigital Healthcare-SeedChoi& LEE
CandyFintech-SeedENSL Partners
GELATO LABNail brand-M&AGlugga
GOUGOIGame500 millionSeedEnliple
IESGESG Software-SeedSpring Camp
GBSOFTSecurity4 billionSeries AHB Investment, KB-Soliders Healthcare Investment, Comes Investment
The Grimm Entertainment.Webtoon14 billionKorea Investment Partners, Naver Webtoon, KODIT, Innopolis
PostlabsPrice Searching-SeedBass InvestmentThe Ventures, Aurora Investment. Data solution, Aurora Investment
Foryou Auto ServiceMobility-M&ACarang
ENERZAiEdge AI3 billionSeries AKorea Investment Partners, Ascendo Ventures, Spring Camp
Horizon technologyFintech-Pre-Series APlug& Play
Working CowKiosk-Seoul National University
Silvia HealthAge tech-Pre-Series AKlim ventures, D3 Jubilee Partners, DSC Investment, KB Investment
Business CanvasCollaboration tool5 billionSeries A2Sui Generis Partners, Shinhan Venture Investment, Infobank, Kakao Ventures, Shinhan Capital
MedirHealthcare-Pre-Series AIMM Investment, KT Investment, 500 Global
Stoic EntertainmentVR Game6 billionSeries AHanwha Investment Securities, KB Investment, SW Investment, ES Investor, Well to Sea Venture Investment

Major Funding

  •  H2, which produces redox flow batteries and energy storage systems (ESS), has completed a KRW 23 billion Series C investment. It has raised close to KRW 56.2 billion in total, the largest investment in a rechargeable battery startup. Redox flow batteries are a high-capacity rechargeable battery technology that are crucial to replace current fossil fuel power plants in order to support carbon neutrality. There is no fire risk, and it is easy to increase the capacity.
  • VR game developer STOIC Entertainment has raised KRW 6 billion and accelerated its global expansion. It launched World War Toons: Tank Arena VR in December. It will advance into the global B2C market in earnest and secure more than 90% of its sales overseas.

#Trend Analysis

Why are Startups Acquiring Other Startups?

In 2022, investment in startups has started to decline significantly. The M&A market, however, was busy throughout the year. Around 80% of all cases involved startups buying out other startups. Due to the decline in corporate value brought on by the deteriorating market, the acquisition cost was discovered to be lower than it was the previous year. Some startups explored disposal at a low value as a countermeasure against the economic downturn after failing to attract additional financing.

The so-called unicorns and preliminary unicorns took advantage of this opportunity by actively acquiring startups of the same kind to enhance their competitiveness or secure opportunities to grow their new businesses.

Some have acquired several startups at once for business expansion. Drama & Company, MyRealTrip, Korea Credit Data, and Fresheasy have absorbed multiple startups. This year, it was not unusual to witness instances of startups absorbing portions of mid-sized businesses or conglomerates. The acquisition of Samsung SDS’ Home IoT division by Zigbang is a representative example. Viva Republica also absorbed Merchant Korea and joined the MVNO market. Through its subsidiary, Interpark, Yanolja purchased the travel platform Triple and used the acquisition as an opportunity to expand.

Conglomerates, on the other hand, continued to invest in startups while taking a passive approach to purchasing them. Those who made active acquisitions in 2021, like Kakao and Naver, were hard to spot. The acquisition of 42dot by Hyundai Motor Company drew the most attention. Some in the industry said that 42dot, which was mentioned as a preliminary unicorn, was acquired at a low price due to the market downturn. In addition, Megastudy purchased ST Unitas, a company that aimed to become a preliminary unicorn in the education sector. TMON failed to be listed and was eventually sold to Q10 due to continued capital erosion.

Mergers and acquisitions can create new opportunities, but they can also be poisonous. Jeongyookgak had a cash flow problem after buying Chorocmaeul for KRW 90 billion. The company underwent restructuring by reducing its employees because additional follow-up investment was not made.

The business may benefit from mergers and acquisitions to expand and boost corporate value when liquidity provision is as active as it was last year. However, in the current scenario where investor confidence is continuing to deteriorate, a wise merger and acquisition strategy is required.

AcquirerTarget Company
Yanolja (Interpark)Dodo Point, Triple
Viva RepublicaMerchant Korea
ZigbangSamsung SDS Home IoT division
LifeGoesOnClean Nuri, Penguin House
Drama &, Liahnson & Company, Rookie Corp
MyRealTripStartrip, IwaTrip
Hyundai Motor Company42dot
FresheasyLine Logistics System, Heodak, Tasty9

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