[StartupRecipe] Why are Startups Acquiring Other Startups?

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#Weekly Funding Overview

[Jan. 2 ~ Jan. 6]

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

Company	Industry	Amount	Round	Investors
Moth	Marine startup	-	Seed	CNTTech
Middle studio	Beauty	400 million	Pre-Series A	Wishcompany, Krypton
VISIT	VR Space	-	Seed	CNTTech
Fashionaide	Styletech	-	Seed	Hanyang university Holdings
InteriorTeacher	Interior	3.6 billion	Series A bridge	Hana Ventures, Strong Ventures, BSK Investment
H2	ESS	23 billion	Series C	The Turning Point, Envisioning partners, SKS PE, KT&G, Shinhan Asset Management, Hana Securities, POSCO
Netogreen	Smart farm	300 million	Seed	Korea Investment Accelerator
Gosu plus	housing rental	1 billion	Pre-Series A	Honest Ventures, Comax Ventures,GongMyeong Partners
Munice	Sleeptech	-	Pre-Series A	BluePoint Partners, Translink Investment, Digital Healthcare Partners
Anipen	Metaverse	5 billion	Series B	The Wells Investment, Clairvoyant Ventures
Gloud	Digital Healthcare	-	Seed	Choi& LEE
Candy	Fintech	-	Seed	ENSL Partners
GELATO LAB	Nail brand	-	M&A	Glugga
GOUGOI	Game	500 million	Seed	Enliple
IESG	ESG Software	-	Seed	Spring Camp
GBSOFT	Security	4 billion	Series A	HB Investment, KB-Soliders Healthcare Investment, Comes Investment
The Grimm Entertainment.	Webtoon	14 billion		Korea Investment Partners, Naver Webtoon, KODIT, Innopolis
Vitealth	Sleeptech	-	M&A	3BOON1
Postlabs	Price Searching	-	Seed	Bass InvestmentThe Ventures, Aurora Investment. Data solution, Aurora Investment
Foryou Auto Service	Mobility	-	M&A	Carang
ENERZAi	Edge AI	3 billion	Series A	Korea Investment Partners, Ascendo Ventures, Spring Camp
Horizon technology	Fintech	-	Pre-Series A	Plug& Play
Working Cow	Kiosk	-		Seoul National University
Silvia Health	Age tech	-	Pre-Series A	Klim ventures, D3 Jubilee Partners, DSC Investment, KB Investment
Business Canvas	Collaboration tool	5 billion	Series A2	Sui Generis Partners, Shinhan Venture Investment, Infobank, Kakao Ventures, Shinhan Capital
Medir	Healthcare	-	Pre-Series A	IMM Investment, KT Investment, 500 Global
Stoic Entertainment	VR Game	6 billion	Series A	Hanwha 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.

Acquirer	Target Company
Kurly	Plannery
Yanolja (Interpark)	Dodo Point, Triple
Viva Republica	Merchant Korea
Zigbang	Samsung SDS Home IoT division
Brandi	D-Unit
LifeGoesOn	Clean Nuri, Penguin House
Drama & Company	Jasoseol.com, Liahnson & Company, Rookie Corp
MyRealTrip	Startrip, IwaTrip
Hyundai Motor Company	42dot
Fresheasy	Line Logistics System, Heodak, Tasty9