YEOSU -- South Korea’s startup ecosystem needs more initial public offerings and corporate acquisitions in venture capital-backed exit market for a more balanced and sustainable funding environment, a local startup ecosystem guru said on June 20.
Lim Jung-wook, managing director of Naver-backed startup advocacy group Startup Alliance, claimed that lackluster VC-backed exits either via IPOs, mergers and acquisition deals poses a hurdle to inviting more private money in an environment largely dominated by state-led funding.
The conference was hosted by Startup Alliance at Yeosu Expo Convention Center. It was attended by some 250-strong audience comprising venture investors, accelerators, entrepreneurs and academia.
Startup Alliance Managing Director Lim Jung-wook speaks at Startup Ecosystem Conference in Yeosu on June 20.
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Of the total 2.7 trillion won ($2.3 billion) value exited from startups in 2018 -- an all-time high -- the IPO value that exited from 145 startups accounted for 32.5 percent at 871.1 billion won, according to an estimate by the Korean Venture Capital Association. The M&A value that exit 25 startups merely took up 2.5 percent at 67 billion won.
Instead, VC exits via the secondary market -- selling existing shares to another investor -- accounted for more than half of the total.
“We see an abnormal setting in VC-backed exit market,” Lim said
The figures are comparable to that of the United States, according to Lim. Regarding US VCs, IPOs made up over half of the exit value totaling $122 billion for 2018, according to data by PitchBook-NVCA Venture Monitor. The US median exit size via IPOs came to $348.4 million, while the median via acquisitions or buyouts reached $105 million.
This came from the unprecedented venture funding boom he observed in the domestic startup ecosystem.
Lim said he has seen a recent upshot in large-scale funding rounds that gives birth to more unicorns, the Moon Jae-in administration-led policy support, a rise in entrepreneurship training programs, and more inter-startup M&As, among others.
Lim expected the total funding amount by the end of this year to cross the 5 trillion won mark.
This was part of the two-day conference.
On the first day, Legend Capital Managing Director Park Joon-sung discussed China as a spawning pool of unicorns. Bon Angels Partner & CEO Simon Kang discussed the growth potential of the startup ecosystem in Southeast Asian countries. Choson Exchange consultant Ian Bennett shared an update of its startup entrepreneurship education project in North Korea.
By Son Ji-hyoung (firstname.lastname@example.org)