Sometimes the end of the road is selling the farm

The two options for start-ups running low on money are to cut costs and try to keep going or merge with another company. "Our company has been running out of capital after failing at the Series D funding round," Choi Hyeok-jae, CEO of Spoon Radio ..

Viva Republica, the operator of the financial platform Toss, acquired mobility start-up Tada last year. [YONHAP]

The two options for start-ups running low on money are to cut costs and try to keep going or merge with another company.

“Our company has been running out of capital after failing at the Series D funding round,” Choi Hyeok-jae, CEO of Spoon Radio wrote on Facebook in June.

“I had to lay off some workers and freeze salaries of major employees due to a cash flow shortage even after reducing marketing costs.”

Keeping going is only possible when some money is left, or additional investments are possible.

Sometimes selling the company is the only way.

Streaming service company Watcha is one start-up facing this dilemma. There has been speculation that the company may be up for sale as it failed to get investment or to go public.

The local press has reported that shareholders of Watcha have been looking for buyers for their stock and that up to 80 percent of the shares may be up for sale. The streaming business has been struggling with weakening demand and pressure from foreign competitors and investments have dried up this year.

It is expected the company's value has fallen a lot from the 300 billion won ($212.5 million) level it reached in 2020.

“The company’s value was 338 billion won last year, but a decline in value is inevitable considering its difficulties in business operations,” said a spokesperson for a venture capital firm.

Onul-siktak, a start-up that operates Onul-hoi, a one-day seafood delivery service, has also halted its business and getting ready to sell its company. The company’s sales grew rapidly from 1 billion won in 2018 to 2.1 billion won in 2019 and 13.5 billion won in 2020. Last year, the company landed funding of 12 billion won in the Series B round but it has gone through financing difficulties since.

Other start-ups are actively seeking mergers with fellow start-ups.

A total of 79 start-up companies merged or were acquired by other companies from January to July this year, according to Startup Alliance, a non-profit support center for start-ups. Among the 79, about half of them were merged with or acquired by other start-ups.

Drama&company, which operates a business networking mobile app called Remember, recently acquired Jasoseol.com, a popular job post website with around 800,000 users. Jasoseol.com is a website used by 70 percent of students at the top 20 universities in Korea. It offers job information for large and public companies.

XYZ, a service robot start-up, acquired an autonomous robot start-up called Cobot and Ambitionem, known for its coffee brand Ouya. Ambitionem is also known for getting funding from the start-up accelerator Krypton.

Jobis & Villains, which operates tax-calculating mobile app 3.3%, acquired the mobile app Howmuch, which calculates paychecks of part-time workers and a video call app Smoothy in the first half. Viva Republica, the operator of the financial platform Toss, acquired mobility start-up Tada last year.

“Acquiring start-ups in similar fields can be a shortcut for companies to expand and become No.1 in their industry,” said a spokesperson for venture capital firm.

“Investments in start-ups are shrinking lately so the current trend of M&As is likely to continue.”

BY HWANG JEONG-IL [cho.jungwoo1@joongang.co.kr]