Korea’s Q1 venture investment down 60% on financial market uncertainties

[Images sources: MK DB, Gettyimagesbank]

Venture investment in South Korea has plummeted 60.3 percent on-year during the first quarter of this year, government data showed on Monday, on what is believed to be due to the fallout from the bankruptcy of Silicon Valley Bank and the overall uncertainty in the global financial market.

The country’s venture investment in the January-March period amounted to 881.5 billion won ($668.1 million), according to the data from the Ministry of SMEs and Startups. The ministry attributed the decline to factors such as a slowdown in the real economy, increased cost of capital due to high interest rates and the expansion of financial market uncertainties.

However, despite the significant decline in venture investment, South Korea fared relatively better than the U.S. and Israel, both of which saw a much larger decrease during the same period. In the U.S., such investment fell by 55.1 percent, while in Israel dropped by 73.6 percent. Excluding two mega-deals, including a $1 trillion investment in OpenAI’s ChatGPT, the U.S. experienced a decline of 75.1 percent.

By sector, ICT services recorded 198.6 billion won in venture investment in the first quarter, down 74.2 percent compared with a year ago. Healthcare investment fell by 63.3 percent to 152 billion, and retail and other service investment declined by 77.5 percent to 102.8 billion won. The only sector that saw an increase was the video, entertainment and music industry, which recorded an 8.5 percent rise to 110.2 billion won. This was due to the sustained increase in demand for K-content.

There was a significant difference in the investment volume received by companies based on their business history. Companies that have been in business for over three years and less than seven saw the most significant decline in venture investment. The amount in the first quarter was 294.8 billion won, down 71.7 percent from a year ago’s 1.02 trillion won.

During the first quarter of this year, the amount of venture capital raised totaled 569.6 billion won, down 78.6 percent from a year ago. In the U.S., the corresponding figure declined by 84.1 percent.