Startup investments grow, but deal volumes decline

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The year-on-year increase in investment in South Korean startups showed a positive trend for the first time in 2023, but the number of investment deals declined, indicating a growing trend of investors concentrating their funds solely on the most promising startups amid economic uncertainty, according to data from Startup Alliance on Monday.

The data showed that investments in Korean startups in September 2023 totaled 717.8 billion won ($540 million), up 85.9 percent from a year ago. September was the first month this year where the monthly investment in Korean startups exceeded the previous year’s levels.

The year-to-date decline in investment in Korean startups was most pronounced in January, at -84.3 percent. Market instability also increased in the wake of the collapse of Silicon Valley Bank (SVB) in March, leading to continued negative growth in these types of investments.

Breaking down the investment figures for September, Toss Bank secured the highest investment with 285 billion won, followed by Story Protocol (71.2 billion won), PIECE PEACE STUDIO (50 billion won), Egnis (34.8 billion won), Sky Labs (27 billion won), BBODEK (18 billion won), dotmill (15.8 billion won), SaigeResearch (15.5 billion won), and Fine One (15 billion won).

Despite the increase in funding for certain startups, industry experts have expressed concerns about the decreasing number of investment deals. They argue that in times of economic uncertainty, investors are increasingly focused on companies with a higher likelihood of exit, resulting in investment that is concentrated on a select few startups. According to Startup Alliance, the number of startup investment deals in September was 105, which is 18 fewer than the same month last year when there were 123 deals.

“Persistently high-interest rates are causing a continued aversion to startup investment. As a result, the competition to identify the most promising startups is intensifying,” according to an official from a local venture capital (VC) company.