South Korea Venture Capital Landscape 2022

Our perspective on one of Asia’s most exciting technology ecosystems, including the latest funding data and perspectives from some of South Korea’s leading VCs.

For those that have followed the tech ecosystem in South Korea, it is obvious that the country is having its moment in the limelight as a regional startup powerhouse. South Korea is one of the most innovative countries in the world, has one of the highest percentages of smartphone ownership globally, and one of the largest e-commerce markets — fuelling the consistent creation of new innovative technology companies.

In this updated edition of our report, we share our continued excitement for the South Korean technology and venture capital ecosystem. With more global investors turning their attention to Korean startups today, we’re excited to continue strengthening our presence in the country.

Key highlights:

• South Korea now attracts the third largest amount of VC funding in Asia each year ($6.45bn), behind only the more populous countries of China and India.
• The country has produced 16 unicorns to date, with 11 of these emerging since 2019, placing South Korea fourth in terms of unicorn output behind China (210), India (72), and Singapore (17).
• Exit performance has been strong too. There have been 309 IPOs and 242 M&A exits since 2012. Overall, South Korea has contributed a 12% share of Asia’s startup exits.
• South Korean startups are going global. Coupang’s NYSE IPO marks a turning point where many more startups will increasingly focus on expanding beyond the local market.

VC funding summary

VC as an asset class has truly stepped into the limelight in South Korea since 2014, with local startups such as Coupang leading the charge in attracting large amounts of VC funding. Like many markets, 2021 was a record year for technology investment in South Korea with almost 2,500 deals at a combined value of $6.45bn.

The median deal size has climbed steadily in the last 10 years at a rate of 12.5% compounded annually and now stands at $4.7m as of H1 2022. Interestingly, despite a contraction in other technology ecosystems, median deal size doesn’t seem to be slowing this year in South Korea. Median Series A investments are up from $4.5m in 2021 to $5m in 2022, and Series B median deal size has similarly jumped from $12.8m to $15.6m. The ecosystem is clearly showing resilience against the backdrop of tough macro conditions, and while time will tell if H2 shows a slowdown in funding activity, we’re confident South Korean startups will continue to offer an incredible opportunity for both local and international investors.

Innovation has attracted international investors

South Korea now boasts several ecosystem champions. The likes of Yanolja, Toss, and Kurly, have all raised large amounts of capital, with the three of them collectively raising over $3bn since 2019.

This strengthening ecosystem has caught the attention of global investors. Large international VC firms, including Sequoia, Altos, and SoftBank have all committed capital to the likes of Coupang, Toss, and Hyperconnect, some of which have already provided great outcomes for their backers.

While these are undoubtedly incredible stories for the South Korean market, we recognize that Korea’s key strengths have been in consistently producing multi-billion-dollar technology companies over the years, long before the startup scene became as closely integrated into the global capital markets as it is today.

Government initiatives and local ecosystem

The ecosystem is continuing to grow and is benefitting from progressive policymaking produced by the Ministry of SME and Startups. The South Korean government is helping to foster innovation through SME-focused organizations, funding from KVIC, and local fund of funds. Angel activity is also gradually returning two decades after the height of the dot-com boom thanks to tax benefits introduced by the government.

We have been actively investing in South Korea since 2020 and believe strongly in the country’s continued success. We have backed the extraordinary teams at Swing and Himedi, and are keen to double down on our presence in South Korea. The future certainly looks bright for the South Korean technology ecosystem and we look forward to watching its continued growth over the next 12 months.

For more details and analysis from us and other local Korean VCs, you can view and download a copy of the report here.

White Star Capital is a global technology investment firm partnering with exceptional entrepreneurs who are building the iconic companies of tomorrow. With offices in North America, Europe, and Asia, our presence, perspective and deep operational expertise enables us to partner with founders to help them scale globally from Series A onwards.

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