South Korean VCs in search of better returns abroad

South Korean venture capitalists’ appetite for foreign entrepreneurs shows no sign of waning as they continue to look for better returns overseas to more than offset the economic slowdown at home.

According to the Korean VC industry on Tuesday, IMM Investment Corp., a Seoul-based alternative investment firm with 7.70 trillion won ($5.6 billion) worth of assets under management, formed a joint fund worth $100 million with Shorooq Partners, a United Arab Emirates-based alternative investor, in May.

This is not the first time that the Korean investment firm has launched funds abroad. It introduced funds in Japan last year and India in the first half of this year.

The Korean investor has indicated it is open to launching more funds with foreign capital that can invest in overseas companies as it has demanded the Korean government amend a related capital law that requires at least 20% of a foreign country-dedicated fund formed by a Korean investor to be allocated to firms at home.

In May, LB Investment Inc., formerly known as LG Group’s venture capital arm, also set up a joint venture with the AIM Global Foundation based in the UAE to invest in Korean startups.

They plan to form a venture fund worth up to $1 billion after attracting investment from limited partners in the UAE. LB Investment will manage the fund.  

Kosdaq-listed SV Investment Corp. is in talks with East Ventures, Indonesia’s first VC, to launch a joint fund worth up to $100 million.

PROLONGED ECONOMIC SLOWDOWN

Korean venture capitalists are actively seeking attractive investment assets overseas for a breakthrough without a sign of recovery in their home country’s economy.

Amid lingering uncertainties about the global economic slowdown despite monetary easing moves, most venture capitalists also want to invest in entrepreneurs with proven technology to generate profit sooner, said analysts. 

Some Korean VCs that have already ventured into foreign markets have had proven track records of handsome profits from their previous offshore investments, attracting more Korean VCs to partnerships with foreign counterparts.

Big local financiers such as fund of funds operators and state-run policy bank Korea Development Bank are especially credited for providing local VCs a springboard for global advancement.

Venture capitalists under Korea’s top four financial groups and corporate venture companies have also jumped on the bandwagon.

DIRECT INVESTMENT IN OFFSHORE STARTUPS

Against the backdrop, more Korean VCs are seeking to make direct investments in foreign startups for better returns.

In September, tech-focused venture capital SBVA, formerly SoftBank Ventures Asia set up in Korea, invested in You.com, a US startup operating an artificial intelligence-powered search platform, during the latter’s $50 million Series B funding round.

The funding was also participated by Georgian, Salesforce Ventures, Nvidia and many others.

In August, Korean conglomerates SK Networks Co., LG Electronics Inc. and Hanwha Group joined with SoftBank to contribute to SBVA’s $130 million fund, dubbed Alpha Intelligence, formed to invest in AI startups.

Hashed Inc., specializing in blockchain and Web3 technology investment, joined Singapore-based Backpack’s $17 million Series A funding round in March. Backpack is a Solana-based blockchain company.

It also joined hands with Andreessen Horowitz (a16z), a leading US VC based in California, to lead a $54 million funding round for Story Protocol Inc.

Write to Joo-Wan Kim at kjwan@hankyung.com

Sookyung Seo edited this article.