Startup funding quickly drying up in Korea amid fast rises in interest rates

2022.06.15 14:05:03 | 2022.06.15 14:05:41

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South Korean startups fret drying in venture capital due to fast rises in interest rates.

Startups raised a total of 1 trillion won ($778 million) in funding last month, down 430 billion won from a month ago, according to data compiled by Maeil Business Newspaper and startup financial data tracker The VC.

The figures nearly halved from two months ago and lost 53 percent from a year earlier. Monthly investment fell from the previous year for the first time in 12 months.

Companies that invested in venture capital funds are shifting their focus to increase investment in bonds to change their investment strategies amid faster rises in interest rates.

An investment company for IT sector affiliated to one of Korea’s top 3 business groups has been studying startups it has eyed for investment in the fields of blockchain, non-fungible token and agricultural technology for troubles in future fund-raising rounds.

“We’ve found that there’s no serious risk factor for now but are closely watching the market situation amid fast changing investment environment,” said an official from the company.

Softbank Group founder and chief Masayoshi Son also hinted that the group could cut its spending for startups by 50-75 percent this year during the earnings release event last month.

“Capital is likely to turn conservative for now, with funding focused on those with actual achievements, said Ko Young-ha, chairman of the Korea Business Angels Association.

Some startups have already taken actions to change their strategies for survival.

“Startup boom lost steam first in Silicon Valley, and the mood is spreading to the Korean market. Companies are fast changing business strategies,” said Park Ik-soo, CEO of AI-based fashion e-commerce startup Imemine.

By Jin Young-tae, Hwang Soon-min, Kim Dae-eun and Lee Ha-yeon

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]