Key Takeaways
- • Annual fundraising by domestic venture capital and private equity funds rose more than threefold to 42.1 trillion won last year, from 12.8 trillion won in 2015, according to the Financial Supervisory Service.
- • Annual IPOs, the main exit route, were roughly flat at 76 versus 73 in 2015, creating a bottleneck that industry participants say threatens the recycling of capital.
- • Off-market share sales and IPOs together account for about 85% of venture investment exits in Korea, per the Korea Venture Capital Association.
- • Korea Growth Investment Corp.'s Kim Hee-jin proposed expanding secondary transactions in limited partner (LP) stakes as a way to diversify exit routes.
- • Securities firms plan to invest 1 trillion won in the exit market over three years, with the country's largest brokerages reportedly buying stakes in aging venture funds.
Summary
Speakers at a policy seminar on revitalizing the venture exit market through the securities industry, held at the Korea Financial Investment Association in Yeouido on October 8, argued that Korea must diversify its venture capital exit routes, including through secondary sales of limited partner stakes. The discussion centered on a structural imbalance: capital raised by venture and private equity funds has expanded sharply, but exits have not kept pace.
According to the Financial Supervisory Service, annual fundraising by domestic VC and PE funds rose more than threefold to 42.1 trillion won last year, from 12.8 trillion won in 2015. Over the same period, the number of IPOs was little changed, at 76 compared with 73. The Korea Venture Capital Association estimates that off-market share sales and IPOs together account for about 85% of venture investment exits in Korea, leaving the market heavily dependent on a single route.
Kim Hee-jin, head of the industrial finance team at Korea Growth Investment Corp., warned that the volume of funds reaching maturity is set to surge. She pointed to the National Growth Fund and the obligation of comprehensive financial investment business operators to expand the supply of venture capital as drivers of that growth. "By contrast, Korea's exit market is heavily skewed toward IPOs, raising the risk of delayed exits," she said. To address the bottleneck, Kim proposed expanding secondary transactions in LP stakes, which would give existing investors liquidity before portfolio companies reach public markets.
Separately reported details indicate that Korea's securities firms plan to invest 1 trillion won in the exit market over three years, with the country's largest fifteen brokerages reportedly committing close to that amount to purchase stakes in aging venture funds ahead of portfolio exits. The seminar framed such commitments as a means of restoring a virtuous cycle in which exited capital is returned to LPs and redeployed into new ventures.
According to the Financial Supervisory Service, annual fundraising by domestic VC and PE funds rose more than threefold to 42.1 trillion won last year, from 12.8 trillion won in 2015. Over the same period, the number of IPOs was little changed, at 76 compared with 73. The Korea Venture Capital Association estimates that off-market share sales and IPOs together account for about 85% of venture investment exits in Korea, leaving the market heavily dependent on a single route.
Kim Hee-jin, head of the industrial finance team at Korea Growth Investment Corp., warned that the volume of funds reaching maturity is set to surge. She pointed to the National Growth Fund and the obligation of comprehensive financial investment business operators to expand the supply of venture capital as drivers of that growth. "By contrast, Korea's exit market is heavily skewed toward IPOs, raising the risk of delayed exits," she said. To address the bottleneck, Kim proposed expanding secondary transactions in LP stakes, which would give existing investors liquidity before portfolio companies reach public markets.
Separately reported details indicate that Korea's securities firms plan to invest 1 trillion won in the exit market over three years, with the country's largest fifteen brokerages reportedly committing close to that amount to purchase stakes in aging venture funds ahead of portfolio exits. The seminar framed such commitments as a means of restoring a virtuous cycle in which exited capital is returned to LPs and redeployed into new ventures.
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