HONG KONG: South Korean start-ups are attracting record levels of cash from private investors, leading to the number of "unicorns" in the country doubling over the past three years and setting the stage for more blockbuster stock listings like Coupang.
Just this week Kurly, which operates online grocery service Market Kurly, announced it raised 250 billion won (US$209.88 million) from Anchor Equity Partners as it concluded its investment rounds prior to an initial public offering (IPO), giving it a valuation of 4 trillion won.
Kurly, one of South Korea's at least 15 unicorns, or start-ups valued at more than US$1 billion, said it aims to advance its listing schedule and targets an IPO in the first half of 2022.
Seoul's bustling IPO market, among the most active in the world this year, and high-profile deals such as e-commerce company Coupang's US$4.6 billion US listing in March, are prompting investors to lock in private funding earlier than in the past.
"The interest in Korean unicorns has taken off this year, and not only in terms of fundraising," said David Chung, head of investment banking at Goldman Sachs in Korea.
"Many more businesses maturing and gaining momentum at a faster rate are facts which are getting more global notice following the marked success of the trailblazers in 2021."
While bigger markets such as China and India boast a higher number of unicorns, it is the pace of investment in the Korean start-ups that has caught regional capital markets bankers by surprise and prompted investment banks to start targeting firms as potential IPO candidates.
Venture capital investments in South Korea in the third quarter were estimated at 2.07 trillion won, the biggest quarterly figure since data collection began in 1986 and a two-thirds jump over the year-ago period, according to data from the ministry for small- and medium-sized enterprises and start-ups.
That took total venture capital investment in start-ups to a record 5.26 trillion won in 2021, eclipsing the previous high of 4.30 trillion in 2020.
The number is even bigger when all forms of private placements are combined, with South Korean companies having raised about US$11.04 billion globally so far this year compared to US$9.4 billion for whole of last year, Dealogic data showed.
The investments are expected to continue apace in 2022.
Ahead of a likely IPO, SK Innovation's wholly owned battery subsidiary SK On plans to raise about 3 trillion won in a private placement, according to two sources with knowledge of the matter.
SK On said it was "reviewing various strategic measures to secure financial stability and raise funds for investment for new businesses," adding no specific decisions had been made.
Two-thirds of the South Korean unicorns are in the so-called platform businesses, including Viva Republica, Wemakeprice, Musinsa and Market Kurly, and that is where the bulk of the investor interest is expected in future.
"A paradigm shift is happening. The focus on platform business is huge and there's a tilt towards 'new economy'-related businesses ... after investors tasted success in deals like Coupang," said Ahn Sung-woo, president of the private equity department at Mirae Asset Global Investments.