Blurring lines between accelerators and VCs with record fundings

Sopoong Ventures Corp. is poised to create a fund worth 10 billion won ($8 million) that specializes in early stage investment, industry insiders said. 

Accelerators typically provide a lower amount of investment than venture capital firms. Taking that into consideration, the market view is that the 10 billion won funding size is unusually high. 

Only two other South Korean accelerators have created funds worth 10 billion won or more; namely FuturePlay founded by the prestigious KAIST (Korea Advanced Institute of Science and Technology) graduates and Bluepoint Partners, also headed by a KAIST graduate. 

Last year, Sopoong Ventures created three new funds and grew its AUM (assets under management) to roughly 10 billion won. This year starts with a bang for Sopoong, with the first funding round by itself projected to be worth 10 billion won. 

AUM refers to the total market value of the assets a company manages at a given point in time. The figure is inclusive of the returns a fund has made on its investment and the capital it has at disposal to make new investments.

Sopoong is not alone in the rapid growth of its funds. 

Bluepoint Partners’ new investment amount for 2020 stood at 8.5 billion won. Last year, the figure jumped 2.5 fold to 20.9 billion won. 

The total corporate value of its invested companies stood at 1.5 trillion won, which doubled to 3.2 trillion last year. 

FuturePlay also saw its AUM exceed the 100 billion won mark, more than double that of the yera prior. The total corporate value of invested companies surged 83% on-year to 3.3 trillion won in 2021.

Not surprisingly, the amount of investment per project also rose significantly to exceed 1 billion won, which used to hover around tens of millions. 

For instance, FuturePlay invested 1.8 billion won in a mobility startup and 1.5 billion won in a healthcare startup so far this year. 

Sopoong Ventures invested an average of 90 million won per project in 2020 but increased that figure to 1.7 trillion won last year. 

Another expansion for the accelerators is that they have begun funding past Series A – diverting from the convention of focusing their interests in Seed to Pre-Series A stages. 

The rapid expansion of accelerators’ funding comes on the back of the bullish market sentiment in the startup scene. Total new investment in startups recorded 7.7 trillion won last year, hitting record highs for two years straight. 

Startup Alliance Korea said last year’s 548 new investments each amounted to less than a billion won, excluding the ones whose amount remain undisclosed. 

“Looking at the investment amount, funding for early stage startups is so active that it almost blurs the line between an accelerator and a VC,” an industry insider told The Korea Economic Daily. 

Industry insiders say early stage startups desperately need managerial assistance, which increases the value of accelerators that provide such support.

Accelerators often provide customized assistance such as mentorship, legal counsel, and demo day to invested companies, in addition to the financial support. They also work with conglomerates in discovering and jointly investing in new startups. 

An industry insider said, “Startups at the very early stage, say a team of three or five people, have high demand for accelerators to help them from the onset of incorporation.”

“While accelerators in the past focused their efforts on individual advice to startups, the widespread perception now is that accelerator heavyweights provide systematic assistance rather than personal anecdotes,” the expert added. 

On the back of the rise in the accelerators’ financial clout, some are slated to go public. 

FuturePlay and Bluepoint Partners are looking to get listed on Kosdaq this year. A lesser known accelerator named CNTTech is expected to follow suit. 

Write to Jong-Woo Kim at jongwoo@hankyung.com
Jee Abbey Lee edited this article.