Thu. Nov 24th, 2022

The “investment ice age” has come to the venture industry. This is because investors such as venture capital (VC) and private equity funds (PE) have become cautious about investing as the financial cost burden increases due to high interest rates. Venture companies are moving offices to places with low rents or restructuring such as manpower reduction to survive the severe investment period. However, as interest rate hikes continue for the time being, the venture industry’s “money hardening” is widely expected to continue for a while.

Start-up ‘money vein hardening’ gets worse

According to Startup Alliance, a public-private cooperation network for domestic startups, the amount of investment attraction by domestic startups fell to less than 500 billion won for the first time this year in September. Startup investment attraction in September was 381.6 billion won, down 246.9 billion won (39%) from the same period last year. Compared to August, the previous month, it shrank by 481.2 billion won (56%).

In particular, medium- and large-scale investments have declined rapidly. Investments worth more than 30 billion won plunged from 7 in August to 1 last month, and investments worth more than 10 billion won were only 17. On the other hand, 25 investments worth more than 1 billion won, 80 investments worth less than 1 billion won, and private investments accounted for the majority of the investment. In other words, most of the amount of investment attracted by startups was concentrated on initial investment.

The main reason for the frozen venture investment market is an interest rate hike caused by inflation. Analysts say that liquidity in the financial market has decreased as interest rate hikes continue around the world, and investors have increased their investment burden.

“International liquidity has decreased as interest rates have been raised in the U.S. in earnest, and investors have begun to see profitability rather than growth,” said Kang Jae-won, head of the start-up venture research department at the Small and Medium Venture Research Institute.

Leave a Reply