"I am the Leading Listed Venture Capital"

LB Investment Settles in KOSDAQ... Rises to 6th in VC Market Cap
Ranking Shake-up Expected Based on Portfolio Company Performance

Venture capital (VC) firm LB Investment has successfully settled in the KOSDAQ market, sparking increased interest in listed VCs. In particular, attention is focused on the possibility of a change in the leading VC stock.

According to the Korea Exchange on the 6th, LB Investment failed to achieve a 'ttasang' (opening price formed at twice the public offering price followed by hitting the upper limit) on its first day of listing on KOSDAQ on the 29th of last month, but succeeded in reaching the upper limit. It closed at 8,450 KRW, recording a price 65.7% higher than the public offering price of 5,100 KRW. Since then, it has steadily maintained a level around the 8,000 KRW range.

LB Investment, a venture capital company registered with the Ministry of SMEs and Startups, has invested in 547 promising domestic and international companies over 27 years, facilitating mergers and acquisitions (M&A) and initial public offerings (IPO) for 111 companies. It is regarded as a unicorn manufacturer, having nurtured more than 10 unicorn companies including HYBE, Pearl Abyss, and Kakao Games. The cumulative investment scale is 1.7 trillion KRW, and based on stable fund management capabilities, its assets under management (AUM) have grown to about 1.2 trillion KRW.

As of the previous day's closing, LB Investment's market capitalization was 175.1 billion KRW. This far surpasses the market caps of existing listed VCs such as DSC Investment (115.8 billion KRW) and Lindeman Asia (103.5 billion KRW). Based on market capitalization, it ranks sixth among listed VCs, following Woori Technology Investment (387.7 billion KRW), Mirae Asset Venture Investment (315.8 billion KRW), Daol Investment (Woori Venture Partners) (289 billion KRW), AJU IB Investment (284.5 billion KRW), and SBI Investment (180.1 billion KRW).

The industry expects a significant shake-up in the rankings of listed VCs. This is because the business conditions fluctuate more severely compared to other industries. Being a representative 'high risk, high return' sector, it is said that predicting even a short distance ahead is difficult.

The revenue structure of VCs differs from that of general companies. They generate profits mainly through funds, including blind funds that invest in multiple companies and project funds that invest in specific companies. There are also different types of operating revenue (sales) generated through funds. Representative examples include 'management fees' earned from fund operations and 'performance fees' received on the excess returns beyond the internal rate of return (IRR) at fund liquidation. Additionally, there is equity-method income or loss recognized in accounting based on the shareholding ratio in invested companies.

In short, the stock price is evaluated based on the performance of the invested companies. Recently, most VCs have received disappointing results due to the global tightening. The valuations of startups invested in the past have plummeted, failing to produce the same performance as before. The path to listing for invested companies has also been blocked, making exits (investment recovery) difficult.

Woori Technology Investment, the leading stock, is a representative example. It recorded an operating loss of 430.9 billion KRW last year, the worst operating loss in the history of the VC industry. Sales dropped 96% year-on-year to 35.4 billion KRW. This contrasts sharply with the 824.2 billion KRW in sales and 792.6 billion KRW in operating profit recorded in 2021. The atmosphere changed drastically in just one year.

This background involves Dunamu, the operator of the cryptocurrency exchange Upbit. Woori Technology Investment holds 2,510,282 shares (7.24% stake) of Dunamu. As of 2021, Dunamu's valuation was in the 800 billion KRW range. The VC investment enthusiasm for Dunamu was intense but did not last long. Its current valuation has dropped to the 300 billion KRW range.

Not only Woori Technology Investment but many VCs have seen their performance decline. SBI Investment recorded an operating loss of 15 billion KRW last year, turning to a deficit for the first time in 10 years since 2012. Sales also decreased by 56% year-on-year to 16.9 billion KRW. Despite being a traditional VC established in 1986, it could not avoid the downturn.

Woori Venture Partners, formerly Daol Investment under Woori Financial Group, also saw sales and operating profit drop by 60% and 80%, respectively, last year. Company K Partners experienced a 42% decrease in sales and a 70% decrease in operating profit. Additionally, Lindeman Asia Investment, Now IB Capital, Stonebridge Ventures, Mirae Asset Venture Investment, and Daesung Startup Investment also saw sales decline by about 20-30%.

Conversely, some asset managers that performed well in investments have attracted attention. DSC Investment, led by Yoon Geon-su, chairman of the Korea Venture Capital Association, recorded sales of 33.8 billion KRW and operating profit of 18.8 billion KRW last year, growing 9% and 13% year-on-year, respectively. TS Investment also recorded sales of 27.3 billion KRW last year, a 22% increase from the previous year. They received favorable results through active recent exits.

Meanwhile, attention is focused on LB Investment, which has joined the ranks of listed VCs. It currently holds a next unicorn portfolio by investing in Musinsa, Kurly, Ably, Musicow, and others. Although it invested 11.7 billion KRW and 3 billion KRW in Musinsa and Kurly respectively, it has not yet recovered the investment funds but plans to explore various methods. Expectations are rising as it plans to further expand its assets under management (AUM) through the public offering funds secured this time.

There are also VCs planning to go public. HB Investment is pursuing a KOSDAQ listing through a merger with a special purpose acquisition company (SPAC). If HB Investment succeeds in listing, it will be the first case of a venture capital going public via a SPAC. It filed for a preliminary review for listing with the Korea Exchange in October last year, and the review is currently underway. After the exchange's review is completed, a shareholders' meeting will be held to obtain shareholder approval for the merger listing, and it is scheduled to be listed on the KOSDAQ market in July.

An industry insider said, "Since the listing of LB Investment, the market is re-evaluating VCs," adding, "They are being recognized as an attractive industry for investment." He further added, "Because it is an industry with many variables, newly listed VCs on the KOSDAQ market may surpass existing listed VCs."

This content was produced with the assistance of AI translation services.