"14.4 Years to IPO... 'Exit Routes Must Be Diversified, Including the Secondary Market'"

Oct. 8 seminar at KOFIA on revitalizing the venture exit market
South Korea’s exits skewed toward IPOs... “Need to broaden investors’ options”
Industry officials and experts call for expanding secondary transactions

Industry officials and experts have called for diversifying the venture investment exit market, which is centered on initial public offerings (IPOs), including by expanding the secondary market for sales of existing shares.

Participants pose for a commemorative photo at the "Policy Seminar on Revitalizing the Venture Exit Market with the Securities Industry at Its Center," held at the Korea Financial Investment Association in Yeouido, Seoul, on the 8th. Photo by Hwang Seoyul, chestnut@

At the “Policy Seminar on Revitalizing the Venture Exit Market with a Focus on the Securities Industry,” held on October 8 at the headquarters of the Korea Financial Investment Association in Yeouido, Seoul, Lim Byungtae, a department head at the association, gave a presentation and said, “It takes South Korean startups an average of 14.4 years to go from founding to an IPO, about twice as long as in the United States.” He emphasized, “In this respect, secondary investments are important because they provide an interim exit route through which existing investors can recover their capital.” Secondary investments involve purchasing stakes held by existing investors.

Exit routes for domestic venture investments are heavily concentrated in IPOs. At the end of last year, IPOs accounted for 30.6% of all exit methods in South Korea, compared with just 22.6% in Europe and 5.4% in the United States. Lim said, “Revitalizing the secondary market is meaningful not as a replacement for existing IPOs or mergers and acquisitions (M&A), but as a way to complement existing markets and broaden investors’ options.”

Another presenter, Kim Heejin, a team leader at Korea Growth Investment Corporation, emphasized in particular the need for secondary sales of limited partner (LP) stakes. Kim said, “In a secondary sale of existing shares, the general partner (GP) carries out the transaction, whereas in a secondary sale of LP stakes, an LP in a fund sells its entire stake in that fund.” She added, “For LPs, an advantage of secondary sales of LP stakes is that they can secure liquidity immediately by selling their entire committed stake.”

Park Yongrin, senior research fellow at the Korea Capital Market Institute, speaks while chairing the policy seminar “Revitalizing the Venture Capital Exit Market with the Securities Industry at Its Core,” held at the Korea Financial Investment Association in Yeouido, Seoul, on the 8th. Photo by Hwang Seoyul

During the discussion that followed, representatives from the securities and venture capital (VC) industries also expressed support for diversifying exit routes, including by revitalizing the secondary market. Lee Geunchang, an executive director at Meta Invest, said, “Speaking from the perspective of an investment manager specializing in LP secondary investments, a company’s growth period may not always align with a fund’s maturity or the investment period desired by its LPs.” He added, “It is not necessarily the best option to sell assets in a hurry simply because existing LPs need liquidity.”

Lee continued, “When a decision is made to invest in a company, the GP that first invested in it is likely to know the company best.” He added, “If the LP stake itself can be transferred to a new investor without undermining the existing GP’s growth strategy, this can give the company time to grow while providing the GP with liquidity.”

Some also argued that regulatory easing is needed for the secondary market to expand in a meaningful way. Jang Myeongsu, a department head at Korea Investment & Securities, said, “Just as banks receive relief from risk-weighted assets (RW) when investing in the National Growth Fund, I believe the financial investment industry needs consistent regulatory principles that ease the net capital ratio (NCR) risk charge when investing in secondary assets or venture funds.” Jang added, “In transactions involving unlisted structures or LP stakes, sellers and buyers often have very different price expectations. I believe substantive transactions will take place only if standard fair-value assessment guidelines are also established to narrow that gap.”

Meanwhile, Hwang Seongyeop, chairman of the Korea Financial Investment Association, said in a video address at the opening, “Diversifying venture investment exit routes, which are concentrated in IPOs, and expanding the secondary market to facilitate transactions are important tasks.” He added, “I hope today’s discussion will mark the beginning of a virtuous cycle of risk capital in the capital market, while providing venture companies with opportunities to grow and investors with a wider range of exit routes.”

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