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Venture capitalists are keen on SaaS providers Vertical service providers dominated South Korea’s venture business ecosystem, in a study of the country’s early stage startups by the Korea Economic Daily. A vertical service provider offers specialized infotech products, services, and solutions in a particular business vertical. Logo of Hankyung Geeks The paper’s startup media arm Hankyung Geeks received data on fundraising by 418 early stage startups between April 2021 and this March from venture capital information platform TheVC. The 418 startups were in Series A or the first significant round of venture capital financing. The name comes from the class of preferred stock sold to investors in exchange for their capital.The startups received a total of 3.5 trillion won ($2.8 billion) from 581 investors. Venture capitalists were the most interested in software as a service (SaaS) and logistics automation solutions. In the United States, 80% of unicorns are in B2B SaaS business. Experts say the next big thing in South Korea will also come from the sector. Team collaboration tools such as the ones that encompass both corporate messenger and document functions are forecast to be continued to be popular investments. In retail, curated online shopping platforms that accurately meet the needs of niche markets received investments. Platforms that offer legal or accounting services are also seen as promising products that change how such professional services are offered. Foodtech and special effects creators for adoption in gaming and metaverse spaces saw rise in valuation as well.WHERE FUTURE UNICORNS AREHankyung Geeks categorized the startups that succeeded in fundraising into eight sectors. In particular, startups in the information and communication technology accounted for 35% of the early stage startups that received the 3.5 trillion won investment during the 12 months.Below are the categories: 1. Curated shopping experienceMore South Koreans are switching over to curated online shopping malls, which target specific demographic and styles, from the traditional e-commerce platforms or department stores. Up-and-coming brands are also adopting the direct-to-consumer sales (D2C) business model, which sells a manufacturer's products to the end customer without intermediaries.Household brand Living Workshop; household items’ direct sales platform Levit; and SLDT, the operator of limited edition sneakers platform SoldOut all garnered more than 10 billion won in Series A round.2. VeganismWhen it comes to what we put and wear on our body, veganism has become the buzzword. From beauty to fashion, marketers used the practice of abstaining from the use of all animal products, including byproducts such as honey, for the marketing of so-called clean beauty and ethical consumption. Plant-based meat products from Organica (Courtesy of Organica Corp.) Notable vegan brands that fared well in the target period include Aromatica, Surebase and AMUSE, to name a few. Organica Corp., a vegan foodstuff company, received 43 billion won in January, thanks to its transition to a plant-based meat manufacturer from a distributor of fresh juice.3. Hipster taste buds Targeting beer connoisseurs, industry insiders see potential in brands that secured direct sales channels. Seven Brau and Satellite Brewing are aiming for an initial public offering. Jeju Beer was the first microbrewery in South Korea to have an IPO. Unlike the days of yore when the conglomerates ruled the domestic market, smaller brands are increasing their influence. In turn, aggregators that acquire smaller e-commerce platforms are attracting venture capital. 4. Professional servicesStartups are also offering professional services – once confined to the walls of law, accounting, and consulting firms – through websites and apps. Law and Good offers legal advice while Trost provides professional counseling via messenger. Humart Company, the operator of Trost, received 3 billion won. 5. “Fan-tech”The next category goes by different names: Creator economy, fan-tech, as well as fandom business.Galaxy Corporation, which manages the alternative and virtual characters for celebrities, and the BeMyFriends, which describes itself as “global fandom business builder,” are the main players in this budding industry. Hybe is one of the biggest entertainment management agencies in South Korea, best known for developing K-pop sensation BTS 6. Blockchain Approximately 3% of the last 12 months’ investment into Series A funding for South Korean startups went to blockchain companies. Block Odyssey, which develops a logistics management system using blockchain-based QR code, received 35.8 billion won, the highest amount of funding into the sector in the surveyed period. DSRV Labs, which has transitioned itself from a coding education provider to an NFT-based gaming company is another success case. 7. MetaverseContent providers to metaverse platforms are also enjoying brisk investment on the back of the growing pie for the virtual space.Visual effects creator VA Corporation received a whopping 100 billion won back in March with a valuation of 1 trillion won. Convenience store brand CU has several locations on Naver's metaverse platform Zepeto 8. Team collaboration toolsThe COVID-19 pandemic gave a push to companies’ digital transformation. In the digital transformation, business-to-business (B2B) SaaS and logistics automation were the key players. San Francisco-based SWIT Technologies is competing against the global counterpart Slack. A number of team collaboration tool providers received investments including Osiris Systems, Business Canvas, and Shopl & Company also received investments. By Lan Heowhy@hankyung.comJee Abbey Lee edited this article.
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