Startup, Venture Business Issue News Summary

Startup, Venture Business Issue News Summary

*Number 1... The VC Association is trying to induce retirement pension investment projects. It's not that I'm reluctant to report something that makes an article about it. They say it's because the banking sector reduces its investment, but they're talking about Risk Weighted Asset (RWA). I learned it hard in CFA LV2 in 2014 and I think I learned it in 3 years. Is it true that RWA simply expresses that if 400% invests 10 billion won, it will be recorded as 40 billion won...

*Number 2.. SBA is going to invest 80 billion won alone this time. Last year, it was 70 billion won, but this year it is 80 billion won. This fund, referred to as the Seoul Vision 2030 Fund, is said to be the follow-up version of the future innovation growth fund that has hit the jackpot. It is not enough to cut or invest..

*No. 3.. Following the last Busan Mortal Fund and SBA Fund, Jeju Island will be doing a solo investment project this time. It will invest 30 billion won, and the financial resources are 15 billion won for Jeju Island and related organizations in the region. What is a public fund? Anyway, the GP who invested twice as much in Jeju Island and was selected as a parent or growth finance is said to be eligible for the application.

*No.5.. MS signed an asset transaction contract with Inflection AI created by DeepMind's founder... This is actually an M&A, which is a problem. MS has decided to pay 620 million dollars to the company for the use of artificial intelligence models and hire 70 employees including the CEO. And Inflection AI liquidates its shareholders...? Is this the creative economy? By the way, shareholders are sad about such a merger and acquisition. The reason is that the acquisition price was less than twice that of the previous round (according to past reports..) So it is a problem because it is a venture capital investment and the return is low, but Exit is difficult and agrees to cry and eat due to LP relationships..

*Number 6... Lotte is extending the exercise period of the call option in the middle and high countries by one year. The PEs who invested together agree because there is no way to do EXIT. Middle and high countries with memories..

*Number 7.. Memories Blank Corporation is back in the black. It is said that sales of 83.3 billion won and operating profit of 2.6 billion won in three years after the deficit transition. But considering the sales level in the past, I don't know if this is good..

*Number 8… I heard that the assets of Internet banks exceeded 100 trillion won. It is called the effect of dealing with various products due to active loans, increased deposit products, and simple sales methods..

*Number 9.. The five major U.S. tech companies have 772 trillion won in cash. I'm telling you this as if it's a big news story. In fact, the cash reserves of Big Tech have been in the news since 2015, and it has long been reported that they are actually moving just like bond funds that invest in blue-chip bonds as a major player in the U.S. government bond market. Anyway, the gist of the news is that they are forcibly increasing dividends due to the rising difficulties of global regulators in M&A and the lack of use of cash. In fact, expectations are high for a rate cut at the interest rate of 5% on one-year government bonds, so isn't it more profitable to manage bonds than investments?  

1) Dry private LP...Emergence as an alternative
The venture capital industry is sending a strong love call to retirement pensions. Starting with Yoon Soo-soo, president of the Korea Venture Capital Association, earlier this year, venture capitalists are insisting on the necessity of investing in venture funds in retirement pensions. The Korea Venture Capital Association, which represents the voice of the industry, has already begun related research. Amid the recent decline in the formation of venture funds, it is seeking to use retirement pensions to diversify investors and revitalize private parent funds. As financial institutions in the banking sector reduce their investment in venture funds, the scale of investment is halved, and the association is moving. The fact that the banking sector has reduced its investment is largely due to the Risk-weighted Asset (RWA) problem. When a financial institution affiliated with a bank invests in a venture fund, the RWA is set at 400%. If 10 billion won is invested in a venture fund, it is recognized as 40 billion won in accounting. This also affects the decline in the BIS (equity capital ratio) of financial institutions affiliated with banks. Financial authorities recommend the BIS ratio of banks at the level of 10.5%, but domestic commercial banks maintain it at about 15%. Meanwhile, according to the Korea Venture Capital Association, 290 new funds formed last year are around 6.53 trillion won. Compared to 11.836 trillion won the previous year, it has decreased in half. The market, which was around KRW 4.241.3 trillion in 2019, surpassed KRW 11 trillion in 2022, three years later.

2) SBA pushes for 80 billion worth of Vision 2030 fund investment
The Seoul Economic Promotion Agency (SBA), which manages the Seoul Vision 2030 Fund, will continue to push for investment projects this year following last year. Investment areas are expected to be similar to last year, including ▲ scale-up ▲ digital transformation ▲ start-up support ▲ bio ▲ cultural contents ▲ first steps. The Seoul Metropolitan Government will invest 80 billion won to pour priming water into the VC investment market. The Seoul Vision 2030 Fund is a fund created by the Seoul Metropolitan Government last year to invest in venture companies and startups. It will invest 350 billion won in the Seoul Metropolitan Government's budget for four years from last year to 2026 to make a total of 5 trillion won in investment. If it goes as planned, the Seoul Metropolitan Government will record a total of 150 billion won in investment, including 80 billion won this year, following 70 billion won last year. The Seoul Metropolitan Government plans to release a notice containing such details in the middle of this month. The detailed creation plan is not known, but the timing of the announcement is likely to be after the 10th when the general election of the National Assembly ends. The goal of the Seoul Vision 2030 Fund was reportedly set by the success of the predecessor, the "Seoul Future Innovation Growth Fund." The Future Innovation Growth Fund planned to raise 1.2 trillion won over the four years from 2019 to 2022, but it was a success with 3.4 trillion won, 283% of the target.

3) Supporting the listing of promising companies to create a fund worth '30 billion won' in Jeju Island
Jeju Island will create a fund worth 30 billion won to foster listed companies. Jeju Island announced on the 7th that it will create a "Shining Jeju Listed Companies Fostering Fund" worth a total of 30 billion won over the four years from 2024 to 2027. The fund aims to invest a total of 30 billion won in companies in the province by matching 15 billion won, including 10 billion won in Jeju Island and 5 billion won in related and private institutions in the province, with 15 billion won in public parent funds. Jeju Island will recruit managers to create funds with investments this year from the 8th to the 22nd. Eligibility for application is limited for managers selected for public parent fund investment projects created by the government, such as Korea Venture Investment and Korea Growth Financial Investment Management, and the selected managers must invest at least twice the investment amount of provincial and provincial related and private institutions in companies in the province.

4) Kolon Invests Biggest Performance on Performance Remuneration

According to the Financial Supervisory Service's electronic disclosure system on the 5th, Kolon Investment recorded 16.75 billion won in sales and 9.263 billion won in operating profit last year. This is an increase of 7.5% and 1.8%, respectively, compared to 2022. Operating profit recorded the highest performance after recording 8.147 billion won in 2020. Kolon Investment also set a record of recording sales of more than 10 billion won for the fifth consecutive year. Sales, which were around 7.512 billion won in 2018, jumped to 13.292 billion won in 2019. Since then, ▲ 12.968 billion won in 2020 ▲ 12.25 billion won in 2021 ▲ 15.58 billion won in 2022 ▲ 16.75 billion won in 2023. Kolon Investment received 3.76 billion won in performance compensation last year. It is the highest level in nine years after receiving 4.6 billion won in performance compensation in 2014. Combined with the liquidation of the fund, the inflow of management fees decreased slightly from 7.748 billion won in 2022 to 6.242 billion won last year.

5) Hiring Large-scale Talent Instead of Merger? Microsoft's Regulatory Avoidance Strategy for 'AI Leading'
Microsoft recently announced that it has hired Mustafa Suleyman, who is known as co-founder of DeepMind, as the head of its artificial intelligence (AI) business. Mustafa Suleyman founded DeepMind in 2010 along with Demis Hubasib and others. After leaving the company in 2022, Microsoft started InflectionAI, an AI start-up. Microsoft has decided to hire more than 70 Inflection AI employees as well as Mustafa Suleyman. Together, they will work at Microsoft AI. Microsoft has agreed to pay 620 million U.S. dollars in exchange for using InflectionAI's AI model and 30 million dollars in exchange for the company's waiver of legal rights for mass recruitment. However, the industry is criticized for using "trick-and-trick" of hiring en masse in order to avoid regulatory investigations that accompany Microsoft's mergers and acquisitions. The EU's view on InflectionAI's massive hiring is also not favorable. According to Reuters, Margrethe Vestager, head of anti-trust regulations in the EU, said, "We are keeping an eye on Microsoft's massive recruitment of InflectionAI, but the merger rules do not apply because it is not a merger." Microsoft invested 13 billion dollars (about 17.5 trillion won) in OpenAI, securing a 49 percent stake. Although it is not subject to M&A reporting as it has a stake of less than 50 percent, the EU is investigating whether MS OpenAI investment violates the antitrust law.

6) 'Business Reconstruction Life and Death' Lotte Extends Call Option Event Deadline for Joonggonara
According to the investment banking (IB) industry on the 8th, Lotte Shopping requested Eugene Asset Management and Opus Private Equity (hereinafter referred to as OpusPE), which had joined the acquisition of the used country, to extend the call option exercise period by one year. Eugene Asset Management and Opus PE invested about 110 billion won in June 2021 to acquire a 93.9% stake in the used country. Lotte Shopping also invested 30 billion won in the deal and participated as a co-investor. It also secured a stock purchase right (call option) that allows it to acquire an additional 69.88 percent stake in the used country by the three-year anniversary of the investment. In response to Lotte's request, the two PE's have effectively decided to extend it because it is difficult to come up with a plan to secure an exit. Meanwhile, Lotte Group is speeding up its carve-out in each affiliate as Chairman Shin Dong-bin publicly announced earlier this year that he would foster new growth businesses and sell existing sluggish businesses. In fact, Korea Seven, led by Samjeong KPMG as its host in February, is speeding up its carve-out