Venture capitalists eye start-ups in South Korea

When South Korean venture capitalist Park Young-ho first visited Kakao Corp, its founders said they did not need any money, at least not yet. It was March 2011 and Park admired the company's messaging app, which was close to passing 10 million users after its launch 12 months earlier.

"I was convinced about its growth momentum," said Park, a senior principal at Korea Investment Partners, the nation's biggest venture capital firm. "Given Korea's population of 49 million, I thought 'Game over, Kakao's won'. I didn't want to miss out so I stayed continuously in contact with the company and after five months, the deal was closed."

Park's persistence paid off. Korea Investment injected 5 billion won (HK$35 million) at about 10,000 won a share. Today, shares of the operator of the nation's largest mobile messaging service, with 167 million subscribers globally, are 20 times that after it merged with Daum Communications Corp in October last year.

In Asia's fourth-largest economy, where neon-lit cosmetics stores and glittering skyscrapers mingle with K-pop and kimchi, venture capital is fast becoming big business. A record 13.2 trillion won was committed to early stage funding as of November last year.

"Venture capital can be a catalyst for creating jobs and adding value as a country's potential for economic growth decreases with an ageing population and low birth rate," said Chah Eun-young, an economics professor at Ewha Womans University. "It's playing a vital role in building infrastructure for creative new businesses, and it's increasing opportunities for women, who in Korea have a low economic participation rate despite so many having higher degrees."

Venture capital funds invested in Korea totalled 1.4 trillion won during the first 11 months of last year, a 14.6 per cent increase from the same period of 2013, data from the Korean Venture Capital Association shows.