SOUTH KOREA Law and Practice Contributed by: Ohryung Lee, Joceline Park, Maria Chang and Hakrae Cho, Bae, Kim & Lee LLC
1. Trends 1.1 VC Market
whereas 30.6% of such investments were recov - ered through IPOs. While the number of IPOs increased and the proportion of third-party sales declined in 2023, 2024 saw a slight reduction in IPO activity, accompanied by an increase in the proportion of third-party sales. 1.3 Key Industries According to the 2024 Venture Capital Market Brief, published by the Korea Venture Capital Association, the ICT service sector accounted for the highest share of VC investments at 31.3%, followed by the bio/medical sector at 16.1%. Building on the trends observed in 2023, there has been a notable increase in investor inter - est in “deep tech” start-ups, particularly in the AI semiconductor and robotics industries. This has led to a substantial rise in investments in the ICT services, ICT manufacturing, and electrical, mechanical, and equipment sectors. Converse - ly, investments in the film, performance, and music industries have experienced a significant decline. In Korea, venture capital funds are commonly established and operated in the form of a part - nership, trust or corporation. Each form of entity is subject to different regulations, with a different set of incorporation requirements, and there are standardised versions of incorporation docu - ments for each form of entity. For example, a venture capital fund established as a partnership requires an investment partnership agreement to be executed by the partners, whereas a ven - ture capital fund established as a trust requires a trust agreement to be executed with a trust com - pany, an investment agreement to be executed between the general partner and limited part - 2. Venture Capital Funds 2.1 Fund Structure
In 2024, venture capital investments in Korea amounted to KRW11.9 trillion, with an increase of 9.5% compared to the previous year. The number of companies attracting venture invest - ments also reached 4,697, the highest number ever recorded in Korean venture investment his - tory. The Information and Communication Technology (ICT) sector remained the most attractive, with a 38% increase compared to the previous year, maintaining the upward trend observed in the prior period. Following ICT, substantial invest - ments were made in the bio/medical and electri - cal/mechanical/equipment sectors. This year, three companies that attracted invest - ments of KRW1 billion or more were all from the ICT sector: ETECH SYSTEM (KRW180 billion), which operates a cloud business, Rebellion (KRW165 billion), an AI semiconductor start-up, and Upstage (KRW100 billion), a generative AI development start-up. ETECH SYSTEM attract - ed investment solely from SG Private Equity, while Rebellion gained attention for receiving investment from Aramco, the world’s largest energy and chemical company, marking the first such investment as a venture company in Korea. 1.2 Key Trends According to the 2024 Venture Capital Market Brief, published by the Korea Venture Capital Association, new funding for venture capital firms in 2024 fell by approximately 15.4% com - pared to 2023, while new investments by venture capital firms increased by 22.9% year-on-year. In addition, a majority (54.4% to be exact) of the investment recovered by venture capital firms was recovered through third-party sales,
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