Venture Capitalists Bulls Again

Venture capital firms that support technology start-ups with funding are increasing their investments this year.

Korea 21 Venture Capital Co.'s president, Kwon Young-kun, recently received requests from 70 start-ups and he reportedly spends much of his day deciding which companies to fund. Once a process for selecting the most suitable start-ups has been completed, he pushes ahead with the investment.

In a survey recently conducted by the Small and Medium Business Administration and the Korea Venture Capital Association, 121 venture capitalists responded that they plan to invest 1.63 trillion won ($ 13.18 billion) in start-ups this year.

This contrasts sharply with last year when venture capitalists were reluctant to extend support to start-up firms, as the Kosdaq market slumped.

But this year is different, with venture capitalists changing their investment patterns by expanding to start-ups in biotechnology, environment and wireless internet.

"We plan to concentrate our investment into other new burgeoning sectors," said KTB Network's managing director, Cho Young-woo.

"We plan to increase our investment in the start-ups after March and we will concentrate mostly on the biotechnology sector in the mid- to long-term," said Yang Jong-ha, a managing director at Korea Technology Investment. The company has already set aside 15 percent of its investment funds for biotechnology and environment businesses.

But venture capitalists said that despite the recent domestic stock market rebound, there still remains negative market factors. "Corporate bond transactions are picking up and the domestic capital market is improving. Market rates are expected to remain low for the time being, which means more start-ups will open businesses. But the most important thing is that the stock markets recover stability fast or else we will be driven out of businesses," said Mr. Cho.

There is one thing that all venture capital firms take into consideration before giving out money to start-up compnies. "Seventy percent of our decision on whether to invest or not invest depends on the firm's chief executive officer's competence," said Mr. Kwon Young-kun. "Whenever we visit Daeduk Valley to find investment target firms, we look at top managers to see whether they are capable of running their businesses," said an official at Terasource Venture Capital.

by Chung Jeh-won