Silicon Valley firm acquires local start-up

As Korean corporations and venture capital remain hesitant to invest in domestic start-ups, foreign interests are snapping them up.

Tapjoy, a leading mobile advertising and monetization platform headquartered in Silicon Valley, announced yesterday it has acquired 5Rocks, a Korean game marketing start-up.

Although the purchase price was not revealed, industry sources estimated the deal was worth 40 billion won ($38.6 million).

“The acquisition of 5Rocks is a transformative moment for Tapjoy, as the combined platforms allow us to quickly integrate best-in-class publisher analytics and insights with the industry’s leading mobile ad platform to create what we call an ‘app-tech’ solution for mobile publishers,” said Steve Wadsworth, president and CEO of Tapjoy.

“5Rocks’ services are complementary to what we have built at Tapjoy, and our combined platforms and team will have the technology, products and expertise to increase advertising effectiveness and help further define the future of app engagement and monetization services.”

Tapjoy also described 5Rocks as a platform built by a world-class team of industry leaders. The start-up has been in business for 18 months.

It was the second time a Korean start-up has been acquired by a Silicon Valley company after Google bought Tatter and Company in 2008.

Peter Thiel, co-founder of American online payment company PayPal, also recently bought a 3 percent share of Korean image sensor company Pixel Plus worth 10 billion won.

Eight IT start-ups have merged with or have been acquired by foreign interests this year, according to the Korea Venture Business Association.

Japan’s largest e-commerce company, Rakuten, acquired Korean global TV platform Viki, and Bitcoin start-up Coinplug was the recipient of $400,000 in U.S. venture capital.

According to the Fair Trade Commission, a total of 41 Korean companies valued at 2.1 trillion won have been acquired by companies from the United States and Japan.

In contrast, tech giant Samsung Electronics acquired only one Korean company last year. The number of mergers and acquisitions by domestic companies declined from 811 in 2011 to 400 in 2014.

Although some Korean start-ups have second-to-none technologies even when compared to the United States, there has been a lack of angel investment and capital that could grow these start-ups into global companies.

While Korean capital stands by idly, Chinese companies also are actively seeking opportunities involving IT companies.

Chinese companies pay attention to investing in Korean companies because they are constantly on the lookout to secure competitive technology to drive future growth.

Chinese Internet giant Tencent’s investment in Kakao, the No. 1 mobile messenger operator in Korea, is a case in point.

“Increasing mergers and acquisitions of domestic start-ups by foreign companies are an indication that many start-ups with excellent technologies are emerging,” said Ko Young-ha, president of Goventure Forum.

“However, Korea’s large corporations are passive and miserly when it comes to acquiring domestic start-ups. It also is because of their past failures in managing the start-ups they acquired.

“Large conglomerates should also complement their lack of innovation through M&As. If they continue to stay on the sidelines, the demise of Samsung is highly likely within three to five years.”

BY KIM JUNG-YOON, CHOI JOON-HO [kjy@joongang.co.kr]