A global platform company.
According to a comprehensive survey conducted by the Startup Alliance on July 22, investment in platform startups has been steadily declining since mid-2022, with large-scale investments of over 10 billion won (approximately $7.4 million) dropping significantly. The survey, which analyzed startups covered by the media, revealed a stark contrast in investment trends over the past three years.
In 2021, platform startups raised a total of 5.4925 trillion won in 314 cases. This figure dropped to 2.4117 trillion won in 377 cases in 2022, and then plummeted further to 1.2486 trillion won in 226 cases last year. “Despite the high number of investments, the investment amount has dropped significantly,” the survey said.
The proportion of platform investment in the overall investment market is also steadily declining. Platform investment accounted for 55.7% of total investment in the third quarter of 2021, falling to 8.9% in the fourth quarter of last year. The survey emphasized that “the growth of the domestic platform startup market, which provides services such as online securities, search, and social networking services (SNS), has hit a ‘red light.'”
In the platform investment market, the proportion of private investments of less than 1 billion won has increased over the past three years, while the proportion of investments of over 10 billion won has fallen by almost half. In 2021, investments of over 10 billion won accounted for 16.6% of the total, but fell to 7.9% last year. The number of investments of over 10 billion won also fell significantly, from 52 in 2021 and 55 in 2022 to just 18 last year.
“Due to the nature of their business, platform startups require sufficient capital and time to reach their break-even point (BEP), so it is important for them to attract the right amount of investment at the right time,” the survey stressed. Platform startups typically provide online intermediation services, search engines, social networking services (SNS), and digital content services, and act as intermediaries connecting users with various services and content.
The survey focused on startups that offer core platform services and analyzed the investment trends of startups that received external investment from venture capitalists (VCs), accelerators, corporate venture capitalists (CVCs), financial institutions, etc. “Core platform services include online platform intermediary services, online search engines, online social networking services (SNS), digital content services, etc,” the survey detailed.
The decline in large-scale investment is particularly concerning given the high development and operational costs associated with platform startups. These startups often require significant initial investment to scale their operations, develop their technology, and enter the market. A decline in such investment could hinder their growth and sustainability.
Broader economic and market conditions are also influencing this decline. Economic downturns, fluctuating interest rates and fluctuations in investor confidence significantly impact the availability of funding to startups. Additionally, global economic uncertainty, geopolitical tensions and shifting investor priorities are impacting regional investment flows.
As the platform startup sector faces these challenges, continued innovation and technological advancements remain crucial. Government policies and support mechanisms, such as subsidies, tax incentives and regulatory frameworks, also play a key role in shaping the investment environment for platform startups.
