Investments in platform startups have been on a steady decline since mid-2022, with a significant drop in large-scale investments exceeding 10 billion won (approximately $7.4 million), according to a comprehensive survey conducted by Startup Allianceon July 22. The survey, which analyzed startups reported by the media, revealed a stark contrast in investment trends over the past three years.
In 2021, platform startups received a total of 5.4925 trillion won across 314 cases. This figure dropped to 2.4117 trillion won across 377 cases in 2022, and further plummeted to 1.2486 trillion won across 226 cases last year. “Despite the number of investment cases, the amount of investment has significantly decreased,” noted the survey.
The proportion of platform investments in the overall investment market has also steadily declined. The share of platform investments, which accounted for 55.7% of the total investment amount in the third quarter of 2021, dropped to 8.9% in the fourth quarter of last year. “The growth of the domestic platform startup market, which offers services such as online brokerage, search, and social networking services (SNS), has hit a ‘red light,'” the survey highlighted.
Over the past three years, the proportion of undisclosed investments under 1 billion won in the platform investment market has increased, while the proportion of investments exceeding 10 billion won has nearly halved. In 2021, 16.6% of investments exceeded 10 billion won, but this figure dropped to 7.9% last year. The number of investment cases exceeding 10 billion won also significantly decreased from 52 cases in 2021 and 55 cases in 2022 to just 18 cases last year.
“Due to the nature of their business, platform startups require sufficient capital and time to reach the break-even point (BEP), making it crucial to attract appropriately scaled investments at the right time,” the survey emphasized. Platform startups typically provide online brokerage services, search engines, social networking services (SNS), and digital content services, acting as intermediaries connecting users with various services and content.
The survey analyzed the investment trends of startups that received external investments from venture capital (VC), accelerators, corporate venture capital (CVC), and financial institutions, focusing on startups providing core platform services. “Core platform services include online platform brokerage services, online search engines, online social networking services (SNS), and digital content services,” the survey detailed.
The decline in large-scale investments is particularly concerning given the high development and operational costs associated with platform startups. These startups often require substantial initial investment to scale their operations, develop technology, and penetrate markets. A decline in such investments can hinder their growth and sustainability.
The broader economic environment and market conditions have also played a role in this decline. Economic downturns, fluctuating interest rates, and varying levels of investor confidence significantly impact the availability of capital for startups. Additionally, global economic uncertainties, geopolitical tensions, and shifts in investor priorities have influenced local investment flows.
As the platform startup sector faces these challenges, the need for continuous innovation and technological advancements remains critical. Government policies and support mechanisms, including grants, tax incentives, and regulatory frameworks, also play a crucial role in shaping the investment landscape for platform startups.