Investment to startups from the large retail players in Korea is now being activated.
The synergy is now being generated between the ideas from startups and the demand of new business of the large retail players. As the growth of domestic retailers has been stagnant due to sluggish domestic demand and changes in consumption culture, it is also a reason to increase investment through startup investment. The cases of adopting technology to legacy retail processes and business are now increasing, so the large retail players can get the advantage as an investor or as an strategic alliance partner.
Programs for the Startups are the beginning.
Most of the investments are being executed less than KR100Million(Around USD100k) per a single investment. Lotte Group, Korea’s largest retail company, is operating Lotte Accelerator with KRW15Billion(Around USD15Million) capital. The Chairman of Lotte Group, Shin Dong-Bin, contributed his personal capital KRW5Biilion(Around USD5Million). More than 100 startups have been supported by the Lotte Accelerator program with the amount around KRW 20Million(USD 20k) to KRW50Million(USD50k) per each advisory program. The program has been operated from its 1st to 4th program. The invested startups grew 3.4 times and got the additional follow-up investment.
MYRO, the company which operates the O2O application called “Last Order”, attracted the investment KRW 2Billion(Around USD2Million) during the L-Camp program participation. L-Camp is operated by Lotte Accelerator.
GS Homeshopping – KRW360Billion(USD360Miilion) Investments with 600 Startups as portfolio.
GS Homeshopping knows exactly that startup investment will generate profit. The company knows how to make synergy with the invested startups as a partner. GS Homeshopping is selling the products by startups on its T-Commerce channel. Or they are adopting the technology from startups within the operation of GS Homeshopping.
GS Homeshopping invested Varram, the robotics for pets. When Varram launched its first robots for pets, GS Homeshopping made a dedicated menu as “Pet Robot”. And the targeting for the right customer GS Homeshopping adopted AI technology by the startup that GS Homeshopping invested.
Pros and Con of Startup Investment
A+B, which runs an online editing shop called ’29CM’, was sold to fashion application company ‘Style Share’ in March 2018. A+B is one of the leading startups that GS Home Shopping invested KRW6.9 billion(USD6.9Million) in 2013. At the time of the stake sale, GS Home Shopping made a profit of around KRW13 billion(USD 13Million), which is considered one of the most successful cases of venture investment.
As of last year, only three or four of GS Home Shopping’s related companies have recorded a surplus. This means that 99% of the invested companies are as minus status within the investment result as of now.
According to an anonymous investment manager at a Korean Conglomerate, he said “We are considering the investment as social contribution first and expanding into new business rather than net investment purpose.” Additionally he said that “I have seen some big companies are spoiling the investment while they are trying to adopt its operational bureaucratic culture.”
