📑Sopoong Brief I Series 2. What about South Korea’s climate tech investment trends? What are the challenges ahead? [카테고리 설정이 아직되어 있지 않습니다.] What does South Korea’s tech market look like?South Korea’s climate tech market is also growing steadily. According to statistics, the export volume of the domestic climate tech industry in 2021 was KRW 34.3481 trillion, up KRW 2.1948 trillion from the previous year, and climate tech research and development investment was KRW 10.6858 trillion, an increase of more than 3 trillion over the previous year. As of 2023, the size of the existing domestic climate tech fund is estimated to reach approximately 340 billion won, and is expected to further expand along with the government's policy to foster the climate tech industry. What areas are investments being made in South Korea?To examine South Korea’s climate tech investment trends, companies that can be classified as climate tech among companies that have attracted investment over the past three years (January 1, 2021 to October 31, 2023) were selected by The VC, which is South Korea's largest startup information platform. A total of 380 sites were selected and examined by applying the Carbon Neutral Green Growth Committee's criteria for the five climate technology areas.Areas with the most investment: Mobility and renewable energy (batteries) > Resource circulation (second-hand trade and waste) > Agtech (smart farm/aqua farm)Figure 1. Number of Korean climate tech investment startups by sectorMobility and renewable energy (battery): Revitalizing battery-related industriesSouth Korea’s climate tech investments are concentrated in the mobility industry. This is also because the automobile industry plays a pivotal role in the domestic economy. Based on the world's 5th largest automobile production capacity, South Korea is accelerating technological development such as carbon-neutral energy production and development of high-efficiency power sources, and related industries are also being revitalized.In particular, growth in the battery sector is notable. South Korea's market share of electric vehicle batteries ranks second in the world, occupying a very important position in the global supply chain. Considering that 7 of this year's top 10 market cap increases are electric vehicle and battery-related companies, investment in these fields is expected to expand further.In fact, of the total 380 companies invested in the climate technology field over the past three years, 33% (125/380) were mobility-related companies. This figure includes 52 battery-related companies classified in the renewable energy sector, and includes companies developing technologies/services such as secondary cell battery materials/parts, energy storage systems (ESS), waste battery recycling, and EV chargers. In addition, companies providing web-based services such as car sharing, car subscription, used car trading, and personal mobility devices were found to have received a large number of investments.Resource circulation: second-hand trading platform, waste source/fuel conversion, resource circulation management solution In the resource circulation sector, second-hand trading and rental platforms accounted for the largest portion. Due to the continued economic downturn following the pandemic, the related market has grown rapidly due to the revitalization of second-hand transaction consumption and changes in consumers' perception of second-hand transactions. Now, beyond the quantitative growth of the market, second-hand transaction items and methods are becoming more subdivided, and related investments are becoming more active.Investment in waste utilization is also active. Companies that convert waste into fuel (Waste to Energy), produce fiber yarn from waste (Waste to Textile), or manufacture rare metals (Waste to Chemical), such as extracting waste plastic-based pyrolysis oil and converting livestock waste into bioenergy, have attracted investment. It was found that companies related to efficient waste processing, waste classification/selection companies, and companies providing resource circulation management solutions received investment.AgTech: Smart farm equipment and solutions, supply/demand forecasting solutions, distribution platformPrimary industries such as agriculture and fisheries are one of the most vulnerable sectors to climate change, and recently, companies that provide more specific solutions are attracting the attention of investors. In addition to smart farm companies for crop cultivation, companies that apply smart farm technology to various areas such as insects and fisheries (aqua farms) have received investment, and investments have also been made in entry-level smart farms, AI-based field farming growth decision support services, and customized seedling supply solutions. In particular, companies with technologies related to climate adaptation, such as seeds with harmful ingredients removed based on gene editing technology, customized agricultural products using agricultural microorganisms, and distribution platforms based on agricultural demand prediction, are also attracting attention.Others: EaaS, eco-friendly packaging materials, artificial intelligence-based climate adaptation solution In the clean tech field, in addition to battery and solar energy storage companies, equipment/system companies related to various energy sources such as offshore wind power, wave power, and hydrogen have received investment. EaaS[1] companies such as diagnosis/monitoring to improve energy efficiency, and food tech fields such as alternative meat and eco-friendly packaging materials have also received a large number of investments. [1] EaaS : Energy-as-a-Service Early stage (Seed, Pre A) investment 53%, 46% or more Series A investment Share of all climate tech investment stages (by number of companies)Figure 3 Comparison of investment stages by sectors (by number of companiesBased on the previous investment stage, the early stage (Seed, Pre A) was 53%, and the Series A stage and above (Series A, Pre IPO, IPO, M&A) was 46%, showing a slightly higher proportion of the early stage. Meanwhile, companies that received Series A or higher investments were concentrated in mobility/battery companies related to the electric and hydrogen vehicle industries and platform companies related to used trading. This shows that there is a concentration in certain technology fields in terms of technology, market maturity, and investment preference.How are South Korean accelerators investing in the climate tech field?In Series 1, we found that the global accelerators are playing an initial role in the climate technology industry. So what role do South Korean accelerators play in the climate tech industry? To find out, we looked at the climate tech investment trends of South Korea's Top 12 accelerators.[2] 스타트업얼라이언스의 설문조사에서 나타난 스타트업이 가장 선호하는 국내 엑셀러레이터 중 헬스케어에 특화된 디지털헬스케어파트너스는 제외, 총 12개 엑셀러레이터를 선정함 (더벤처스, 매쉬업엔젤스, 블루포인트파트너스, 빅뱅엔젤스, 소풍벤처스, 스마일게이트인베스트먼트, 스파크랩, 씨엔티테크, 크립톤, 패스트벤처스, 퓨처플레이, 프라이머) Climate tech accounts for 17% of the total portfolio, Sopoong Ventures ranks 1stFigure 4. Share of climate tech in the portfolios of the top 12 Korean accelerators in '21-'23 (by number of companies)Figure 5. Number of climate tech companies funded by each accelerator from 21-23From 2021 to October 31, 2023, the 12 largest accelerators' investment in climate technology accounted for 19% (169/904) of the number of investments and 17% (134/768) of the number of invested companies. Among them, Sopoong Ventures was investing in the largest number of climate tech startups (44 cases/39), followed by CNT Tech (28 cases/25) and Blue Point Partners (26/25).Accelerator’s largest investment areas: circular economy, ag-tech, mobilityFigure 6 Climate tech investments by the top 12 accelerators in KoreaPreviously, in the overall South Korea’s climate tech investment over the past three years, the largest investment was made in the mobility field, including batteries, while accelerators focusing on initial investment were found to have invested the most in the circular economy field. This includes companies such as waste fuel/raw material conversion and energy recovery-based carbon reduction/fuel efficiency improvement solutions, in addition to used trading platforms and subscription services.Agtech also ranks high. It appears that investments are being made in various types of new technologies, such as smart farm and aqua farm equipment/solutions and related robot technology, microorganism-based crop control solutions, biological pesticides using plant mechanisms, and development of pharmaceutical raw materials through mass cultivation of microalgae.The mobility field is also receiving a lot of attention. However, while overall mobility investment in South Korea was previously focused on battery-related companies, the accelerator was focusing its investments on companies providing solutions such as HaaS/SaaS/MaaS[3] and new eco-friendly transportation methods. These include demand response transportation operation systems, electric vehicle charging station information platforms, on-demand electric vehicle charging services, unmanned electric large trucks, and hydrogen electricity-based ship propulsion systems.[3] HaaS : Hardware-as-a-Service / SaaS : Software-as-a-Service / Maas : Mobility-as-a-ServiceMaximum number of investments by 2022, 82% of investment in early stage (Seed~Pre A)Figure 7. 12 Accelerators Climate tech Quarterly Investment Trends (by number of investments)Figure 8. Climate tech investment stages of the 12 top accelerators (by number of investments)As a result of examining the number of investments, climate investments were most active in 2022. Considering that the total number of investments over three years was 169 and the number of invested companies was 134, it can be seen that in some companies, multiple accelerators co-invested or multiple investment rounds were conducted.In addition, the proportion of investment in the early stages (Seed~Pre A) was 82%, showing that South Korean accelerators are also playing a role as a catalyst for the climate tech industry.Global climate tech investment that is experiencing qualitative growth, and domestic climate tech investment that is in the blooming phaseIn the global climate tech industry, many technologies are already reaching maturity according to the technological growth cycle (Hype Curve), and investment in new technologies is also expanding. Renewable energy technologies such as wind and solar power have made it possible to produce low-cost, high-efficiency energy through steady technological advancement, and in mobility, a variety of solutions incorporating IT technology are emerging beyond hardware development. The development of new fuels such as green hydrogen and carbon capture technologies such as CCUS and DAC are also gradually deepening.Technological advancements are also affecting investment. This is because the proportion of investment in solar/wind power and mobility sectors is gradually decreasing, and investment in areas with high carbon reduction potential is increasing. Additionally, as reported by SVB, the high proportion of late-stage investments (44%) and the creation of more than 80 climate tech unicorns shows that climate tech companies have reached the stage of generating profits.However, unlike the global climate tech industry, which is achieving qualitative growth in addition to quantitative growth, the domestic climate tech industry is still in its blooming phase. Investment in renewable energy and mobility sectors, led by the automobile industry, is active, but investment in other fields is often still in the early stages. In particular, investment appears to be low in areas such as carbon capture and hydrogen, which require high costs and long periods of time from technology development to commercialization.In order for the domestic climate technology industry to achieve faster quantitative and qualitative growth in line with the global level, active investment in climate technology by accelerators is needed, which serves as a catalyst for industrial growth.Figure 10. Climate tech growth stages and the extent to which each actor and sector is actively investing. (Src : SVB) Figure 11. Comparison of climate tech focus sector of global accelerators, Korean VCs in general, and top 12 Korean acceleratorsSo what is Sopoong Ventures, South Korea’s No. 1 climate tech investment accelerator, doing?Sopoong, established in 2008, is South Korea's first social venture accelerator and impact investor. It has invested in areas of great social value such as the environment, agriculture, education, and healthcare, and has recently focused on investing in climate technology to tackle the climate crisis. Since launching 'Impact Climate' in 2022, South Korea's first climate tech accelerating and networking program. In the same year, Sopoong Ventures formed the 'Impact Picnic Investment Association', a KRW 10 billion climate fund focusing on early-stage climate tech, empowering itself as a climate tech accelerator.This is leading to investment performance. As of October 31, 2023, we invested in a total of 48 climate tech companies, of which 75% (36/48) were made after 2021, when climate tech investments began in earnest.Sectors most frequently invested in by Sopoong Ventures: Agtech, circular economyFigure 12. Climate tech portfolio by sector invested by SopoongSopoong's climate portfolio had the largest number of companies classified in the agtech and circular economy sectors. In the agtech field, we are focusing on discovering solutions that help reduce carbon and adapt to climate. Sopoong Ventures have invested in Forte Biotech, which has shrimp disease diagnosis technology, the Korea Fisheries Research&Development Institute, which provides data-based aqua farm solutions, and Rowain, a robotic plant factory platform based on autonomous transport robots and mobile cultivation devices. In the field of circular economy, we are actively investing in companies that offer innovative solutions for carbon reduction. These include BLQ, which operates Test Valley, a platform for pre-trying and purchasing electronic products, AeTech, which develops AI-robotics-based resource recycling robots, and Repla, which produces high-purity recycled plastic using microorganisms.Leading investment in areas where domestic investment is inactive and spurring the discovery of overseas companiesIn addition, we are actively discovering companies in the fields of carbon capture, AI, data, finance, and space weather, which are relatively underinvested in South Korea. Capture 6, which has Direct Air Capture (DAC) technology, RainbirdGEO and Earth Eight, which provide climate information based on satellite data, and Carbon Neutral Research Institute and CarbonSaurus, which provides carbon accounting solutions that are gaining more attention due to climate disclosure and revitalization of the carbon market. Recently, we are also actively seeking out companies based overseas. The previously mentioned Capture 6 is based in Silicon Valley, USA, and has also recently invested in Selex Smart Electric, the vietnamese startup which provides electric motorcycle (bicycle) sales and battery replacement services. Active lead investment participation 77%, investment proportion within 1 year of company establishment 41%Sopoong Ventures participated as a lead investor in 77% (34) of the entire climate tech portfolio. In particular, 43% (19) invested within one year of company establishment, Sopoong Ventures proactively discover early-stage companies and provide investment and acceleration support.Figure 13. Percentage of Sopoong's climate tech portfolio with lead investmentsFigure 14. Time from company establishment to Sopoong's first investmentProportion of attracting follow-up investment 48%, attracting follow-up investment within 1 year 57%, participation in investment-related R&D projects such as TIPS 52%The success rate in attracting follow-on investment was 48% (21), of which 57% (12/21) received follow-on investment within one year after making the investment. Considering that 80% (36) of the entire climate tech portfolio was invested in 2021, it can be said that it succeeded in attracting follow-on investment relatively quickly.In addition, we are actively taking a combined finance approach (private finance + public finance). The number of companies participating in investment-linked government R&D projects such as TIPS is 52% (23 companies), and Sopoong is contributing to the continuous growth of companies by attracting follow-up investment from the private sector and actively linking government subsidies such as R&D funds as a TIPS operator.Figure 15. Follow-on investment rateFigure 16. Time from Sopoong's first investment to the first follow-on investmentFigure 17. Whether to attract grantsParticipation in strategic investment (large corporations, local governments, non-profit organizations) 27%Of Sopoong’s Climate Tech portfolios that successfully attracted follow-up investment, 53% (11/21) received investment from strategic investors. Hyundai Engineering & Construction and SK Telecom are working to achieve the company's RE100 goal by investing in 60Hertz, which is pursuing a virtual power plant business, while CJ Foodville, OB Beer, etc. are expanding the scope of collaboration by investing in Re:harvest, which produces alternative food. We are also continuously pursuing collaboration with VCs affiliated with non-profit and public institutions. Vandal Soft and Green Goods, which are conducting business targeting developing countries, are expected to contribute to solving climate change and food crisis problems in developing countries by receiving investment from Good Neighbors Global Impact and ADB Ventures, respectively.Figure 18. SI investment rateWhat tasks remain for us to revitalize investment in climate tech?Last June, the government announced a public-private joint investment plan worth about 145 trillion won in the climate technology industry by 2030. Also, the government its plan to create a policy fund worth more than 400 billion won and activate private investment worth 200 billion won through corporate venture capital (CVC), etc. However, in order to revitalize private investment, the role of an accelerator specialized in climate technology is essential to reduce the investment risk of follow-on investors VCs and large corporations, and improve efficiency through early discovery of innovative climate solutions and appropriate support. In particular, the level of domestic climate technology technology is still in the technology growth stage (57.0%), and it is reported that most of the technologies are in the pre-market entry stage, except for some technology areas such as energy demand. This is a time when the role of accelerators to support healthy scale-up is even more necessary so that innovative technologies can find an appropriate market fit.Figure 19. Growth stages of Korea's climate tech industry in 2021As South Korea's No. 1 climate tech accelerator, Sopoong Ventures has strived to discover and foster companies with innovative solutions. So far, Sopoong has been promoting the urgency of carbon neutrality and the growth potential of the climate tech industry through not only climate tech investment and accelerating, but also holding monthly climate seminars and a private study club for the media. Sopoong Ventures have also strived to support the climate tech ecosystem through holding an annual climate tech startup summit to provide a chance for stakeholders to meet and discuss solutions together.2023 CLIMATE TECH STARTUP SUMMIT - "Climate Technology and Artificial Intelligence," with over 100 experts in attendanceClimate tech is attracting attention as a game changer for achieving carbon neutrality. However, there are still high mountains to overcome in the investment field. We need more capital, and we need to continue to discover innovative technologies that can accelerate carbon neutrality. To achieve this, everyone's efforts are needed. Sopoong Ventures will continue to make efforts to develop domestic climate technology.
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