Big Banks in Korea Invests in Startups through Strategic Funds

Banks in Korea such as KDB, Shinhan, and KB have participated in various venture and growth funding rounds for innovative startups in Korea. While most are interested in the fintech sector, the latest investments also show interest in emerging technologies such as AI and Blockchain. The motivation for banks in Korea to invest in startups ranges from finding innovative startups to use their services or simply seeing them as assets that will generate a high return on investment. In addition, in some cases, acquiring a minority stake in a startup will also allow banks to guide the startup’s direction to ensure their product or service will align with the bank’s own strategic direction. 

The pandemic has shifted Korean consumer habits when it comes to banking. Korean consumers are now looking for new systems that are flexible, secure, and resilient. Therefore, it is not uncommon to see banks in Korea invest together in the same round, especially when the target is mutually beneficial for all involved. This is more often the case with fintech startups in Korea which are focused on building a strong infrastructure such as financial data or network which has more value if more banks are involved. Below are some of the Banks in Korea that are active in investing in startups. 

Banks in Korea that invest in Startups

KDB Korea Development Bank

Korea Development Bank is a government-owned bank that supplies and manages major industrial capital to help develop the economy of South Korea. They provide financing for the development and promotion of industries, the expansion of social infrastructure, and the facilitation of sustainable growth. They make direct investments and provide financing to startups and small companies that show strong growth potential. One of their biggest investments was into Fintech Startup Toss for $72 million. 

Global Partnership Fund

KDB started the Global Partnership Fund back in 2016. The fund is for international venture capitalists interested in Korean startups looking to increase their exposure to the global market. It also runs the venture investment platform KDB NextRound and an accelerator program called KDB NextOne in Korea. KDB is also the organizer of NextRise, a startup event in Seoul that gives opportunities to early-stage startups looking for investment. 

KDB also set up a venture capital firm in Silicon Valley, US, to help startups in Korea enter the global market. They will help Korean startups connect with VCs and businesses located in Silicon Valley. 

“Innovative growth is something the bank has been aiming to achieve. KDB will prepare various types of funds not just to help find promising startups but also to scale up innovative startups,” said the KDB chairman, Lee Dong-gull. 

Shinhan Financial Group

Shinhan created a venture capital unit in 2019 to operate a $170 million fund of funds portfolio. The fund looks for startups in Korea that can have synergies with Shinhan Financial Group. To find the right startups, Shinhan Capital created an incubator called Shinhan Future’s Lab in 2015. While Shinhan has investment-related arms such as Shinhan Investment, it does not have any subsidiaries that focus on making initial-stage investments. Instead, they partnered with affiliates to carry out projects related to innovation in the financial industry. 

In 2020, Shinhan Financial Group took over Neoplux, a venture capital subsidiary of Doosan Group. This acquisition was aimed at helping Shinhan find new growth engines and foster financial startups. 

KB Securities/Investments

KB Securities and KB Investment are subsidiaries of KB Financial Group (KB Kookmin Bank). They are a part of the KB Innovation Finance Council which provides investment and credit support to innovative startups and SMEs in Korea. The council has 12 executive members, with KB Securities and KB Investment being 2 of the 12. KB Investment stated they will invest $1.7 billion of venture funds from 2020-2025. They invest in undervalued enterprises that are listed on the KOSDAQ market. In addition, they offer up to $10 million worth of corporate venture capital funds for the businesses to scale up. 

KB Growth Platform Fund

The KB Growth Platform Fund is a $200 million VC fund launched in 2019 to invest in Asia. 60% of the fund was dedicated to startups in Southeast Asia, including $45 million going to startups in India. One of the fund’s biggest investments went to Singapore’s popular ride-sharing service operator Grab. The KB Growth Platform Fund also participated in the Centauri Fund, jointly launched by PT Telkom Indonesia, and stands at $100 million. The Centauri Fund invests in fintech and big data startups. 

KEB Financial Group

KEB Hana Bank is a subsidiary of KEB Financial Group. It runs the 1Q Agile Lab, which supports 10 promising startups. It is the bank’s startup mentoring/incubation program. The program was launched in 2015 and has supported 75 startups in Korea. The startups are given private office space KEB Hana Bank affiliate firms provide business and financial consulting services. KEB Hana Bank also invests in these startups and helps them enter the global market.

Furthermore, the startups selected for the program get $17.5 million in investment over five years. Hana Financial Group also has a securities arm called Hana Financial Investment. It operates as a wealth management firm that invests in startups in Korea. 

Hana Financial Group will focus on enhancing financial support in three key areas: customized financing for the Digital New Deal and Green New Deal, technology innovation of startups, and digital personal education. Moreover, this will be done through their Hana New Deal Growth Fund. The green initiative by Hana will focus on developing Korea’s new renewable energy. The group believes this will help Korea achieve carbon neutrality by 2025. Therefore, they will focus on three core next-generation energy industries: hydrogen fuel cells, wind, and solar power. In addition, they will continue to help startups in high-tech sectors such as AI, Blockchain, cloud computing, and data science. 

Woori Financial Group

Woori Financial Group runs its incubation program for startups in Korea. This is their strategy to find new partners to accelerate their digital transformation. The incubation program is called Dinno Lab (digital innovation lab). Woori Financial Group will offer support for a year for the 17 startups selected this year. In addition, they will offer the startups free office space, IT training, and support from business and investment specialists. 

Startups in the program will also access Woori’s affiliates with strong networks in the Southeast Asian market. To date, Woori Financial Group has made direct investments worth over $50 million to startups.