I am currently working with Korea Telecom (“KT”). KT currently invests in two dozen of venture capital funds as a limited partner. Strategic VC fund investment serves two purposes. First, it gives access to a newer and more promising opportunity. Second, it helps to achieve attractive return. Strategic and policy-driven investment mandate does not guarantee tangible outcome. It is, therefore, very important to keep balance between strategic and financial goals. It is like chasing two rabbits at the same time.
Money allocation to venture capital does not sound like sexy investment idea these days. VC still delivers results, though. Korea top tier VC return multiple over past 10 years is 1.2x. U.S. top tier VC return multiple over past 10 years is 1.3x. It is not like when VC asset class used to deliver solid 4~6x in the middle of 1990s. VC is still quite competitive. To give you a number, $1.4B goes into ventures in Korea and $26.5B in the U.S. (If you count angel investment, it comes close to $50B.) Excessive money supply in venture capital may do good creating a couple of good companies, but not necessarily make the great ones with huge impact.
As of today, we monitor 400+ projects and investments under KT’s VC fund exposure. KT also invests overseas. KT often looks for further business collaboration opportunity with portfolio companies. KT started very first VC fund investment back in 2006. There should have been a great deal of learning curve in the beginning. Now, the size has grown to $350M. It feels more comfortable to manage this relatively new and fully VC focused program. We see some serious distribution from our managers as well. It is time to think of how to squeeze more value out of it and more consistently generate return.
Personally, I enjoy exploring different perspective as an investor to a VC fund. Only drawback is that now I have to see a promising new start-up with bird’s-eye view.