Investment outcomes analyzed since LIPS program launched in 2023

Average sales per firm up 43%, employment up 31%

51 companies secure 39.2 billion won in follow-on funding

K-consumer goods exports expand in cosmetics, food sectors

Photo not related to article [Yonhap]
Photo not related to article [Yonhap]

Local small-business startups attracted more than 120 billion won ($90.6 million) in private investment from 2023 through this year, with some firms growing into mid-sized companies as the results of the investment program become increasingly visible. Sales and employment at recipient companies have also risen.

The Ministry of SMEs and Startups released the findings Thursday in a report titled "Trends and Analysis of Private Investment in Local Startup Small Businesses."

The analysis was based on the performance of LIPS, a private investment-linked matching loan program introduced in 2023. Under LIPS, private investment firms designated by the ministry first invest in local startups that leverage regional resources, culture and characteristics, after which the government provides linked support through policy funds and commercialization grants. The program offers loans of up to five times the private investment amount (capped at 500 million won) and commercialization funding of up to three times the amount (capped at 200 million won).

From 2023 through August of this year, a total of 765 small businesses received investment through LIPS, with total private investment reaching 122.7 billion won. The average cumulative investment per company rose from 117 million won in 2023 to 160 million won this year. The share of companies receiving an initial investment of 100 million won or more also climbed from 43.0 percent to 57.9 percent over the same period.

By business age, companies operating for three to seven years accounted for the largest share, at 375 firms, or 49.0 percent of the total. Firms within three years of founding numbered 292 (38.2 percent), while those operating for more than seven years totaled 98 (12.8 percent). The average business age was 3.6 years.

By sector, manufacturing led with 321 companies (42 percent), followed by services at 131 (17 percent), information and communications technology at 126 (16 percent), and wholesale and retail at 125 (16 percent). The range of investment targets has broadened, spanning consumer goods manufacturing in food and beauty to lifestyle services and education and staffing-matching platforms.

An analysis of 519 companies for which sales and employment data were available showed that average sales per company rose 43 percent, from 765 million won before support to 1.09 billion won after. Average employment grew 31 percent, from 4.0 to 5.3 workers per company. Total employment across the group increased by 646 people, from 2,083 to 2,729.

Early-stage companies within three years of founding posted particularly strong results, with sales growth of 188.1 percent and employment growth of 100 percent. Firms in the three-to-seven-year range saw sales rise 44.7 percent and employment increase 22.4 percent.

Ten of the 765 recipient companies have grown into mid-sized enterprises — four in food and beverage, two in beauty and four in lifestyle. In addition, 51 companies secured follow-on investment totaling 39.2 billion won.

Among the standout cases, Power Player, which operates the skincare brand Ongredients, has expanded its overseas distribution to about 40 countries. Sales grew from 4.08 billion won in 2023 to 26.08 billion won last year, and the company secured 2 billion won in follow-on investment from CJ ENM.

Beanspace, a decaffeinated coffee bean processor, developed new products and landed an exclusive supply contract with a major coffee franchise. Andamiro Neulbom, a Jeju black goat specialty restaurant, developed black goat soup and extract products and opened a second location.

Investment in companies outside Greater Seoul also expanded. Through August of this year, 298 local startup small businesses outside the metropolitan area attracted 58.27 billion won in private investment, representing 38.9 percent of all recipient companies and 47.5 percent of total investment.

The share of LIPS-supported companies engaged in exports rose from 12.0 percent in 2023 to 22.7 percent last year, and average exports per company increased from 183 million won to 233 million won. Cosmetics and apparel were the leading export categories, and the number of export destinations grew from 32 in 2023 to 57 last year.

The ministry plans to hold a LIPS performance-sharing event in conjunction with the first Local Startup Festa in Jeju, scheduled from Sunday through Wednesday in Jeju. The event will feature presentations on investment outcomes and notable growth cases, along with awards for outstanding operators and small businesses.

Industry observers expect the expansion of private investment in local startups to diversify the growth paths available to small businesses. Ventures built around regional resources and local characteristics are translating product development and brand competitiveness into overseas market access, demonstrating that small startups can reach beyond the domestic market. The combination of private investment and government support is also seen as a way to ease the financing burden on regionally rooted companies and improve their prospects for attracting follow-on funding.

Kim Jeong-ju, the ministry's director general for small business policy, said that "as global demand for K-consumer goods grows, local startups are showing clear momentum and drawing attention as attractive investment targets," adding that the ministry would "continue to broaden private investment opportunities for promising local small businesses to support their growth."


boo@heraldcorp.com