Under The Radar, a prominent IT and startup-focused blog in Korea, recently published a top 10 list of venture backed enterprises in Korea. Not surprisingly, Kakao placed number one in the list by a wide margin.
In Korea, unlike most other venture ecosystems around the world, success is often a zero sum game, where competition almost seems futile if there is already a dominant player. Kakao has claimed this throne as it reigns the mobile platform business with its indisputable power.
However, Kakao was the only social media platform that made it into the list, with no other social applications / services in the list. This is quite different compared to the other markets where social media services dominate a number of spots in the top ten. E-commerce and gaming companies, which that have had a long and successful run in Korea, filled the remaining list, showing that the competition is thriving in these two areas.
It’s been five years since the second venture boom started in Korea, and now there are several ‘startups’ that are big enough to compete with KOSDAQ listed companies. These success stories create a positive trend as they draw more capital and talent to the venture industry, away from the traditional employers of Samsung, Hyundai, LG, KT, SK Telecom, and other large corporations.
As a disclaimer, it is debatable whether the companies listed can still truly be classified as ‘startups’ and precise valuations are not available, but we have conducted extensive research and have determined valuation estimates, based on available figures.
For this article, we specifically set our startup universe from the beginning of mobile and social-tech boom, with a focus on companies that are highly likely to go public soon. Additionally, publicly held information and news media articles from reputable sources have been used for the valuations.
1. Kakao ($2~3 billion)
Kakao is definitely one of the most successful startup companies in the last several years. Currently, Kaokao’s valuation fluctuates between $2 billion and $5 billion. Kakao’s equities were recently traded in the OTC market at $70~80 per share, which roughly sums up to $2 billion in total value. From a growth perspective, we estimated a total valuation of $5 billion, after applying the industry average Sales-to-Price ratio of 0.1 to Kakao’s estimated revenue of $500 million in 2015. However, with their business slightly stalling at the moment, experts believe that Kakao’s value will be in the lower range.
2. Coupang ($350 million)
Coupang is a social e-commerce company operated by Forward Ventures LLC, a US based company. Interestingly, the company has consistently done its PR through online business media, Business Insider. In 2012, Business Insider placed Coupang as 37th in the top 100 highest valued Korean companies in 2012. Coupang supposedly commanded $600 million in total value, but the data suggested in the article was not officially validated. Considering a slight downward in the social e-commerce industry, Coupang’s value may need to be heavily discounted from the upper estimates.
3. Ticket Monster ($300 million)
Ticket Monster is one of the most well known startups in Korea after Kakao. Its company value can be more precisely measured, as it already has a couple of precedent transactions. In 2011, the company was first acquired by Living Social at $300 million, and later by Groupon at $280 million. Right now, the company should be valued roughly around the same amount. At the time when the company was being acquired, the valuation seemed somewhat underpriced. That was mainly because Ticket Monster had some financial issues during that time, and the overall industry trend for e-commerce was downwards. Currently, Ticket Monster seems to have more stable operations, and has succeeded in trimming some of its previous losses.
4. WeMakePrice ($200 million)
According to the public filings in 2012, Min Huh, former CEO of WeMakePrice, now owns 100% of the company. Due to lack of external investments, value of the company is a bit difficult to measure. Recently, WeMakePrice’s operational activities have been growing, thanks to its aggressive marketing strategy. However, we assume that this created some pressure in its financials, netting out the overall effects. Based on the peer group analysis, the company’s fair value should be around $200 million, which is slightly below compared to Ticket Monster.
5. SundayToz ($160 million)
SundayToz, the game developer behind Kakao Games first release (and rock-star success) Anipang, filed its IPO last November, and currently has a market value of around $160 million. Its share price has been skyrocketing during the past months, despite a recent copyright scandal. Although mobile gaming companies have been suffering lately, SundayToz is still standing strong, in part thanks to a highly successful second release, anipang2. Recently a 20% stake in the company was acquired by another gaming giant in Korea, Smilegate for $112 million.
6. PATI Games ($100 million)
With SundayToz’s successful IPO, PATI Games is also likely to file its IPO. In 2012, the company’s revenue and net income were around $25 million and $10 million, respectively, figures much more impressive than SundayToz’s. The market is expecting the company’s value to be at least on par with SundayToz’s initial IPO valuation, though it’s concerning that the revenue from PATI’s flagship title, ‘I Love Coffee,’ is rapidly decreasing. Also, the company doesn’t seem to pay much attention to marketing, or attracting investor interest. Therefore, we expect the value to be slightly lower than SundayToz.
7. DevSisters ($70~80 million)
As many people know, DevSisters is a game developer behind the hit title, ‘Cookie Run.’ Cookie Run is still performing strongly, and remains in the top 2~3 spot in both the App Store and Google Play in terms of total sales. Recently, NHN Entertainment acquired a 22% stake in the company. At that time, one of the shareholders, Com2us, sold 7.4% stake at $5.6 million. Based on this data, we can infer the total value to be around $75 million. DevSisters has a bright future as it’s consistently generating cash. The company recently released its hit ‘Cookie Run’ globally on the LINE platform and has enjoyed 20M downloads in the last 2 months alone.
8. Yellow Mobile ($60~70 million)
Yellow Mobile is a rising star in the local-based service industry. The company was founded by Sang-hyuk Lee, an ex-Daum member, in 2012. Now, Yellow Mobile is growing exponentially, having already acquired more than 17 local service companies. In the process, Yellow Mobile raised a whopping $11 million capital from VCs like DSC Investments. Currently, the market is divided into two sides, one saying that its executions were exceptional while the other saying that the growth was too fast. Regardless, the company’s valuation continues to increase.
9. 4:33 Creative Lab ($40~50 million)
If the mobile gaming industry was lead by SundayToz and PATI Games in the past, now DevSisters and 4:33 Creative Lab dominate the scene. 4:33 was founded by ex-Nexon Mobile members. Last May, the company received $9 million from LB Investments and Korea Investment Partners. If we assume that the company sold a 10~30% stake in the company, and based on this the value it should range between $40 and $50 million. 4:33 is also growing fast with a number of hit titles including ‘Arrow’ and ‘Watermargin.’
10. Woowa Brothers ($40~50 million)
Woowa Brothers became successful with its delivery service app, ‘Nation of Delivery,’ a platform where users are connected with local restaurants that offer home delivery. The company takes a fee in exchange for use of their platform in the process. This seemingly simple idea is expected to bring around $10 million in revenue for the company this year. Recently, there was news about the comapny’s series B funding, which totaled $10 million, which will be used for marketing in Korea, as well as building out a more comprehensive mobile service and overseas expansion into South East Asia. However, the company is now pressured to find a new revenue source, and its profitability is by no means as lucrative as the mobile gaming companies on this list. For this reason, we value Woowa Brothers at a slightly lower level than 4:33 Creative Lab.
There are many more rapidly growing ventures in Korea that didn’t get into the top 10 list. IUM, NBT Partners, ID INCU, Frograms, KnowRe, Studymax, SE Works, and 5 Rocks also command valuations of around $10~30 million and are showing good signs of sustained growth.
Recently, Sirgoo Lee, CEO of Kakao, mentioned that with the mobile technology ecosystem having existed for only 3 years, the startup scene is now on the cusp of truly taking hold and making an impact on the economy. “In 2014, we hope to see more successful startups emerging in the scene,” he stated.
Original Korean here: Article
This story originally appeared on BeSUCCESS. Copyright 2014
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