Korea’s KTAC closes two venture funds in one week

Kibo Technology Advancing Capital, a Korean venture capital firm funded mostly by the Korean government agencies, has raised $36 million for two funds this week.

Kibo Technology Advancing Capital, better known as KTAC in Korea, has raised $36 million for two venture funds this week, Jung-Kyoo Yang, president of the firm said in an interview with PrivateEquityOnline.

KTAC has raised $87 million so far this year, almost as much as the $97.5 million it has managed since it was established in 1994.

Jung-Kyoo Yang: shift to private institutional funding

Yang said: “We are closing a fund on $16 million at the end of the week.” The early-stage technology-focused fund received commitments from KVIC, a Korean fund-of-funds, Korea Development Bank and Taeshin Securities, he said.

On 31 July, KTAC closed a $20 million IT Fund, sponsored by Korea Telecommunications Operator Association, established in 1996, by the country’s Ministry of Information and Communication.

Taeshin Securities’ participation in the early-stage fund marks the first time KTAC has successfully attracted a private investor. Many Korean firms are funded by government agencies.

Yang said: “It has got to change from reliance on government bodies to private institutional funding sources. Taeshin invested $2 million, not a big amount but the investment is a significant one.”

Attracting private investors is top of Yang’s agenda. Yang joined KTAC in November last year. He was previously heading KTIC, another Korean venture firm.

“KTAC takes six to 10 companies annually to the IPO market. There is room for us to work with securities companies (like Taeshin).” Banks and chaebols (Korean conglomerates) are also on Yang’s radar.

The two funds follow the close in January of a separate $51 million debut mezzanine fund that provides financing for mergers and acquisitions. The fund ‘IBK-KTAC PEF’ – jointly managed with Industrial Bank of Korea – targets small to mid-cap companies listed on Kosdaq, Korea’s Nasdaq.

It has already invested $22.5 million, Yang said, providing mezzanine financing for Ildong Chemicals, and Woojing Engineering. The fund has a 5-year life cycle, and be invested within two years.

The success of the fund will pave the way for KTAC to raise a second private equity fund, with a $50 million target. It hopes to embark on the fundraising before mid 2007, and is now seeking an anchor investor, Yang said. He expects to complete fundraising for Fund II within three to four months.

At the end of last year, KTAC was managing seven special-purpose funds. Three funds will be liquidated next year, 3 more in 2008, and one in 2010. Since inception, it has liquidated three funds and their gross cash returns were 1.5 times, 2.1 times and 0.8 times (1999 vintage) respectively, Yang said.