• Super Hot Korea Gets a New Venture Fund

    Screen Shot 2016-03-20 at 10.46.55 AMKorea is sizzling, and the fact isn’t lost on Altos Ventures or its backers. The early-stage venture firm, with an office on Sand Hill Road and in Seoul, has just raised an oversubscribed $110 million fund to invest exclusively in the country, the second fund of its type for Altos, which raised its last Korea-focused fund with $60 million in 2013. (The firm has also raised four U.S.-focused funds over the last decade.)

    It’s easy to understand LPs’ enthusiasm. Korea boasts the world’s 12th economy, with more than 50 million inhabitants and GDP per capita of roughly $25,000, according to the World Bank. Its inhabitants are entrepreneurial, with 28 percent of the population self-employed versus 10 percent in the U.S. Korea also has among the world’s fastest and mostly broadly deployed broadband.

    Also very notably, Korea has produced more than a dozen Internet companies worth more than a billion dollars over the last decade or so, including the web search giant Naver, a now publicly traded company valued at $17 billion; the web search company Daum Kakao, formed when Korean internet firm Daum merged with domestic messaging app company Kakao in a $2.9 billion deal in 2014 (it’s now valued at $5.5 billion); and Yello Mobile, whose mobile apps business was valued at $4 billion during its most recent funding round in December.

    Yesterday, we talked with Altos Ventures managing director Anthony Lee to get a better picture of what’s going on, and how his firm is going to invest its new fund.

    When and why did you start investing in Korea?

    About 10 years ago. We started seeing this opportunity that was very much overlooked in many ways. Everyone knows the country for LG and Samsung, but there are now a lot of very real, billion dollars companies, and there’s almost zero Western capital in those companies. Many bootstrapped themselves. They were almost entirely missed by VCs in Silicon Valley.

    That must be changing. What other investors are you starting to see who you didn’t see five years ago?

    There’s now a domestic VC market, investing $1.5 billion annually in all sorts of things, from Internet stuff to hardware, movies, medical, and manufacturing. We’re seeing a lot more foreign attention now, too. At the later stages, you’re seeing Chinese hedge funds, Japanese corporates — Softbank invested $1 billion in [our portfolio company, the e-commerce startup] Coupang last year. Goldman Sachs is coming in. Blackrock also led an investment in Coupang in late 2014. At the earlier stage, you’re also starting to see, Japanese, Chinese, and more U.S. investors start to venture over there.

    There’s a much stronger focus on profitability in Korea than in the U.S., is that right?

    Yes. Korean venture has been more merchant banking and corporate in its nature, meaning it invests for very quick returns. The government is a large LP in many funds and they’ve [accordingly been] optimized for lower risk. We sometimes find ourselves pushing companies in the direction of growth and not profitability. At the same time, of the 30 companies we’ve invested in there, we’ve only had one loss. It’s a bit emblematic of the way Korean entrepreneurs work. They hate to fail.

    Much more here.

  • Joya Raises $5 Million to Make Messaging More Fun

    JoyaThree years ago, Michal and Vlada Bortnik, former Microsoft employees who met on a soccer field in Seattle, had a host of problems every time they gathered up their two young daughters and tried communicating online with far-flung family members.

    The couple decided to do something about it, founding Joya, a mobile video communications company whose two newest messaging apps allow users to record playful messages of up to 30 seconds in length. One app, FlipLip, allows users to play with their voice and insert their face in a variety of county-fair-like cut-outs, including a princess, ninja and bear; the other, Cleo, invites people to make video selfies using filters designed to make them appear more attractive.

    Whether the apps take off remains to be seen, but Facebook certainly thinks they’re promising. The couple was among 39 other developers to work with the company in advance of the rollout last month of its Messenger Platform, for which it hopes developers will build apps that integrate with Facebook Messenger.

    Facebook’s apparent endorsement could prove especially meaningful as it attempts to turn Messenger into its own ecosystem. (Yesterday, as you likely read, Facebook launched a standalone Messenger app for the web with the hope that people will use Messenger both inside and outside of the social network.)

    Certainly, Joya’s traction caught the attention of Battery Ventures and Altos Ventures, which have just provided the now seven-person company with $5 million in Series A funding.

    As for what’s next, the pair — now based in Palo Alto, Ca. — say to expect more apps this year that will continue their focus on making quick, online messaging easier and more enjoyable.

    They add that for now, they plan to make their existing (free) apps better and more tightly integrated with Messenger.

    “It’s very rare that platforms like this come out with such large audience,” says Michal Bortnik, noting that according to Facebook, Facebook Messenger now has more than 600 million monthly active users.

    “We’ve developed many concepts that never saw the light of day,” he says, “but we now have a clear product and a clear story: How can we make communications more personal and fun . . . We have something that’s growing.”

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