L&S Venture Capital December 2011

confiden'al

Experience the Difference!

A Brief Look into Korea and Its Venture Capital Investments

confiden'al Few Stats on Korea •  Pop. 49M, occupying 100K sq km •  Member of G20 and OECD •  2010 export of $467B (7th) •  2010 GDP $1T (14th), $20,575 per

capita (26th)

Capable Workforce & Strong Export & Healthy Domestic Consumer Market!

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79%

64%

57%

48%

38%

36%

56%

Korea

US

England

Japan

Switzerland

Germany

OECD Avg

OECD: % of High School Graduates Attending College

•  Highest % entering college •  160K PhDs •  50.8M mobile phone subscribers •  77.8% with Internet Access •  18M registered automobiles

confiden'al Upward Momentum for Made-In-Korea K-pop and Korean movies and soap operas are entertaining people throughout the globe. This recent phenomena is enhancing “Korea” as a premium brand.

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Biggest beneficiaries are Korean consumer goods and services providers, who now find it easier to conduct business overseas.

少女時代  

confiden'al Korean VCs Manage More Among 100+ registered VCs, roughly 30 VCs are active and well.

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Com

mitm

ents

($M

)

Source: Korea Venture Capital Association, Nov. 2011

$617 $599 $633 $813 $822 $876 $1,040 $1,283 $1,449 $1,017 $3,072

$3,537 $3,907 $4,325 $4,472 $4,504

$5,174 $6,010

$6,958

$7,740

412 430 424

400

350 332 336

366 393

409

0

50

100

150

200

250

300

350

400

450

500

$0

$2,000

$4,000

$6,000

$8,000

$10,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.10 New Funds Created Funds Expired Funds Outstanding Number of Funds Outstanding

US

$1 :

1,10

0 K

rW

confiden'al

$1,440

$876 $1,040

$1,283 $1,449

$1,017

$0

$500

$1,000

$1,500

$2,000

2000 ~ 2006

2007 2008 2009 2010 2011

Current VC Funds by Vintage The vintage of currently outstanding VC funds suggest increasing investments in coming years.

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US

$1 :

1,10

0 K

rW

Vintage

Tota

l Com

mitm

ents

($M

)

Source: Korea Venture Capital Association, Nov. 2011

In 2012

Out-of-Investment In-Investment

confiden'al The Anchor Korean government anchors (offers stability to) the VC industry.

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22.8%

12.1%

23.2%

13.5%

18.5%

3.6% 5.9%

0.4%

Government Agencies National Pension Financial Institutions Venture Capitals Corporations Ind Investors Foreign Investors Others

Source: Korea Venture Capital Association, Dec. 2010

confiden'al Special Vs. General Purpose Funds Most Korean VC funds have explicit investment criteria, which reflect the mandates of the participating government institutions and strategics.

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41.14%

11.14% 10.86%

9.14%

7.14%

3.72%

3.71% 3.14%

2.86%

2.57% 2.57% 1.71% 0.29% SME Invest Movies and TV Shows IT Incubation General Purpose Entertainment Media* Components M&A Overseas Invest Contents Patent Bio

Source: Korea Venture Capital Association, Nov. 2011

confiden'al VC Investments Are Up Following a short-lived decline after the recent crisis, VC investments increased to $1B by 2010 (China $5.4B).

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Inve

sted

Am

ount

($M

)

Source: Korea Venture Capital Association

$618 $631 $604

$757 $733

$992

$725

$867

$1,091 $1,035

$0

$200

$400

$600

$800

$1,000

$1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.10

US

$1 :

1,10

0 K

rW

confiden'al

28%

32%

23%

7%

5% 4%

0% 1% IT

Manufacturing

Contents

Life Science

Service/Education

Distribution

Material Recycle/Clean Energy Others

VC Investment Allocation Current VC investments reflect today’s revenue / export drivers.

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Source: Korea Venture Capital Association, Nov. 2011

confiden'al VC Investment Allocation Korean VC investments are spread evenly among companies young and old.

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13%

15%

14%

12%

30%

16%

1 Year or Less Between 1 and 3 Years Between 3 and 5 Years Between 5 and 7 Years Between 7 and 14 Years 14 Years or More

Source: Korea Venture Capital Association, Nov. 2011

confiden'al VC Backed KOSDAQ IPOs Are Up The returns on local investments remain attractive for Korean VCs.

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134

105

58

37

61

43 52

29 29 34

73

53

36 28

49

35 44

22 20 26

$2,177 $2,215

$1,383 $1,358

$2,851

$1,488

$1,882

$1,379

$1,938

$2,428

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

0

20

40

60

80

100

120

140

160

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Non-VC Backed IPO VC Backed IPO VC Backed IPO Market Cap*

Num

ber o

f IP

Os M

arket Cap ($M

)

Source: Korea Stock Exchange, Korea Venture Capital Association

US

$1 : 1,100 KrW

confiden'al Recap

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•  Korea’s strong domestic and export market affords it a resilient economy •  The accumulative sum of funds at Korean VCs’ disposal is increasing •  The accumulative total investments made by Korean VCs is increasing •  Korean VC investments are made primarily in Korea:

–  Scarcity of overseas investment fund –  High threshold for overseas investment mandated by participating

government agencies –  Additional cost and inconvenience of investing in start-ups overseas –  Viable return on local investments

confiden'al Collaborating with Korean SMEs Foreign start-ups looking to raise capital or pursue business in Korea should consider working with Korean SMEs for the following reasons: 1.  Korean conglomerates’ preference for built-it-here solutions suggests, which

makes Korean SMEs the preferred suppliers 2.  Korean SMEs are the key ingredients in Korea’s pursuit of New Economic

Growth Drivers. Qualified SMEs can access investment funds and grants dedicated to the acquiring and developing technologies needed for the pursuit of New Economic Growth Drivers

3.  Korea installed investment programs and business development support programs to help SMEs expand beyond borders

4.  The SMEs run on shorter chain-of-command, which allows them to make quick business decisions and be less averse to long-term investments

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confiden'al Where to Begin •  Korea / Israel Inter-Governmental Collaboration Program – Our past two

administrations have been keen on facilitating across-the-border collaboration with Israel (i.e. KORIL RDF)

•  Israeli Local VC - Having raised capital or won interest from a credible Israeli VC goes a long way. One of our biggest challenge in overseas investment is the additional cost and burden associated with the discovery and investment management

•  Korean Conglomerate - Most Korean conglomerates maintain in-house corporate venture teams. Many of them conduct periodic searches in Israel for innovations. Be weary of business restrictions and lengthy investment process!

•  Korean SME – Most successful collaborations between Korean companies and Israeli companies we observed were initiated by Koreans. Israeli companies should make information describing their innovations more accessible to Koreans

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confiden'al Inter-Governmental Collaboration Korea-Israel R&D Foundation (aka KORIL RDF) offers both the venue and grants for the partnership between Korean companies and Israeli companies.

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Ministry of Knowledge Economy (MKE), Korea

Ministry of Industry, Trade & Labor

(MOITaL), Israel

A public, non-profit organization established in 2001 and financed fully by the governments of Korea and Israel in order to administer the joint R&D fund and

concurrent projects.

Israel Office Ms. Deborah Schabes Tel: 972-3-511-8183

dvora@matimop.org.il

Source: KORIL RDF

confiden'al Who We Are

We are a Korean government accredited private equity fund manager. •  Established: October, 2006 •  Founders: Mr. Dongshik Chang, Mr. Seongjin Joo •  Main Offices: Seoul, Korea •  Investment Focus:

–  Early stage –  Smart IT, green/clean tech, fusion tech, Contents

•  Major Accolade 2010: Selected by Korea’s Small & Medium Business Administration as the Early Stage Investment Fund Manager

•  Major Accolade 2011: Selected by Korea’s Ministry of Knowledge Economy as the first New Economic Growth Driver Fund Manager

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confiden'al Our Competitive Advantages Our unique make-up affords us the benefits of a small firm (autonomy, agility, flexibility) without the drawbacks (thin knowledgebase, lack of experience, incomprehensive network).

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Knowledge-base

Network

Approach

•  Corporate venturing •  Investment management •  Global business expansion

•  Aggressive investment approach •  Preference for leading deals •  Willingness and ability to structure

complex deals

• 

•  First-Tier SMEs •  Korean government institutions •  Overseas business partners and

financial investors

confiden'al

Global  Stars!  

Produc:-­‐za:on  

Open  Innova:on  

What We Look For

We look to invest in Israeli innovators who can work with Korean SMEs. If our investment model works, we will create a fund specifically to invest in Israel.

Our Investment Model •  Open Innovation – Start-ups with

desired innovations discovered with help from universities, tech centers, governmental programs, and business partners within/out Korea

•  Productization – Work with Korean SMEs in turning innovations into commercial products

•  Global Stars – Help the Korean SME/start-up collaboration reach beyond borders

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confiden'al

Green/Clean  Tech Solar,  Win,  Fuel  Cell,  LED,  EV,  Resource  Conserva:on    

Smart  IT  

Smart  Phone/Pad/TV  

Smart  Grid  

Fusion  Tech  Broadcas:ng,  Nano  Tech,  

Intelligent  Robot,  Telema:cs

Media  Contents Contents  Crea:on,  

Distribu:on,  New  Media    

Our Typical Investments

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We typically invest in companies pursuing the following segments and with solutions beyond the proof-of-concept stage.

confiden'al

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Jason  Lee  Managing  Director