South Korean gaming giant Krafton wants to help investors back home capitalise on India's maturing startup ecosystem - a move that is likely to expand its footprint in the country.
The first such investor is IMM Investment, a South Korea-based multi-asset investment firm with nearly $7 billion in assets under management (AUM) across three segments - venture capital, growth equity, and infrastructure. Its portfolio includes NYSE-listed Coupang, as well as Korean unicorn startups Woowa Bros, Bucketplace, Musinsa, and Krafton itself, which is listed on Korea Exchange.
On October 29, Krafton's India unit announced a partnership with IMM Investment to become the anchor investor in IMM's maiden India fund. The company however didn't disclose any specific details.
“Our partnership with IMM marks an exciting new chapter in our journey to foster India’s startup ecosystem. By introducing further South Korean capital, expertise, and global perspectives into the Indian market, we aim to help startups in critical sectors scale and thrive, ultimately strengthening India’s position on the world stage" said Sean Hyunil Sohn, CEO of Krafton India.
He also said this collaboration is in line with the government’s Invest India initiative and strengthens the investor relations between India and South Korea while accelerating growth for Indian startups.
Il Bu Joung, President of IMM Investment said that the Krafton-IMM partnership in India will combine their expertise to create a system that will help support Indian startups.
"For 25 years, IMM investment has invested in some remarkable startups in South Korea and supported them throughout different stages of growth," he said.
Read: Funding is back, with a catch: Secondary share sales fuel $100 million rounds in Indian startups
Where will the fund invest?
The fund, called IMM India Fund, will back startups in sectors such as Consumer Brands, Consumer Tech, Software-as-a-Service (SaaS), Fintech, Gaming and Media, and DeepTech. It will primarily target growth-stage companies that demonstrate strong IPO potential and will benefit from linkages with South Korean expertise and capital.
Its first investment is in Sugar Cosmetics, a Mumbai-based beauty and personal care brand started by 'Shark Tank India' judge Vineeta Singh and her husband Kaushik Mukherjee in 2015.
Prakhar Khanduja, who currently leads India investments for IMM Investment, told Moneycontrol that the fund has invested $3 million in Sugar Cosmetics as a secondary investment.
"Sugar Cosmetics is now doing Korean cosmetics as well, where we see a lot of synergy," Khanduja said.
"We are particularly impressed by Sugar's growth trajectory with high gross margins driven by its high-quality, unique product offerings and affordable pricing, which serve the large Gen Z population" he added.
Read: Secondary funds bloom as venture capital investors seek more exit options
The fund did its first close in December last year and it will include multiple other limited partners (LPs) along with capital from the parent fund, Khanduja said. However, he did not disclose specific details regarding the fund size. He also noted that the fund plans to close another investment by the end of the year.
"Our major focus will be secondary investments for the next year. You can find really good assets within the secondary market. If there's a primary (investment opportunity) available, we will do primary as well" Khanduja said.
Khanduja mentioned that IMM India Fund will only back founders and business models which are either nearing profitability or are profitable, at least at an operational level.
"Our focus is only to invest in sustainable models...every company which has a sustainable model has been able to raise money. Yes, valuations are high, but they are high across public markets as well" he said.
"If a company is nearing profitability, or is profitable, we can at least see some sort of a liquidity event in the next three years to the public market. That has been our focus whenever we enter a new market, and that will be the focus for India as well" he added.
Khanduja said that over the past three to four years, the firm has witnessed a shift in the mindset of Indian startups, which are now focused on profitability, and thereby becoming candidates for public market exits while maintaining growth.
"This makes them very attractive to global investors. The Indian market is also unique due to its large and diverse population, and founders are innovating to suit the Indian consumer base" he said.
IMM Fund also plans to build a physical office in India and expand its team next year, Khanduja said.
What's in it for Krafton?
This fund-of-funds (FOF) approach helps Krafton India scout for investment opportunities beyond interactive entertainment, Nihansh Bhat, the company's Corporate Development Lead for India and MENA told Moneycontrol.
"Even our investments that have happened so far came about because we participated as an LP in certain sectors. Through this, we got to learn more about those sectors, which ultimately led to those investments" Bhat said.
Krafton India has previously backed domestic venture capital firms such as 3one4 Capital and Lumikai. The company said it is in active discussions with other prominent South Korean investors to bring additional funds into the country.
Krafton, the maker of the popular battle royale title Battlegrounds Mobile India (BGMI), had pledged to invest $150 million in Indian gaming and interactive entertainment startups over the next two to three years in August 2023. This brings its total commitment to the Indian market to about $290 million, making it one of the most prolific strategic investors in the country in recent years.
Its portfolio includes mobile game development studios Nautilus Mobile and Lila Games, esports firm Nodwin Gaming, Indian language storytelling platform Pratilipi, audio content platform Kuku FM, and influencer marketing platform One Impression.
Bhat said the firm is now exploring investment opportunities in the DeepTech and SaaS sectors and may invest either in a fund or directly in a startup.
"We believe there are opportunities to invest (in these sectors). We will also be trying to expand into other sectors, wherever we can find strategic synergies" he said.
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