CONTENTS
- 1. Venture Capital Investment, 14 Trillion Won in Private Capital Poured In, yet Few Companies to Invest In
- - The More Capital There Is, the More Conservative the Review Becomes
- - More Refined Contract Terms
- - What Matters More Than Valuation Is the "Next Round"
- 2. What Companies Should Review in the Recovery Phase of the Venture Capital Investment Market
- - The Key Is Not "Fundraising" but "Structural Design"
- 3. The Concept and Basic Structure of Venture Capital Investment
- - Risks That Companies Must Understand
- 4. Methods for the Qualitative Design of Venture Capital Investment
- - The Need for Daeryun at the Structural Design Stage
1. Venture Capital Investment, 14 Trillion Won in Private Capital Poured In, yet Few Companies to Invest In
Venture capital investment is now becoming not merely an "act of receiving money" but a process of designing a company's future structure.
Venture capital investment is becoming active again.
New venture investment in 2025 amounted to 13.6 trillion won, the second-largest figure on record, and the total fund formation likewise exceeded 14 trillion won.
With regulatory easing and policy drives added on, the channels for capital inflow have certainly widened.
On the surface, the investment environment appears to have improved, but the atmosphere that startup CEOs feel on the ground is different.
Many respond that "there is said to be plenty of capital, but the contracts have become more demanding."
The More Capital There Is, the More Conservative the Review Becomes
A considerable amount of dry powder (uninvested capital) has now accumulated in the venture capital investment market.
As the period for fulfilling investment obligations has lengthened and the participation of private capital has expanded, VCs have gained more time than in the past.
The change that has resulted is not "speed" but "precision."
Investors now comprehensively verify recurring revenue structures, unit economics, governance stability, and even the feasibility of designing follow-on rounds.
This is because an abundance of capital is no reason to invest in just any company.
In the end, venture capital investment is shifting toward a market of selection.
More Refined Contract Terms
This change appears most clearly in the contract.
In recent investment contracts, provisions such as the following tend to be strengthened.
- Clarification of the conditions for exercising redemption rights on redeemable convertible preferred shares
- Increase in the liquidation preference multiple
- Expansion of the scope of tag-along and drag-along rights
- Strengthening of lock-up and voting-right restriction provisions related to management control
- Additional equity adjustment based on financial performance
From the company's perspective, there is a growing possibility of a structure in which "investment is received, but managerial autonomy is reduced."
The larger the investment amount becomes, the more refined the investor's risk-control mechanisms become, so an increase in capital does not necessarily work to the startup's advantage.
What Matters More Than Valuation Is the "Next Round"
Recently, large venture capital firms have been focusing on later-stage rounds and large deals.
Early-stage companies are subject to relatively stricter structural verification, and at this point the most important question is the following.
"After this round, can the company handle the next round?"
An excessive valuation may appear to be a success in the short term, but if the company fails to attract follow-on investment, it can lead to equity dilution, a down round, and instability in management control.
Venture capital investment is not a one-off event but a continuous structure of rounds.
2. What Companies Should Review in the Recovery Phase of the Venture Capital Investment Market
It is certainly a positive sign that the venture capital investment market has entered a recovery phase.
However, because this is an era in which contracts have become more refined, companies should review the following matters.
This is a point at which understanding the structure of the investment has become more important than attracting the investment itself.
The Key Is Not "Fundraising" but "Structural Design"
Venture capital investment is a process that designs governance, voting rights, and even future strategy.
In a market overflowing with capital, the real competitive edge is not IR capability but the ability to design a structure that can explain risk.
What now remains is the matter of the qualitative design of venture capital investment.
3. The Concept and Basic Structure of Venture Capital Investment
Venture capital investment is an investment method in which a specialized investment institution injects capital into a company with high-risk, high-growth potential.
Generally, a VC raises a fund to invest in a startup or growth-stage company and, after a certain period, recovers its investment through an IPO or M&A.
Basic Structure
- Investment method: common shares, convertible bonds, redeemable convertible preferred shares, and the like
- Investment purpose: exit after an increase in corporate value
- Recovery strategy: IPO, strategic sale, equity sale
- Contract structure: investment agreement + shareholders' agreement
In particular, recently, the redeemable convertible preferred share structure, a form in which the investor can convert into common shares under certain conditions and may demand redemption if necessary, has become common.
This structure may appear to be a flexible fundraising means from the company's perspective, but depending on the conditions, it can lead to a financial burden or a constraint on management control.
Risks That Companies Must Understand
This is a structure in which the investor recovers funds on a priority basis at exit. The higher the multiple, the smaller the founder's actual recovery amount.
· Redemption right
If an IPO or exit does not take place within a certain period, the investor may demand redemption. This places direct pressure on the company's cash flow.
· Tag-along and drag-along rights
In an M&A, an equity sale may take place regardless of the founder's intention.
· Management consent provisions
Provisions may be included that restrict the company from making key decisions without the investor's consent.
4. Methods for the Qualitative Design of Venture Capital Investment
· Establishing a round strategy
A simulation is needed of how the current round will affect the next round.
· Designing a balance in the contract terms
The liquidation multiple, redemption conditions, conversion ratio, and the like should be adjusted from a long-term perspective.
· Working backward from the exit scenario
The recovery structure for the investor and the founder at an IPO or M&A should be calculated in advance.
· Conducting a legal review in advance
The contract prepared at the time of investment is a document that defines the company's future.
It is advisable to conduct the contract review at the early stage of negotiations rather than after the IR.
Venture capital investment is currently in a phase of quantitative recovery, but the market has become more dispassionate.
Because companies with ample capital but insufficient design are not selected, what a company should consider now is not "how much to receive" but "with what structure to grow."
The Need for Daeryun at the Structural Design Stage
In recent investment contracts, which include composite conditions such as redeemable convertible preferred shares, liquidation preferences, redemption rights, and tag-along rights, the corporate value and the founder's recovery structure can vary greatly depending on a single provision.
Accordingly, an approach is needed that comprehensively reviews the contract structure, dilution simulation, round design, and even the exit scenario from the stage of establishing the investment-attraction strategy.
Daeryun Law Firm LLP provides comprehensive legal support throughout the venture capital investment process, drawing on its practical experience in corporate law, M&A, and the capital markets.
At the stage of establishing a negotiation strategy, you are welcome to arrange a 🔗legal consultation with a corporate attorney to conduct a legal review in parallel and to address the company's risks in advance.
