Investors worldwide are currently grappling with a slew of challenges, and this trend is not limited to South Korea. These difficulties are trickling down to impact startups seeking funding.
One significant factor contributing to this situation is the withdrawal of funds by Limited Partners (LPs), who are clients of VCs. LPs are pulling out investments due to soaring interest rates, inflation concerns, economic recessions in East Asia, and overall market volatility.
The ripple effect of high interest rates is particularly burdensome for startups relying on debt financing.
However, escaping this predicament is unlikely to be straightforward. Interestingly, despite these challenges, VCs are pouring substantial investments into startups related to recent successful satellite launches in Korea.
These investments are primarily flowing into companies involved in rocket and payload development, many of which are claiming imminent plans to go public.
Taking a closer look at South Korea's recent IPOs, it's evident that several AI startups that went public in the last two years are still operating in the red. Ironically, when these startups did go public, most VCs who initially invested cashed out and turned a profit, while individual investors who bought stocks later bore the losses.
But let's not blame individual investors. Yes, it's essential to emphasize that they have a responsibility to make informed investment decisions. However, VCs passing the time bomb onto individual investors should be criticized too.
In the business world, failures are common, and even companies listed on stock exchanges or large profitable companies can collapse in an instant. While nothing in business is guaranteed, it's concerning to see companies preparing for IPOs as a way to give an exit the VCs or because they've exhausted their funding options, leaving future investors at risk.
Attempting to cover financial gaps by raising more money after a company goes public is also not a sustainable solution.
Recently, Korean aerospace startups have been expressing interest in entering the remote sensing image analysis business. Typically, these companies claim they will leverage their satellite or payload technology for analysis. However, it's important to note that the resolution of images captured by Korean-developed satellites equipped with EO sensors or Synthetic Aperture Radar (SAR) is relatively low.
Low-resolution images limit the depth of information that can be extracted from them, even with advanced super-resolution techniques. This contrasts with the global trend where satellites from countries and companies are continually improving their image resolution capabilities.
Indeed, the resolution of photographs captured by U.S. keyhole satellites is recognized to be exceptionally high, to the point of being virtually incomprehensible. Moreover, this resolution continues to increase. This trend holds true for upcoming satellites slated for launch by numerous countries and corporations. The move toward higher-resolution imagery is driven by the potential for more comprehensive information extraction from high-quality images.
It's possible that Korean satellite startups may not face immediate bankruptcy. This is primarily due to the substantial government support they are likely to receive. Even if these startups are not at the forefront of technological advancements compared to other countries, the Korean government is committed to backing these companies to secure space technology independence.
However, there's a notable trend where VCs are investing in these startups without the necessary expertise in the field. Consequently, individual investors are bearing the brunt of losses in the stock market when investing in newly listed space-tech companies.
In a world where technology evolves rapidly, many global companies are quickly enhancing their capabilities in handling large volumes of high-resolution image data. This trend deepens my concerns about the Korean investment market and suggests that the Korean aerospace market is overheating.
