Jacob Schindler

The venture capital arm of Korean patent fund operator Intellectual Discovery recorded another profitable year in 2016, according to an annual financial disclosure. The firm also has a new fund in the works that will take it beyond the technology sector for the first time in a bid to diversify its holdings. Any traction gained by the venture outfit is good news for the overall ID organisation, which has had its share of turbulence in the last year.

Last year, ID Ventures earned around $1.2 million in operating profit. That figure was down to around $360,000 in 2016 as a slight reduction in expenses was unable to make up for a 36% decline in operating income. In previous years, the firm had operated at a loss, so a second year of profits does seem to indicate that it has found its footing. It’s worth remembering that ID Ventures is relatively young for a VC firm, having been founded in 2012.

Year

2016

2015

2014

Operating income

W1,903,483,630

W2,959,814,281

W611,903,971

Operating expenses

W1,494,860,970

W1,629,401,554

W1,213,772,477

Operating profit

W408,622,660

$360,000

W1,330,412,727

$1.2 million

(W601,868,506)

($531,000)

Net income

W304,628,601

$269,000

W1,598,216,795

$1.4 million

(W601,868,506)

($531,000)

Source: ID Ventures

The company inaugurated a new fund last summer called the IDV IP Creative Growth Fund, with around $13 million in assets under management. The firm says the investments will be targeted at technology ventures owning IP assets that receive a grade of ‘B’ or higher using a patent evaluation model called SMART 3.1. Developed by the Korea Invention Promotion Association, a semi-governmental body affiliated with the Korean IP Office, it appears to model patent strength, technology strength, and the ability to enforce or commercialise a patent. While previous funds have targeted “strong” IP, this is the first time the fund has articulated the metrics it will use. Perhaps it is a sign of ID’s tighter relationship with KIPO.

But it looks like ID Ventures’ next fund will be the first to have its focus entirely outside the high-tech space. The company announced that it has been selected to help manage a fund of up to $52 million that will invest in cultural content companies. This will presumably see the firm analyse a new type of intellectual property as it seeks to support companies taking part in the so-called ‘Korean Wave’ that has seen the country’s music, movies and television find huge audiences elsewhere in Asia. Given the uncertainty of patent value, it is probably a good idea to diversify into other areas of IP if there are other opportunities to apply the same valuation principles already in use to prospective investments.

Media reports suggest that the first fund launched by ID Ventures back in 2012, IBKC-IDV IP Specialty Fund No 1, has produced some impressive results. The portfolio companies include Peptron, which subsequently had a successful IPO, and Hugel, a Botox maker that was recently acquired by Bain Capital. A report said that ID may move to liquidate the first fund’s holdings this year in order to maximise greater-than-expected returns. If that comes to pass, we may see the fund make a tidy profit next year.

The recent announcement of a massive new IP investment fund launched by the IP Office of Singapore confirms that there is still significant interest in the business model, and ID Ventures can claim to be one of the first to implement it in this region. With ID’s core patent business sailing into potentially controversial waters, it is a nice auxiliary to have.