In September of 2009, Cisco Systems Inc., the world’s largest maker of computer networking equipment, announced that they are taking their first major step into the Korean market, through an investment in a local venture fund.
Committing KRW 40 billion ($32 million) to Korean private equity firm SkyLake Incuvest & Co.’s latest fund ‘Sky Global Invest 4′ (SGI4), which will focus on SMEs in IT and new growth-engine industries.
Left to right: Hilton Romanski, VP Corporate Development, Cisco; Daeje Chin, CEO of Skylake Incuvest Ltd; Hyungki Kim, CEO of the Korean Venture Investment Company (KVIC)
Not to go back is somewhat to advance, and men must walk, at least, before they dance. – Alexander Pope
Cisco’s current slogan “Welcome to the human network” could easily be replaced by “Fools rush in”, due to this market entry method of co-investing in locally based venture capital funds.
The strategy allows the company to first learn about a new market, before moving on to direct investments and finally acquisitions.
“The value of (investing in) a fund is that it allows us to get closer to some new areas we’d like to explore…it gives us leverage and scalability without having a lot of people. ” according to Tyson Li, a business development manager at Cisco.
This model of market entry has worked well in the past, when Cisco entered India and China, and more recently in Eastern Europe and Russia. With about 30% of the Company’s total revenue now coming from emerging markets.
“Entering through co-investment allows us (Cisco) to learn about different needs and price sensitivities of customers, as well as different business models that work well in that market”, Tyson Li stated regarding previous co-investments in China.
Cisco CEO John Chambers shakes hands with Korean President Lee Myung-bak (April 4, 2009)
Cisco’s Investment in Korea
Cisco’s co-investment in the SGI4 fund is the first of $500 million Cisco CEO John Chambers pledged his company would provide in investment and loans for South Korean IT and communications companies, when he met with Korea’s President Lee Myung-bak earlier this year.
SkyLake Incuvest & Co. will manage the $80 million fund, whilst Tongyang Life Insurance Co. and Korea Venture Investment Corp. are also investors.
“Strong local venture capital and limited partners are the foundation for successful engagement” said Hilton Romanski, vice president of Corporate Development at Cisco, in support of their Korean partners.
Cisco executives, cited Korea’s innovation -
“Korea is world-renowned as a leader in ICT innovation, and Cisco’s anchor investment in the SGI4 fund underscores our belief in the innovative technology and ideas in this exciting market,” according to Hilton Romanski.
and infrastructure -
“(Korea provides) a lot of opportunity to build interesting applications that take advantage of the country’s extensive broadband infrastructure” Li added.
as reasons behind the investment.
The Korean Venture Investment Corp. (KVIC) is a government-backed fund-of-funds management firm established for the purpose of fostering the growth of the Korean domestic private equity industry. SkyLake is a leading private equity investor in Korea, dedicated to technology investment.
The Investment Partnership Support Team has strong links to Korea’s VC industry, on both the buy and sell-sides, so if you would like more information regarding investment or co-investment opportunities in Korea please do not hesitate to contact us.
(Sources: Cisco Uses Venture Capital To Push Into Korea- Wall Street Journal, Cisco Press Releases, Cisco Invests 2 billion in Korean IT – Korea IT Times)
