A $1.7 billion private equity fund backed by Peter Thiel is scouting for mid-sized South Korean tech companies that have the potential to expand globally.
Crescendo Equity Partners is looking for opportunities in Korea’s mid-cap market, especially business-to-business software service providers, managing partner Kevin Lee said in an interview. The Seoul-based firm looks for “hidden gems” — little-known companies with a technological edge in niche markets — that can become “global champions,” he said.
“South Korea has a lot of business owners with outstanding technology and the ambition to expand into global markets,” said Lee, who previously worked at Excelsior Capital Partners and Intel Corp. “The ability of Korean engineers is amazing, too.”
Global investors are seeking opportunities in Asia outside China, where President Xi Jinping’s crackdown on tech firms and adherence to a strict Covid-Zero policy has soured sentiment. SoftBank Group Corp.’s Vision Fund II last year invested about $1.7 billion in South Korean travel platform Yanolja.
Crescendo is looking at companies involved in systems automation, smart factories, artificial intelligence and automated document service providers, Lee said. The firm is investing 80 billion won ($63 million) buying 16 percent of Medipost Co. — a Korean biotech firm developing stem cell treatments for ailments like knee osteoarthritis — including some of the founder’s stake in the company.
Medipost will use the funds to buy a U.S. contract development and manufacturing company and on clinical studies for its pipelines of treatments.
Lee started Crescendo in 2012 after meeting with billionaire Thiel’s team — when the co-founder of PayPal Holdings Inc. and first outside investor in Facebook was looking for opportunities in Asia.
Crescendo deeply engages with management after making an investment, Lee said. In 2020, the firm invested 50 billion won in Movensys Inc., a Korean maker of software-based motion controllers used in making semiconductors. Revenue jumped 70 percent the following year.
“When we visited the Movensys for the first time, it was based in an factory area” on the outskirts of Seoul, Lee said. “We told the founder, ‘you shouldn’t be here if you want to be a global company’,” and recommended he move closer to Pangyo Techno Valley, where software giants Kakao Corp. and Naver Corp. are based.
Crescendo then appointed a former executive from Rockwell Automation Inc. as chief executive officer and changed the entire working system, including redesigning the office to mimic that of U.S. tech giants.
“It takes about a year to persuade a Korean business owner to let us invest and get involved,” he said. “We are looking for businesses who want to develop into a leading global company, but have no idea on how to do that.”