As venture markets tighten in South Korea and Japan, founders are urged to look beyond valuation when selecting investors, focusing on fund structure, follow-on reserves, and ongoing support to build durable companies amid growing market competition.
For founders, the first venture term sheet can look like the finish line. In reality, it is often the start of a longer test: not just whether the price is attractive, but whether the investor will still be able to help when the company needs more capital, more introductions and more patience. According to KoreaTechDesk, that question is becoming more important as venture markets tighten and investors grow more selective.
South Korea’s Ministry of SMEs and Startups said venture investment reached KRW 3.3 trillion in the first quarter of 2026, while new venture fund formation rose to a record KRW 4.4 trillion. Yet the broader market has also become more concentrated, with fewer startups securing funding even as average deal sizes rise. That makes the identity and structure of the fund behind the cheque more relevant than ever.
Takahiro Kawanishi, a general partner and head of investor relations at ALPHA Inc. Japan, told KoreaTechDesk that founders should not focus only on valuation and cheque size. Having spent years assessing fund managers as an institutional investor, he said he now pays close attention to where a fund sits in its life cycle, how it sets aside capital for later rounds and whether the general partner has the capacity to keep supporting portfolio companies.
That reserve question matters because venture funds are not meant to deploy all their capital on day one. Industry guides on follow-on investing say many firms hold back a large share of committed capital for later rounds, with some typically reserving 50% to 70% for follow-ons. The aim is to back the winners, defend ownership and signal confidence to future investors. If a fund runs out of dry powder too early, it may be unable to support a company when it matters most.
Fund timing can matter as well. Research cited by KoreaTechDesk suggests companies backed earlier in a fund’s investment period tend to see stronger exit outcomes than those financed later in the cycle. That does not mean later investments are necessarily weak, but it does underscore the importance of understanding how much capital remains available and how the firm plans to deploy it across years of follow-on funding.
The point becomes sharper in slower markets. KoreaTechDesk noted that Japanese startups raised JPY 761.3 billion in 2025, while the number of funded companies fell, private-stage fundraising stretched out and IPO activity dropped to a 10-year low. Carta data also showed bridge rounds accounted for nearly half of seed financings in the first quarter of 2025, a sign that many startups needed extra time before reaching their next priced round. In that environment, investors with reserves, conviction and fast decision-making can be as valuable as the initial valuation.
Kawanishi said founders should ask direct questions before taking money: where the fund is in its cycle, how much is reserved for follow-ons, how quickly it can decide on extra financing and what support it offers beyond capital. According to KoreaTechDesk, that support can include customer introductions, strategic partnerships, hiring help and access to future investors. For founders building durable companies, the lesson is simple: evaluate the fund as carefully as the term sheet.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
