This case study is part of AVPN Catalytic Capital in Asia research, which explores how catalytic capital has been deployed in different parts of Asia.
Catalytic Capital in Asia
Structure: Private investment company, with incubator and consulting arm
Year established: 2011
Market based in: South Korea
Market(s) active in: Asia and Africa
Key Impact Areas: Industry innovation, economic inequality, social problems, and climate
Affiliated organisations: AVPN’s Korea representative, B Corp (co-founder of B Lab Korea), and 1% for the Planet
The Merry Year Social Company (MYSC) is an impact investor based in South Korea that provides a mix of consulting, social venture acceleration and incubation services in addition to equity investments. With an AUM of around KRW 50 billion (USD 41 million), MYSC is the fifth largest out of more than 400 early-stage investors (start-up accelerators) in Korea.
MYSC and partners invest in early-stage social venture companies that intentionally deliver impact and do not have access to mainstream investors. It provides patient capital, seeking financial returns over an investment horizon of 7 or 8 years, in sectors that are urgently in need of funding in South Korea. This includes sectors such as job creation, eldercare, STEM education, and energy innovation. It has so far invested in 115 start-ups including two Vietnamese social enterprises: Imagitor, and Journey of the Senses.
MYSC also invests in a number of funds, manages its own funds, and provides upfront capital in impact bond transactions. Through its incubator arm, MYSC provides financial and non-financial support to 130 Korean startups per year, such as credit guarantee funds and business model consultation in an effort to help them to scale.
Catalytic capital in action
Leveraging blended financing to provide flexibility of capital deployment to investees
MYSC, acting as both an investor and intermediary, designs blended transaction structures. By deploying upfront risk capital and crowding in other equity investors, MYSC seeks to address the unique financing needs of impact organisations. It also plays the integral role of aligning risk-return expectations. This is particularly challenging in new and often complex financing mechanisms where stakeholders’ financial, impact, and risk expectations may not be equal and aligned. One example is Harli K, a womTen-led social enterprise, which provides job opportunities to older women in Dae-gu City, located 273 km from Seoul. Given its distance from the capital city, the start-up had difficulty securing funding. MYSC devised a blended financing model for Harlie K which included a combination of grants funded by the Korea Securities Depository, equity through Korea’s largest crowdfunding platform Wadiz, and junior equity investments in the form of common stock from MYSC, which saw the successful crowding in of senior equity investment from other investors. Through MYSC’s support Harlie K became the first social venture in Dae-gu City to receive equity investments.
Deploying patient capital to crowd in investors to support underserved communities
MYSC operates on the principle that its capital, although limited, can create impact at scale by catalysing investments from other investors. An example of this in action is the launch of Seoul SIB, which is the first social impact bond in Asia. In 2020, only 27% of students with special needs in South Korea were enrolled in schools that provided suitable education despite the country enacting the Act on Special Education for Persons with Disabilities in 2008. To address this, MYSC, alongside co-investors People and Peace Link and UBS Seoul, launched the Seoul SIB which aims to improve the educational outcome of children with special needs in welfare facilities across the city. MYSC was one of the first private investors to deploy upfront risk capital within the bond structure. Working with Pan Impact Korea as the intermediary, MYSC put together resources and capital and supported the formation of the transaction structure, which eventually crowded in the other investors. After three years, the Seoul SIB has exceeded its expected outcomes by more than 10% and recorded returns of 25% for the investors.
Fostering collaboration between public, social, and private actors
For a number of years MYSC has focused on bringing public, corporate and social sectors together. In 2017, MYSC launched the 3-year KOICA Global Social Enterprise Accelerating Programme, with its partners KOICA, Crevisse Partners, CSIP and UNLtd Indonesia. The programme aimed to discover, accelerate and invest in social businesses in developing countries like Vietnam and Indonesia. MYSC has also successfully partnered with financial institutions like HSBC and UBS, and senior equity investors like The Wells Investment and Eugene Investment & Securities as well as, organisations like Hyundai Motor Group and Shinhan Financial Group to build a sustainable social business ecosystem in the region.
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Catalytic Capital in Asia