Urbanbase, a South Korean proptech startup backed by Hanwha Group (Hanwha Hotels & Resorts) and Shinsegae Group (Shinsegae I&C), is currently undergoing a sale process. The company sought corporate rehabilitation after struggling to secure additional investment amid a stagnant venture capital market and its inability to achieve a special tech listing.
As of Mar. 28, venture capital (VC) industry insiders revealed that Urbanbase has chosen E-JUNG Accounting Corporation as the lead entity to facilitate its mergers and acquisitions (M&A) process, which occurs before rehabilitation plan approval. The company is poised to make a public announcement soon and will invite letters of intent (LOIs) from potential buyers.
Founded in 2014, Urbanbase has made a name for itself in 3D spatial data, boasting significant advancements in the metaverse, particularly in virtual reality (VR) and augmented reality (AR). One of its standout innovations is a modeling technology that can automatically transform 2D drawings into 3D models. This technology has enabled Urbanbase to create over 98,000 3D models, covering approximately 96.5% of local apartments in Korea.
The startup has attracted interest from major Korean corporations. In 2020, Shinsegae I&C became a strategic investor, followed by a $9.68 million (1.3 billion won) investment from Hanwha Hotels & Resorts in 2021, which valued Urbanbase at $298 million (40 billion won). Other financial backers include CKD Venture Capital, Samsung Venture Investment, Breeze Investment, and SL Investment, bringing the total investment to $18.6 million (2.5 billion won).
Urbanbase’s ambition for an initial public offering (IPO) encountered difficulties last year. Despite appointing Hana Securities as its listing agent and applying for a special tech listing, the company’s underwhelming performance hindered its progress.
The company reported revenues in the upper hundred million won range annually, with figures of $892,600 (1.2 billion won) in 2020, $1 million (1.4 billion won) in 2021, and $1.2 million (1.6 billion won) in 2022. However, its deficit widened significantly during this period, escalating from $1 million (1.4 billion won) in 2020 to $6 million (8.2 billion won) in 2022. These growing losses and a lackluster venture capital environment led to the decision to initiate rehabilitation proceedings.
The expected sale will likely take the form of a third-party placement, without selling existing shares to the public, involving the issuance of new shares. This approach will dilute the stakes of existing shareholders, including Shinsegae and Hanwha, which could lead new investors to secure control of the company. This could result in a significant loss in their initial investment.
