A Messaging Giant Goes Public In Korea And DCM Reaps The Rewards

As the mobile messaging company Kakao Corp. gets ready to celebrate the culmination of its long-awaited initial public offering on the Korean stock exchange, a world away, on Sand Hill Road, the partners at venture capital firm DCM are probably getting ready to do some celebrating of their own.

Three years after its initial investment in Kakao, the venture firm will be able to harvest the fruits of its labor with the blockbuster $10 billion pubic offering Kakao is making today. The IPO follows Kakao’s merger agreement with Korea’s largest internet portal, Daum, which was announced in late May.

“We invested in Kakao in 2011,” says Osuke Honda, the DCM partner who made the firm’s original investment in Kakao. “Back then, they were only a messaging app, similar to WhatsApp.” Screen Shot 2014-09-30 at 8.00.53 PM

However, the company had a broader mission, says Honda, which was to become a platform. The company wanted to create something akin to Path¬†or Line, which would incorporate gaming, commerce and messaging into a social platform. “A lot of stuff that was initially done on the web we are trying to figure it out on the mobile side. Kakao was the first messaging company on mobile that started monetizing.”

And it’s continued to monetize. Unlike the U.S., where messaging applications like WhatsApp have remained focused on messaging, as Kakao expanded into a platform encompassing mobile commerce, gaming, and other tools, the company’s revenues ballooned. Honda says it will be one of the most successful exits DCM has had.

“We’re probably going to make 20x to 30x on this investment,” says Honda. “It’s going to be double-digit multiples for sure… Conservatively speaking 20x is good, but we’re hoping it’s going to be bigger.”