Ark & Partners, a spinout from South Korea-based VIG Partners, has closed its debut blind pool fund on KRW 200bn (USD 150m), securing equal support from domestic and international investors.

The fund launched in September 2023, starting with the domestic tranche. The international fundraise primarily featured fund-of-funds and endowments. Sungmin Kim, Ark’s co-founder, managing partner and CEO, believes they were sold on a proposition to address a neglected part of the middle market.

“Some GPs have moved into the large cap space, but we want to focus on the low to mid-cap buyout space where we see tremendous opportunities,” he said. “We like to invest in tech-enabled companies, which most buyout firms are reluctant to back because of the shorter history and unstable cash flows.”

Kim and his fellow managing partner, Songwook An, departed VIG to launch their new venture in 2020. The broader team – which includes a value creation unit – comes from investment banking and private equity, with experience at groups such as TPG, Praxis Capital Partners, and GIC.

Ark claims to prioritise internal transparency. Unlike many established firms, ownership of the GP is broadly dispersed among the team to incentivise and retain young talent, according to Yujin Jhang, a managing director.

Clean-up jobs

The strategy is buyout – deal sizes below USD 200m, typically featuring LP co-investment – but targets may have growth equity heritage. These are situations where companies need more capital to reach the next level, and founders and existing shareholders are looking for liquidity solutions.

While other buyout investors might be unwilling to step down to look at these opportunities, venture capital firms are not minded to step up. Many Korean VC investors raise capital from institutions and quasi-government entities under strict mandates that prevent them from engaging in growth-stage activity, Jhang noted. They may also lack the necessary skills.

“The venture capital firms don’t have the capability or interest in cleaning up a cap table. For buyout firms, it’s too small and too complicated. We’re willing to roll up our sleeves and talk to each investor on the cap table to make sure that we can consolidate a significant portion of the cap table to acquire properly structured companies,” Jhang said.

There have been four investments to date: Remember, a human resources technology business formerly known as Drama & Company, street fashion player Kashina, education technology platform Team Sparta, and local services marketplace Brave Mobile.

Remember and Kashina were backed via project funds, while Team Sparta and Brave Mobile are from the debut flagship fund. All were sourced through connections to early-stage investors. A fifth transaction is nearing completion. It will take Fund I deployment past 50%. The Ark team expects to come back to market in 2027, likely targeting USD 250m-USD 300m.

Maintaining alignment

Alignment of interests is crucial to investments in which cap tables are being realigned. Ark’s pitch to founders is that it can simplify the ownership structure – replacing many investors with one – in return for an attractive entry valuation. Each deal is then carefully tailored. For example, Series A and B investors might be exiting while the Series C contingent remains but is restructured.

Jhang observed that financial security is often a priority for founders who have been running their companies for over a decade without taking any money off the table. While Ark wants them to keep some skin in the game, it facilitates liquidity events that often go towards apartment purchases or children’s tuition fees.

Sometimes investments are accompanied by operational heavy lifting. In the case of Remember, Ark provided a KRW 160m Series D alongside SaraminHR, becoming the largest individual shareholder. Jae-ho Choi, the company’s CEO, retained a minority interest. Ark then oversaw a transition from business card service provider to profitable B2B HR platform.

Remember has completed multiple M&A transactions as part of this process, picking up recruitment platforms Jasoseol.com and Super Rookie, professional network service Lanson & Company, and executive search firm Briscan Young. Ark expects EBITDA to hit USD 20m in 2025.

“We’re very hands-on investors. Founders who don’t buy into or believe in our value creation, resources and upside won’t partner with us,” Jhang said. “For founders that do, they will leave money on the table when we invest because they believe we can help deliver 2x-3x growth.”