AI Startup Sweeping Up Investments... The 'Promising Bud' Is the Best

'Over 50 Billion Won Investment' Reaches 5 Companies in Last 2 Months
Some AI Startups and VCs Compete for 'Gap' Position
Foreign Companies Also Show Investment Enthusiasm... Nvidia Among Those Opening Wallets

Despite the venture investment winter, the enthusiasm of institutional investors such as venture capitalists (VCs) for artificial intelligence (AI) startups is growing even stronger. While the overall market continues to favor investors, the AI sector is creating an atmosphere where "promising sprouts" become the "boss." The emergence of the country's first AI semiconductor unicorn (a private company valued at over 1 trillion won) is expected to draw even more attention.

According to the startup growth platform 'Forest of Innovation' on the 14th, AI, deep tech, and blockchain startups have attracted a total of 466 billion won in new investments from April to that day. There were even five companies that received "large sums" of over 50 billion won. With the second quarter (April to June) still underway, a total of nine companies have secured investments exceeding 50 billion won this year, with AI accounting for more than half. Forest of Innovation is a private platform operated by Mark & Company. It classifies startups into a total of 24 categories, among which AI, deep tech, and blockchain sectors have seen a particularly notable increase in investments. In March, just before the second quarter, the amount was 16.1 billion won.

The AI investment fever was also confirmed in the first quarter (January to March) by government statistics. According to the Ministry of SMEs and Startups, the investment scale in domestic AI startups and venture companies in the first quarter was 91.4 billion won, a 345% increase compared to a year earlier. The atmosphere has become even hotter entering the second quarter. Although there are slight numerical differences between private platforms and government statistics, the overall trend is consistent.

"Why didn't you invest?" "Why did you miss out?"?Criticism also arises

AI startups regarded as promising attract not only domestic VCs and institutional investors but also foreign companies rushing to invest with large sums of money. Twelve Labs, which recently secured 70 billion won in investment, is a representative example. Nvidia, currently at the pinnacle of the AI ecosystem, directly invested. Its corporate venture capital (CVC) subsidiary, NVentures, opened its wallet again eight months after its initial investment in October last year. This was Nvidia's first and still only investment in a domestic startup. Korean Investment Partners and others also participated in the investment domestically. In the case of Eltek Korea, "oil money" was injected. The AlphaTango Group from the United Arab Emirates (UAE) invested 50 million dollars (approximately 66.8 billion won).

A VC official said, "Generally, many startups are desperate for funds and often plead for investment in an investor-favored market. However, AI startups that appear to be 'promising sprouts' are in the position of 'boss,' deciding the timing and investors themselves." He added, "When news of large-scale investment in AI startups that we were unaware of or had insufficient review about comes out, professional evaluators sometimes face criticism like 'Why did you miss out?'" There is also a spreading trend where startups seemingly unrelated to AI insert AI into their company profiles or even their company names to attract investment.

Beware of 'blind investment'... "The sorting of wheat from chaff will begin"

Looking globally, the investment fever for AI startups is also intense. Notably, big tech companies rather than VCs are at the center. According to global market research firm PitchBook, of the 27 billion dollars raised by generative AI startups last year, about two-thirds came from big tech companies such as Microsoft, Google, and Amazon. Conversely, this means that due to intensified investment competition, it has become more difficult for VCs to invest in AI startups.

The general outlook is that the AI startup investment fever will continue for the time being. Domestically, the birth of the first-ever 'AI semiconductor unicorn' is expected to further ignite the fire. On the 12th, AI semiconductor startup Rebellion and SK Telecom’s subsidiary Sapeon announced a merger, with the industry estimating the merged entity’s value to exceed 2 trillion won. Rebellion was also a representative AI startup that had attracted VC interest, with a cumulative investment scale of 277 billion won.

There are voices cautioning against blind investment driven by blind expectations. Choi Sung-jin, CEO of Korea Startup Forum, said, "In the past, startups that did not claim to be AI-focused are now promoting AI, leading to an investment rush, but over time, the wheat will be separated from the chaff." He added, "Ultimately, AI will be applied to all industries, so the key will be how quickly AI startups can rapidly capture their respective industries, and it is important to identify and invest in such promising startups early."