[Listed VC In-Depth] ② LB Investment, the Unicorn Maker... Focused on AI Investments

Bold Early-Stage Investments in Over 550 Companies
More Than 10 Unicorns Backed at the Outset
Over Tenfold Returns from HYBE, Pearl Abyss, and Kakao Games
Musinsa, SemiFive, and S2W Expected to Deliver Exits This Year

Editor's Note
The Lee Jaemyung administration has demonstrated a strong commitment to fostering the venture industry. Major regulatory easing and an expansion of related budgets are expected. Venture capital (VC) firms are drawing attention, as they are likely to play a pivotal role in the upcoming process of nurturing ventures. In particular, listed VCs are in the spotlight. These listed VCs captured significant investor interest in 2021, when the venture budget surged, by reaching record-high share prices. In this series, Asia Economy will provide an in-depth analysis of the strengths and core investment portfolios of major listed VCs.

LB Investment is known as a "golden hand" in the venture capital (VC) industry. More than 10 companies that have grown into unicorns (unlisted companies valued at over 1 trillion won) have passed through LB Investment's hands. Notable examples include HYBE, Pearl Abyss, and Kakao Games. This year, the company is preparing for exits from leading domestic companies such as Musinsa, a top fashion platform, and SemiFive, a semiconductor design solution firm.

Bold in the Early Stage, Relentless Follow-up Investments

LB Investment was originally established as LG Venture Investment in 1996. After being spun off from LG Group in 2000, it changed its name to LB Investment in 2008. LB Corp., led by Vice Chairman Koo Boncheon, the grandson of the late LG Group founder Koo Inhoe, owns a 79.5% stake in the company. Koo Boncheon is the largest shareholder of LB Corp. with a 28.3% stake.

With nearly 30 years of experience, LB Investment has invested in more than 550 companies, playing a leading role in vitalizing the domestic startup ecosystem. Its strength lies in its philosophy of "selection and concentration," identifying promising startups at an early stage and supporting their growth.

LB Investment boldly invests between 3 billion and 5 billion won in early-stage startups, enabling stable technology development and business expansion. It then provides additional second-round (5 billion to 10 billion won) and third-round (over 10 billion won) investments, helping startups overcome the J-curve risk. The J-curve refers to the sharp growth that occurs after a period of significant early-stage operating losses and cash burn.

As a result, LB Investment often accumulates investments exceeding 10 billion won in a single startup. This strategy has proven its value, generating more than 10-fold returns from companies such as HYBE, Pearl Abyss, and Kakao Games.

Last year, LB Investment liquidated its 20th Future Creation LB Leading Company Investment Fund, which was worth 115.9 billion won. The total amount recovered from this fund was 242 billion won, or 2.2 times the principal investment of 109 billion won. The internal rate of return (IRR) reached 17%. As of last year, the company achieved performance fees for 10 consecutive years, with the average annual performance fee over the past five years totaling 10.7 billion won.

Kiho Park, CEO of LB Investment.

Multiple 'Ten Baggers' Awaiting Exit Through IPO

This year, four of LB Investment's venture funds are approaching maturity: the Chungbuk Creative Economy Innovation Fund (31 billion won), the LB Global Expansion Investment Partnership (81.5 billion won), the LB Technology Finance Fund No. 1 (54 billion won), and the Creative Economy Bio Fund (10.1 billion won). Several companies invested in through these funds are expected to become "ten baggers" (assets that have increased tenfold from the investment point), drawing attention.

Musinsa is a prime example of a ten bagger. LB Investment invested 11.7 billion won in Musinsa through a secondary share purchase in 2018 and has continued with follow-up investments, making it the most active domestic VC in the company. Musinsa is currently preparing for an IPO, with its corporate value estimated at 5 trillion won. In this scenario, LB Investment's expected return could reach 200 billion won.

Other anticipated exits this year include SemiFive, a semiconductor design solution company; S2W, an AI security firm; and Bluezonwide, a beauty company. S2W, often called "the Palantir of Korea," is aiming to list on KOSDAQ in the second half of the year, while SemiFive is also planning an IPO in the latter half. Bluezonwide posted sales of over 100 billion won last year, with an operating margin of 15-20%, continuing its rapid growth.

Kiho Park, CEO of LB Investment, stated, "Three out of the four funds have already recorded IRRs in the mid-10% range, and the remaining one has also surpassed that level based on potential valuation. Musinsa and SemiFive are portfolios we invested in from the early stage, and we currently hold 5-10% stakes in both companies."

3 Billion Won Mega Fund Focused on AI Investment

Despite successful investments and strong performance, LB Investment faces a challenge: its share price. When it was listed on KOSDAQ in 2023, it drew significant attention with a competition ratio of 1,298 to 1, but at the beginning of this year, its market capitalization was only half of its initial level.

This year, the outlook has changed. In the first half, LB Investment established a new fund, the "LB Next Future Fund," totaling 303 billion won. This is the company's second mega-sized venture fund exceeding 300 billion won, following the "LB Next Unicorn Fund," which was established in December 2020 with 310.6 billion won. As a result, the company's assets under management (AUM) surpassed 1.5 trillion won for the first time in its 29-year history.

The LB Next Future Fund is centered on AI, with investments planned across various AI value chains, including robotics, healthcare, content, and gaming. The fund will make investments throughout all stages, from early to late. The lead fund manager is CEO Park himself.

This fund is drawing attention because the Lee Jaemyung administration has announced a vision to become one of the world's top three AI powerhouses and has unveiled plans for large-scale investments. Additionally, the government's pledge to create a 40 trillion won annual venture investment market and its policies to nurture ventures and startups have also contributed. As a result, LB Investment's share price increased by about 75% as of June 16 compared to the beginning of the year.

CEO Park stated, "Based on our proven experience with the strategy of selection and concentration, we will also achieve our target returns with this fund."