[Reporter’s Notebook] Innovation Withers Behind the AI Investment Craze

Bio and Other Globally Competitive Sectors Face a Financial Cliff
Balanced Attention Needed for Sectors Requiring Long-Term Investment
Policy Support Essential, Including Changes in Korea Fund of Funds Allocation

"Should we add artificial intelligence (AI) technology just to qualify for an AI fund?"

While a rare breeze of optimism is blowing through the domestic venture investment market, there are still sectors left in the shadows. One such area is the bio and medical sector. Bio and medical startups, which attracted intense investor attention during the early days of the COVID-19 pandemic due to soaring demand for vaccines, treatments, and diagnostic devices, are now, just four to five years later, suffering from a drought of investment and facing the risk of collapse.

Dry powder in the venture investment market is rapidly being concentrated on AI startups. With both government and private sector budgets pouring in, venture capital (VC) firms are busy creating dedicated AI investment funds. In some large VC firms, AI investment capital is piling up with nowhere to go. As a result, there are self-deprecating voices in the bio industry suggesting that, in order to survive, companies must incorporate AI technology just to qualify for an AI fund.

It is the fate of venture investment to nimbly follow rapidly changing technology trends, but the current excessive focus on AI investment is preventing capital from flowing into other sectors that also require sustained investment. This cannot simply be dismissed as market inertia. If innovative companies with global competitiveness lose the opportunity to grow steadily, it could ultimately result in a painful decline in industrial competitiveness over the long term.

Venture investors do more than pursue investment returns; they also take risks to discover and nurture new possibilities. Through this, they contribute not only to solving societal issues with new technologies, but also to spreading a culture of innovation and strengthening overall economic competitiveness. The reason Nvidia, now at the center of the AI boom, was able to continue investing in and developing AI technology when no one else was paying attention was because of the trust and financial support from leading Silicon Valley VCs such as Sequoia Capital and Sutter Hill Ventures. When balanced attention is paid to sectors that require long-term investment as much as AI does, the true value of venture capital as risk capital will shine even brighter.

Given Korea's high dependence on public resources (such as the Fund of Funds), policy changes must also support this effort. It is necessary to strengthen institutional mechanisms that allocate Fund of Funds investments not only to popular sectors like AI, but also to areas such as bio and medical, materials, components, and equipment, which have high growth potential and require long-term investment. Introducing policy indicators that focus on long-term innovation and strengthening industrial competitiveness, rather than short-term profits, and reflecting these in investment policy and fund execution is also important. We must not forget that true innovation comes from a balanced perspective and a sustainable investment environment.