Home Government South Korea Releases the First Tranche of the $9B AI Startup Fund

South Korea Releases the First Tranche of the $9B AI Startup Fund

South Korea has started rolling out the first portion of a $9 billion investment fund set up to boost startups in dozens of growth fields including AI, fintech and drone technology.

The move comes during rising concerns in what is referred to as Asia ’s fourth-largest economy that its export-driven growth model is losing ground and that the nation requires to nature expertise in various new technologies in a bid to stay competitive.

“ A low-growth pattern has taken root in the economy,” said Min Byung-doo, who is the lawmaker behind the presiding over of the recent launch of the fund. He added that “innovative growth is a task that cannot be postponed. And in order to make this growth possible, finance must play a pivotal role.”

South Korea’s Ministry of Small and Medium Enterprises (SMEs) and Startups and her Financial Services Commission are the entities charged with the role of shepherding the three-year fund. They are both expected to allocate about $2.8 billion to startups before going ahead to boost the available amount to over $3.3 billion per year for 2019 and 2020.

The fund’s launch followed closely the announcement made by Samsung, the nation’s richest and largest conglomerate, last month that it would set aside $160 billion for investing in startups and new technologies over the next three years.

“South Korea’s fund is much smaller than similar funds in Japan and China. But with the move the government is signaling to big Korean companies like Samsung and Hyundai to increase their investments in start-ups and SMEs,” said Lee Hang-Koo, a researcher based at Korea Institute for Industrial Economics and Trade.

For both Samsung and South Korea, their investments in new technologies and start-ups in the country are being initiated with a key focus on China. Specifically, this is because Beijing has already made it clear, under the “Made in China 2025” master plan that it is looking forward to dominating high-technology industries over the coming decade as well as spend considerably towards realizing that goal.

According to Gavekal, a research group, the Chinese government can spend a whopping $300 billion on the project. However, the analysts warned that the raised amount of money available for the project is only nearly a third of that figure.

“Although the total amount of the South Korea start-up fund is not so big, the funds are needed because venture capital here is weak and the M&A market is also too small,” asserted Mr. Lee. He also added that unlike with past government funds, Seoul is now putting fund managers instead of bureaucrats in charge of evaluating promising start-ups.

An FSC spokesperson claimed that the entity would raise private funds in an effort to match the public fund before giving the money to promising enterprises.

Kim Young-soo, a Korea Development Bank official, said that this year’s allocation would be invested in about 45 sectors including fintech, drone technology, autonomous driving and artificial intelligence.

He also said that the funds would also be channeled to developing new chemical materials, advanced manufacturing processes and biopharmaceuticals.

Source FT

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KC Cheung
KC Cheung has over 18 years experience in the technology industry including media, payments, and software and has a keen interest in artificial intelligence, machine learning, deep learning, neural networks and its applications in business. Over the years he has worked with some of the leading technology companies, building and growing dynamic teams in a fast moving international environment.
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