Kakao, Naver step up global AI hunt amid fierce tech race

South Korea’s internet pioneers, Kakao Corp. and Naver Corp., are ramping up overseas investments in artificial intelligence startups, shifting focus to North America in a move that is raising concerns among domestic startups about tighter funding at home.

After a two-year lull, both companies have resumed active startup investing but with a markedly global tilt.

The pair, which respectively backed some 20 startups annually in 2021–2022, have now cut that pace by more than half, according to Seoul-based tracker The VC.

Their investments are now skewed toward US-based companies developing next-generation AI technologies in hopes of tapping innovations that align with their core platforms or open up new growth paths.

AI IS A MUST FOR ANOTHER LEAP  

According to the investment banking industry on Tuesday, Naver Cloud Corp., a cloud computing arm of Naver, recently led a Series A funding round for Urban Datalab, the developer of the AI medical platform MeDiAuto, with its own investment of 3.5 billion won ($2.5 million).

Naver’s newly launched Naver Ventures also made its debut investment in TwelveLabs, a Silicon Valley-based startup with an unrivaled multimodal AI technology that has already attracted big-name backers including Nvidia, Samsung Electronics Co. and Intel Corp.

“We are open to collaboration (between Naver and TwelveLabs) next year or later,” said Kim Sung-ho, the head of Naver's Immersive Media Platform team.

Naver’s renewed push into AI investing has gained momentum since its founder Lee Hae-jin returned as chairman earlier this year.

“If David wants to beat Goliath, he must aim well with the right stone,” said Lee at a ceremony in June celebrating the opening of Naver Ventures, the company’s first dedicated overseas venture capital in Silicon Valley. “We are in the middle of picking the right stone.”

Based on this analogy, Naver is the underdog battling US tech giants in the AI race.

Naver’s in-house corporate venturing (CV) team, D2SF, has also made a series of AI-focused investments this year.

It has invested in AI-powered logistics platform startup Techtaka; AI game developer Anchor Node; AI-supported autonomous driving technology developer whereable.ai; and multi-modal commerce AI startup Studio Lab.

Kakao has been similarly active in investing in AI companies.

According to The VC, Kakao’s venture investment arm, Kakao Investment Co., recently invested 3 billion won in Seoul-based AI chip startup FurisosaAI Inc.

Its other venture capital company, Kakao Ventures Corp. has joined early-stage funding rounds of AI agent developer Tzafon and large language model startup Trillion Labs.

NORTH AMERICA EMERGES AS A NEW BATTLEGROUND

While the uptick in tech investment is a welcome shift after years of slowdown, Korean startups now worry they may be left behind.

Historically reliant on Kakao and Naver for early-stage capital, domestic startups fear the funding tide may be turning westward — just as global AI interest is surging.

Of five startups Naver D2SF has invested in 2024, three are US-based, including 3D content developer Claythis and YesPlz AI, a fashion-focused multimodal AI developer.

Kakao Ventures has also invested in FS2, a 3D AI chip design company led by MIT engineers; Oligo Space, an automated spacecraft design and production toolchain developer; and medTech startup Kompass Diagnostics.

To deepen its reach in the North American venture capital ecosystem, Naver opened D2SF’s US office in Silicon Valley last year and launched Naver Ventures in the global tech hub to uncover growth-stage firms.

Kakao Ventures officials regularly visit the US every two to three months to build ties with local VCs, engineers and researchers.

Investors see more upside potential in US startups than in their Korean counterparts, offering greater synergy.

“The ecosystem for tech-based startups is more mature in the US, and top US universities generate stronger pipelines of investable early-stage companies,” said an official from a Korean VC company.

The trend also reflects a strategic calculus, said industry observers.

Korean tech giants face less public scrutiny abroad compared with frequent criticism at home over big tech firms’ aggressive M&A moves with startups after investment.

That is fueling concerns that capital could increasingly flow to overseas startups instead of bolstering the local tech scene.

“Startup funding is borderless,” said a VC industry official. “Without competitiveness to appeal globally, no startups will survive.”

Write to Eun-Yi Ko at koko@hankyung.com
Sookyung Seo edited this article.