[StartupRecipe] Korean Startup Ecosystem Undergoes Major Shift to Deep Tech

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Korean Startup Ecosystem Undergoes Major Shift to Deep Tech

After a boom period that saw nearly ten unicorns emerge annually, South Korea’s startup ecosystem is now navigating a unicorn drought. However, the recent ascent of deep tech companies is heralding a significant turning point, reshaping the investment landscape. The trend gained momentum last year with Ably and Rebellions achieving unicorn status, and was further solidified by FuriosaAI’s recent entry into the unicorn club following its rejection of an acquisition offer from Meta. The success of AI chip developers Rebellions and FuriosaAI, in particular, signals a pivotal change from the nation’s traditionally platform-centric unicorn ecosystem.

This shift was especially pronounced in 2024, marked by a surge in deep tech investment. Concentrated in the semiconductor sector, companies like Rebellions, Upstage, and DeepX each secured funding rounds exceeding 100 billion won. Other deep tech innovators such as Panmnesia and XCENA also attracted substantial large-scale investments.

Fueling this transition is a strong alignment with government industrial policy. The Ministry of SMEs and Startups reported that domestic deep tech investment in 2024 reached 3.6 trillion won, a 34% increase from the previous year and the largest sum in five years. The government’s focus on AI development has further accelerated this trend. This is evident in the “baby unicorns” program, where 43 out of 50 selected companies this year—representing 86% of the total—specialize in one of the ten major deep tech fields, including AI and big data. Underscoring this focus, the largest investment recipient in the first half of the year was Wrtn Technologies, an AI platform company.

The government is also steering private venture capital towards national strategic priorities through its Fund of Funds. This initiative provides a significant portion of capital for new venture funds, effectively shaping the investment ecosystem. The central role of this program is highlighted by the fact that 75% of deep tech companies that received venture investment in 2024 had a history of support from the Fund of Funds or other government startup programs.

Despite this momentum, significant challenges remain. The broader investment environment has deteriorated, and a lack of institutions capable of executing follow-up investments persists. Declining corporate valuations and stagnant fundraising have forced many startups into survival mode, prioritizing financial restructuring and global expansion. A key limitation is that most of Korea’s existing unicorns are platform-based companies focused on the domestic market. Currently, only Rebellions, FuriosaAI, and Megazone Cloud are recognized as AI startups among the nation’s unicorns.

Looking ahead, companies like Upstage and DeepX are poised to be the next unicorns to emerge from this deep tech wave. However, their success will hinge on overcoming fierce global competition. The new generation of deep tech unicorns must contend not only with global big tech giants but also with promising startups from around the world. Securing global competitiveness beyond the domestic market will be the ultimate determinant of their survival and long-term success.

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