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[StartupRecipe] Conglomerates-Startups Idea Theft Controversy

#Weekly Funding Overview

[Jan. 16 ~ Jan. `20]

The total funds raised by Korean startups of this week is KRW 104 billion.

EnerzaiEdge AI500 millionSeries AKODIT
HubrizKids care-Pre-Series AKorea Social Investment Foundation
YaylabsArt platform-SeedSV Partners, BlockCrafts, Iljin Investment Partners, Kingsley Ventures
BillyoShared room reservation-Pre-Series AInfo Bank
Nonce ClassicWeb3 accelerator4.2 billionPre-Series ASV Investment, KB Investment
ENERGYXESG20 billionSeries BShinhan Capital, Shinhan Asset Management, Welcome Ventures, VTI Partners, Honest Ventures, Enlight Ventures, Eljovi Smart Trades, JJBM
BasilclubInfluence commerce-Vaiv Company
GigplannerGig worker platform1.5 billionCoolidge Corner Investment, BA Partner
Petonpettech-SeedMoonlight Partners
KindpeopleTrainer platform200 millionSeedY&Archer, CNTech
MadmadePet food-Pre-Series AStrong Ventures, Daekyo Investment, Magna Investment, Lighthouse Combine Investment
EzcaretechHealthcare9.9 billionKakao Healthcare
Vivity10 billionHanhwa System
People fundFintech24.7 billionSeries CBain Capital, Access Ventures, CLSA Capital Partners, D3 Jubilee Partners, 500 Global, Kakao Investment, TBT Partners, IBX Partners
PluglinkElectronic car charging15 billionKDB KIAMCO
HilokalEducation-Pre-Series A BridgeKakao Ventures
VoithruContent-M&AKakao piccoma
IntegrationDigital Healthcare10 billionSeries BTBT Partners, Smilegate Investment, A Ventures, IBX Partners, Hana Bank, Insight Equity Partners
M3SENSmart Farm8 billionSeries AKB Investment,Ajou IB Investment, Magna Investment, Kodit

Major Funding

  • PeopleFund, an AI-based credit rating fintech company, has raised KRW 24.7 billion in investment. Its total funds raised amounted to KRW 125.6 billion. Through this investment, the company will enhance AI-based risk management technology that can be employed not just in the non-banking sector but also in the entire credit industry. It will also increase investment in the fundamental algorithm of the credit evaluation model.
  • ESG construction platform Energy X has bagged KRW 20 billion. So far, it has raised KRW 31.5 billion. It is a construction platform and a company that connects clients, architects, and construction companies and provides technology to improve energy efficiency. It is a startup that offers technology to increase energy efficiency and a construction platform that links clients, architects, and construction companies. This funding will be spent on upgrading its energy efficiency technology.
  • Pluglink, an electric vehicle charging platform, has secured KRW 15 billion, raising KRW 30 billion in total. With this investment, the startup will provide a total charging service for more than 7,400 chargers.

#Trend Analysis

Tech giant Lotte Healthcare is facing accusations of intellectual property theft from healthcare startup Algocare. According to the startup, Lotte approached them for investment and collaboration, but later allegedly used the information obtained to copy their concept and release similar products. Both companies presented their products at the CES exhibition, where the alleged theft was brought to light. The controversy has sparked a wider conversation about the ethics of conglomerates stealing ideas from smaller startups, and the government has announced countermeasures in response. The outcome of this case could have major implications for the healthcare startup industry.

Left : algocare / Right: Lotte healthcare

<Algocare’s claim>

  • A year ago, there was an investment meeting with Lotte Healthcare. Between September and October 2021, Lotte Ventures and Lotte Healthcare met with Algocare and suggested an investment and business partnership. Lotte Healthcare obtained Nutrition Engine, a cartridge-type nutrient dispenser that Algocare was developing, and its business strategy.
  • Lotte Healthcare stole Algocare’s business idea. Lotte Healthcare developed Cazzle using the data it received from Algocare. It stole the key concept, which is the cartridge-type nutrition bottle and Nutrition Engine.
  • “Legal action will be taken,” says CEO Joung Ji-won. Under the excuse of investment and partnership, Lotte Healthcare stole Algocare’s business information and ideas and made a copycat. Instead, it was audacious enough to assert, “There was nothing wrong as we haven’t signed an NDA.” (NDA was not completed since Lotte Healthcare has not yet been founded.) It contravenes the Fair Trade Act and the Unfair Competition Prevention Act. Algocare will take legal action.

<Lotte Healthcare’s claim>

  • The production plan was set after the investment discussion. After the funding negotiations with Algocare came to an end, we planned to produce our own dispenser that suited our business strategy. We have manufactured dispensers and cartridges by referring to automatic tablet sorting and packaging system machines used in commercial pharmacies.
  • The dispenser-based intake model is a common concept. Personalized nutritional supplements were already suggested overseas before Algocare participated in CES in 2021. And the idea of using dispensers to consume them is a general one.
  • There are key technical differences between the two products. Algocare’s products are not the same as our models. Algocare inserts a memory chip containing product information into the cartridge, and Lotte Healthcare uses RFID stickers to identify the nutritional information in the cartridge. It differs from Algocare, which employs a way of storing diverse information in an RFID sticker with a memory chip, in key technologies.

<Announcements by Ministry of SMEs and Startups>

  • Prompt initial support through visits to companies that have suffered from idea theft: It will send out public officials in charge of administrative investigations on technology infringement and experts from the Korea Foundation for Cooperation of Large&Small Business to assess the damage and discuss countermeasures. It will provide consulting and guidance on damage relief support measures.
  • Continued support for the affected companies from the Ministry of SMEs and Startups: The ministry will make measures to expedite mediation if the company requests an administrative investigation of technology infringement or mediation of technology disputes. It will support litigation costs, should mediation fail. To aid the victim company, it will use digital forensics to secure evidence, work with its legal support groups to help report violations of technology protection regulations, and offer legal advice for reporting to the relevant ministries.
  • Promoting the national agenda to eradicate technological theft and provide SMEs with damage relief: The ministry will enhance the effectiveness of technology theft damage relief by strengthening the punitive damages system. It will overhaul related laws and systems, establishing the right to request court data. It will also promote industry leaders in technology protection, increase policy insurance, and strengthen legal assistance.

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