‘Money tree sister also shot’… 2600 billion won for ‘military drones’ in the Yi-Pal war
[Global Startup Scene] Hot News for the First Week of November
‘Global Startup Scene’ is a corner that delivers major global venture capital (VC) and startup news that occurred throughout the week. In addition, we will touch on the impact and prospects for the domestic startup market.
The age of human-led warfare is over. Drones that do not require human pilots are changing the face of modern warfare. Beginning with the Ukraine-Russia war, drones have evolved from reconnaissance tools to unmanned attack aircraft.
In the recent war between Israel and the Palestinian militant group Hamas, military drones are being actively utilized. Israel deployed small drones the day after Hamas’s surprise attack to identify Hamas’s troop arrangements and secret facilities before launching an attack.
Amidst this, a U.S. startup supplying military drone technology to Israel is attracting attention for receiving investment from ARK Invest, known as ‘Money Tree Sister’ in South Korea.
Defense Drones Used in ‘Israeli-Palestinian War’ Attract $200 Million Investment
This year, the largest investment among defense tech startups has been made. The protagonist is Shield AI from the U.S.
According to major foreign media such as Bloomberg, Shield AI recently raised $200 million (about $260 billion KRW) with a company value of $2.7 billion (about $3.55 trillion KRW). This is the largest scale among defense tech startups that have received investment this year. Shield AI, which was valued at $2.2 billion (about $2.9 trillion KRW) last December, has increased its company value by 22% in a year.
The U.S. Innovative Technology Fund and Riot Ventures led the investment, and ARK Invest, known as ‘Money Tree Sister’, also participated as a new investor.
Shield AI, founded in 2015 by Brandon Tseng, a former U.S. Navy member, along with his brother Ryan Tseng and Andrew Reiter, developed an AI pilot software called ‘Hivemind’.
Recently, they announced ‘V-BAT Teams’, a next-generation intelligent swarm drone that can simultaneously operate at least four drones through Hivemind. The AI autonomously controls the drones, communicates in teams, collects and analyzes information, and even carries out operations to target attacks.
According to Shield AI, this technology is being supplied to Israel in the war with Hamas, and Shield AI’s drones are being used for attack and reconnaissance purposes in the Middle East conflict zones and the Ukrainian war.
Bill Gates, Jeff Bezos, and Others Set Up $250 Million Fund
Venture Capital (VC) Village Global, which has successful entrepreneurs like Bill Gates (Microsoft), Jeff Bezos (Amazon), and Mark Zuckerberg (Meta) as Limited Partners (LPs), is setting up a venture fund of $250 million (about $330 billion KRW).
Village Global, which set up its first venture fund of $100 million (about $130 billion KRW) in 2017, mainly invests in early-stage startups. It is known to typically invest $250,000 to $1.5 million (3 billion to 20 billion KRW) per company. So far, it has invested in about 300 startups, and its assets under management (AUM) are approximately $500 million (about $660 billion KRW).
There are Korean startups that have received investment from Village Global. Last year, robot technology development company Contoro Robotics received seed investment of $1.3 million (about $1.7 billion KRW) led by Village Global. Contoro is developing intelligent robot technology optimized for robots to quickly learn and apply human intelligence, including Human Robot Interface (HRI) hardware and software, AI, remote control, and haptics.
When you receive investment from Village Global, you can join a network composed of senior entrepreneurs like Bill Gates and Jeff Bezos. They also hold a conference called ‘The Grove’ every year, which is attended by senior entrepreneurs and institutional investors.
Investment in Climate Tech Booming…Record High in Q3
According to Pitchbook on the 1st (local time), climate tech startups raised $7.6 billion (about $10 trillion KRW) in the last quarter. This surpasses the highest investment amount ever in the third quarter of 2021 ($5.8 billion).
The reason for the influx of funds into climate tech startups is interpreted as due to support measures for carbon reduction, such as government subsidies, in countries including the U.S. The number of startups raising funds to build related factories has increased thanks to government support.
For example, in the last quarter, H2 Green Steel, which makes steel with hydrogen renewable energy, raised $1.6 billion, and battery recycling company Redwood Materials raised $997.2 million.
Pitchbook analyst John McDonough said, “It’s very unusual for there to be eight deals in the climate tech sector exceeding $250 million,” and “Most of the large deals in the third quarter were funds for the purpose of establishing factories.”
Pitchbook analyzed that although VC investments have shrunk, it does not have a big impact on climate tech startups related to carbon reduction technology. John McDonough, an analyst, said, “The median investment in all series stages of startups, including angel, seed, and later stages, has increased compared to last year,” and “As the speed of climate change accelerates, investment in related startups is also increasing.”
Despite the Investment Winter, a16z Sets Up $3.4 Billion Venture Fund
According to major foreign media such as Pitchbook, a16z is currently pushing to set up two funds totaling $3.4 billion (about $4.5 trillion KRW). This is 17% larger than the previous fund. In 2021, a16z set up two venture funds of $400 million and $2.5 billion.
The interpretation is that money is only being poured into large VCs whose skills have been verified. This is because many VCs are either not setting up new funds or it is taking a long time to set up funds.
The growth rate of U.S. venture funds has also somewhat slowed down. According to Pitchbook, the growth rate of U.S. venture funds in the third quarter of this year decreased from 51.4% last year to 19.6%. For example, Lux Capital and Felicis Ventures announced this year that they would set up funds of $1.15 billion and $825 million, respectively, both of which are smaller than the previous ones by $360 million and $75 million. Canaan Partners also set up a fund with $650 million, 20% less than in 2020, and Founders Fund reduced its fund from $1.8 billion to $900 million.
The situation where funds are concentrated in large VCs is similar in South Korea. In September, Atnum Investment set up the ‘Atnum Growth Investment Association 2023’, a venture fund of the largest scale in South Korean VC history, totaling 870 billion KRW. This greatly surpasses the 550 billion KRW from the ‘Atnum Growth Investment Association 2020’ set up three years ago.
A domestic VC official said, “While many VCs are having difficulty in fund raising due to interest rate hikes and recession, capable VCs are raising funds based on their brand and track record,” and “As funds are concentrated in large VCs, there are not a few cases where funding for medium and small-sized VCs is delayed or completely cancelled.”
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