SoftBank, SK, and LG to Join $130 Million AI Fund Targeting Asia's Growing Tech Startups

Japan's SoftBank Group, alongside South Korea's SK Networks and LG Electronics, will contribute to a $130 million AI-focused fund aimed at rapidly investing in Asia’s emerging tech startups. The fund, established by The Edgeof, targets sectors like health care, robotics, and AI-driven software.

SoftBank and Major Asian Conglomerates Unite to Drive Rapid AI Investments with New $130M Fund

Nikkei Asia has learned that Japan's SoftBank Group and conglomerates from South Korea and Thailand will contribute to a fund designed to promptly make "substantial" investments in AI ventures.

A person familiar with the matter informed Nikkei Asia that SoftBank, SK Networks, LG Electronics, Hanwha Financial, and a Thai conglomerate have recently signed an agreement to participate in the $130 million fund established by the founders of venture capital firm The Edgeof by the end of this month.

"The aim of the fund is for investors to quickly realize collaborations with startups for their AI-based applications," the person said.

While the Alpha Intelligence Fund is modest, it is also designed to serve as a platform that facilitates the connection between established companies and AI ventures for investment or acquisition. The source also stated that individual fund supporters can develop special-purpose entities to invest more in a specific startup.

The fund is being discussed with additional companies in East and Southeast Asia, and it intends to increase its capitalization to approximately $200 million by the end of the current year. It will concentrate on middle-stage startups specializing in sectors such as health care, robotics, and software as a service and have a primary business based on AI or other cutting-edge technologies, such as quantum computing.

The former SoftBank Ventures Asia (SBVA), a South Korea-based venture fund with $2 billion in assets under management, will provide researchers and other resources to the new fund. In 2023, The Edgeof, a venture capital firm co-founded by Taizo Son, the younger sibling of SoftBank Group CEO Masayoshi Son, acquired SVA. All three founders, including Taizo Son, will serve as general partners of the new fund.

The decision is being made because venture capital funds are experiencing difficulty keeping pace with the rapid expansion of startups utilizing generative AI to expand their services at a rate that exceeds the limitations of conventional measures, such as staff size.

Simultaneously, the investment required for AI ventures to remain competitive has increased significantly.

Microsoft promised OpenAI, the developer of the popular chatbot ChatGPT, a "multiyear, multibillion-dollar investment" in January 2023, shortly after the chatbot was released in a beta version in November 2022.

Taizo Son Highlights Challenges in AI Investment as New Fund Focuses on Asian Startups Amid Market Uncertainty

In an earlier interview with Nikkei, Taizo Son stated that venture capitalists need help to meet this aggressive investment demand.

In recent weeks, global technology equities have experienced a sell-off due to investors' concerns that potential returns on AI investments may take longer to materialize than anticipated.

According to the source, it may take some time for AI ventures that concentrate on "enhancing the value" of products and services, such as chatbots, to generate revenue. The market for substituting human labor in the maintenance of IT systems, for instance, will expand significantly faster. "AI will spread from unflashy areas," he indicated.

Although the new fund intends to recruit Silicon Valley companies, it will concentrate its investments on startups with aspirations to conduct business in Asia.

The U.S. has 670 unicorns, while ASEAN, South Korea, and Japan collectively have only 53 unicorns (privately held businesses valued at $1 billion or more), according to data from the U.S. researcher CB Insights published in July 2024.