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Policy funds are flooding into the unlisted startup sector. Using resources from the National Growth Fund, the government invested 800 billion won in artificial intelligence (AI) chip company FuriosaAI. This was a direct investment through which the government purchased a stake in the company. The National Growth Fund also poured 100 billion won and 250 billion won, respectively, into Upstage, a developer of AI foundation models, and Rebellions, an AI chip company. These companies were recognized with valuations of more than 3 trillion won during their fundraising.
The capital market views the government's direct investment in startups with concern. FuriosaAI's revenue last year was 5.74 billion won. Based on the roughly 3 trillion won valuation recognized by the government, its price-to-sales ratio (PSR) reaches 522.6 times. Even considering that it is an unlisted startup whose business has yet to fully take off, this is high. The price-to-earnings ratio (PER) cannot be calculated due to an operating loss of 62.48 billion won last year. The situation is not much different for other companies that received National Growth Fund money.
The government can foster industries by injecting funds through various methods, including direct investment, indirect investment, and loans. Among these, direct investment carries significant risk from changes in the business conditions of the companies invested in. The AI companies into which the government poured National Growth Fund money all lack solid current performance, yet were recognized with trillion-won valuations on the strength of future growth potential. What will the government do if these visions are not realized? The 150 trillion won in total National Growth Fund resources ultimately comes from the pockets of citizens.
With countries around the world staking everything on strengthening their AI industry competitiveness, we sympathize with the government's aim to nurture the ecosystem. Just as Korea's information technology (IT) and bio industries grew on the back of active government support in their early stages, the AI industry will also need fostering policies. However, rather than direct investment, in which the government itself bears the risk and resources concentrate in specific companies, other support methods need to be considered. With indirect investment, multiple fund managers entrusted with policy funds can spread the resources across diversified investments.
The goal of policy funds should be to serve as a catalyst that helps the private economy operate smoothly. It is undesirable for the seed money to overflow and overheat a specific industry. It is time to once again examine and reconsider whether the current policy stance of directly injecting hundreds of billions of won into loss-making unlisted startups is safe, and whether it truly helps foster the ecosystem.
