Why Conservative Private Equity Funds Are Focusing on AI Investments

Many Considering FuriosaAI Pre-IPO Investment

Deal Size Expanding, IPO Expectations Rising

LP Demands Grow as National Growth Fund Fully Activates

Domestic private equity funds (PEFs) are ramping up investments in companies related to artificial intelligence (AI), actively entering the growth company investment space traditionally dominated by venture capital (VC). The rapid growth of AI companies and the influx of liquidity into the sector have raised expectations for substantial profits. Industry insiders believe that this trend will continue if the National Growth Fund, which leads large-scale investments in growth industries, is fully activated.

According to the investment banking (IB) industry on April 10, multiple PEFs are considering participating in the pre-IPO (pre-initial public offering) funding round of AI semiconductor company FuriosaAI. An official from a major limited partner (LP) stated, "FuriosaAI's funding is attracting attention in the industry, and many AI-related investments are also being made in overseas companies, including those in the United States."

There is a growing number of cases where PEFs are investing in AI companies. Fabless semiconductor design company Rebellions recently completed a pre-IPO round worth 640 billion won. In this round, the National Growth Fund invested 250 billion won, Korea Development Bank invested 50 billion won, and private investors contributed 340 billion won. Private investors included Mirae Asset Group, IMM Investment, and private equity fund No & Partners, among others. Neural processing unit (NPU) semiconductor startup Mobilint also secured a 70 billion won Series C investment, during which Praxis Capital invested around 70 billion won and became the second-largest shareholder.

As Results Emerge, Investors Shift from VC to PEF...Eyeing Big IPO Returns

The most direct reason why PEFs are investing in AI companies is the rapid growth of these businesses. As the valuations of major companies such as Rebellions and FuriosaAI have soared, the scale of required capital has also grown. It has now become too large for VCs to invest alone or to rely solely on club deals (joint investments). In addition, since AI companies have already undergone several investment rounds and passed technical due diligence with multiple investors, the environment now allows PEFs, which make larger ticket-size investments, to boldly enter from Series C onward.

Market trends are also playing a role. With the government moving to lower the bar for IPOs and liquidity pouring into the stock market, the perception that "listing will guarantee at least double the profit" is spreading throughout the industry. An IB industry official said, "From the perspective of PEFs, they are approaching AI company investments with a focus on short-term exit possibilities and building a track record."

LPs Set AI Investment as a Condition...Influence of National Growth Fund Grows

The momentum is expected to strengthen further once the National Growth Fund is fully operational. The National Growth Fund is a public-private initiative to raise 150 trillion won to invest in companies operating in national strategic industries such as AI, semiconductors, and biotechnology. Korea Development Bank already selected mother fund managers for indirect fund investment projects in March, and plans to finalize the selection of sub-fund managers by June. LPs are also stipulating that managers participating in delegated management projects must either link with the National Growth Fund or be required to invest in related industries.

The Military Mutual Aid Association has announced that, in the process of selecting managers for a 200 billion won co-investment fund this year, if a firm has a competitive advantage due to linkage with the National Growth Fund, it should include this in its management strategy. Korea Growth Investment Management has also set a condition that managers must invest in SMEs or in the AI and biotechnology sectors, which are among the supported fields for the National Growth Fund. A PEF official stated, "Because the National Growth Fund is significant for enabling large-scale investments in growth industries, VCs with expertise in these sectors are expected to focus on scaling up, while PEs specializing in large-scale investments are likely to pursue growth investments."

This content was produced with the assistance of AI translation services.