South Korean billionaire Chey Tae-won’s SK Group has invested in artificial intelligence startup Upstage, as the semiconductor-to-telecoms conglomerate seeks to utilize the startup’s technology across its various businesses, including data management, home appliances and even hotels.
SK Networks, SK Group’s de facto AI investment arm, led Upstage’s $72 million Series B round announced in April. Other investors include SBVA (formerly SoftBank Ventures Asia), billionaire Park Hyeon-joo’s Mirae Asset Venture Investment, telecom operator KT, Shinhan Venture Investment (which has also backed South Korean chip startups Rebellions and MangoBoost) and Company K Partners (whose portfolio includes AI drug discovery startup HITS, cofounded by 30 Under 30 Asia listee Jaechang Lim).
The round brings Upstage’s total funds raised to more than $100 million, which the startup claims makes it the most well-funded AI software startup in South Korea. Upstage declined to disclose its valuation in the new round.
Cofounded in 2020 by Sung Kim, who previously headed an AI team at South Korean internet giant Naver, Upstage specializes in helping companies develop language-specific large language models (LLMs), the technology powering generative AI tools like ChatGPT. For example, Upstage is building a Thai language model for a telecom company in Thailand, says Kim, the startup’s CEO, in a video interview. About 100 companies use Upstage’s LLMs, and another 200 companies are in talks with the startup about building custom models for them, adds Kim.
The technique that Upstage uses to develop custom models is language agnostic, says Lucy Park, cofounder and chief scientific officer of Upstage, in the video interview with Kim. “Which means that if we have the data, we can use our previous experience and extend it to other languages,” she explains. “So Upstage already has succeeded in expanding to Korean and we will easily be able to extend to other languages.”
Kim says he sees a lot of potential deals with SK, the second-largest conglomerate in South Korea by market capitalization. “SK is huge, so definitely there are lots of LLM needs inside the group,” he says. “SK has huge investments in many different companies and startups, and those companies are potentially our customers.”
The conglomerate agrees. “Among SK Networks’ businesses, there’s notable anticipation for the synergy expected with Encore,” says Yoo Bong Woon, SK Networks’ CFO, in emailed comments. Encore is a Seoul-based data services and consulting company that was acquired by SK Networks in October for about $70 million. Upstage’s LLM technology, for example, can be used to answer user queries based on data managed by Encore.
“Furthermore, SK Networks is actively driving business innovation by embedding AI into its operations,” adds Yoo. “The strategy involves acquiring expertise in AI-related software and hardware and implementing AI solutions across various sectors, including SK Magic, Encore and Walkerhill. We anticipate potential collaboration with Upstage throughout this endeavor.”
SK Magic makes home appliances like water purifiers and Walkerhill operates hotels and resorts; both companies are controlled by SK Networks. Upstage’s technology, for example, can be used to build new kinds of AI-powered SK Magic appliances. At Walkerhill, the potential uses of Upstage’s technology include smart hotel rooms (where guests can control the lighting, heating and curtains by voice command), robot baristas and AI concierges.
SK Group has recently been selling non-core assets to focus on AI. In April, for example, SK Networks agreed to sell its car rental business, SK Rent-a-Car, to private equity firm Affinity Equity Partners for about $610 million. In the same month SK Networks announced it opened an AI lab in Silicon Valley.
SK Group controls the world’s second-biggest memory chip maker by revenue, SK Hynix, which has benefited from the AI boom. SK Hynix, whose shares have doubled in the past year, is the dominant maker of the most advanced high-bandwidth memory chips—a type of high-performance memory chip used in AI computing.
“SK is a big believer in AI,” says Upstage’s Kim. “So we can get a lot of support.”
