Headlines of the Week
Kakao Entertainment Merges With Music Streaming Powerhouse Melon
Kakao Entertainment, the media subsidiary of internet giant Kakao, completed a merger with the Korean music streaming platform Melon on Wednesday. The newly formed company will combine Melon with other Kakao media ventures including Page Company (web comics, web novels) and M Company (record label / talent agency, formerly LOEN Entertainment) to form an independent subsidiary.
The deal puts Kakao in control of a vast media empire ranging from Korea’s biggest K-Pop idols and K-Drama actors, and most importantly the most popular music streaming service in the country. The company stated that it aims to use its newly acquired assets to develop more content directed towards a worldwide audience.
Kakao seems to be winning the corporate finance game lately, with a torrent of spin-off IPOs of homegrown subsidiaries (Kakao Bank, Kakao Games, Kakao Mobility, KakaoPay) and aggressive M&A (Melon, LOEN Entertainment, Yanadoo, XLGames, ZigZag). It seems that Kim Beom-soo’s playbook for world domination isn’t build or buy, but build (then spin-off) and buy (with the proceeds from said spin-offs).
DeepBrain AI Raises $43mm in Series B
Seoul-based AI startup DeepBrain AI (formerly MoneyBrain) has raised KRW 50bn (USD 43mm) in a Series B funding round with participation from Korea Development Bank, IMM Investment Corp, and others. This round brings the company’s total funds raised to KRW 60bn (USD 52mm), and gives the company a valuation of KRW 200bn (USD 173mm).
Deepbrain develops a range of AI-powered customer service software including its “AI Humans”, which are human-like avatar chatbots that use natural language processing capabilities to respond to questions. The company’s customers include broadcaster MBN, KB Financial Group, and education service provider Kyowon. The company plans to work with its partners and clients to develop AI counterparts to public facing roles such as newscasters and bank tellers.
Other Deal News
Upstage, a developer of AI solutions for companies in diverse industries including finance, education and retail, has raised $27mm in a Series A funding round led by Company K Partners and Softbank Ventures.
Class101, an online education platform, raised $26mm in Series B funding led by Goodwater Capital and joined by Strong Ventures, KT Investment, Mirae Asset Capital and Klim Ventures.
Sweet Technologies, developers of business communication platform ‘Sweet’ (similar to Slack or MS Teams) whose clients include Twitter, Wework and Thomson Reuters, have raised $18mm in a Series A funding round at a valuation of $147mm. Investors include Smilegate Investment, SV Investment, IMM Investment Corp, Dunamu & Partners and others.
Robocon, a developer of robotics solutions for manufacturing, raised $8.7mm in a Series A funding round with participation from Must Asset Management, Shinhan Investment Corp, etc.
Deep Pixel, developer of virtual try-on software Style AR (think Warby Parker), raised $1.7mm in a Series A funding round led by EBEST Investments & Securities.
FXGear, a computer graphics, AR/VR technology, and production company, has retained NH Investment and Securities as its lead underwriter for its upcoming IPO. The company plans to launch its metaverse service ‘NARANG’ within the year.
Other Interesting Stories
Hancom Joins the Space Race???
Hancom, the office suite software developer who created Hangul office (a native language word processor for Korean), has officially joined the Space Race. The company announced on Thursday that it will be launching Sejong I, an optical Earth observation satellite, in the first half of 2022.
This seems like the last thing you would expect from a productivity software company, although we have recently seen multiple successful space excursions from tech entrepreneurs. In fact, the Sejong I effort is still technically in-house unlike SpaceX or Blue Origin, which are largely unaffiliated from their founders’ other day jobs.
Hancom InSPACE is the subsidiary of Hancom leading the satellite launch and was born from an acquisition in 2020. The subsidiary is led by CEO Choi Myung-jin and spearheaded by Kim Yeon-soo, the recently appointed 38-year old CEO of parent Hancom Group and daughter of Hancom chairman Kim Sang-cheol. The junior Kim has undoubtedly played an outsized role in the company’s push into the space industry, and plans to use the Sejong I launch as a springboard into other industries such as visual data processing and ultra high-resolution sensors.
This hard pivot into completely unrelated industries is not a first for Hancom, which has entered both the firefighter equipment and personal protective equipment industries on separate occasions in the last five years. For a software company that is either a traumatizing name to anyone who has dealt with Korean bureaucracy1 or a brave “David” that stood up to the foreign “Goliath” (Microsoft) to protect Korean consumers from the tyranny of monopoly power2, perhaps now is the time to reinvent the company with fresh leadership and a bold new direction.
Blurbs
LINE is issuing NFTs based on LINE Friends
SKT acquired a 20% stake in Korea Content Platform for $26mm
Game developer Wemade is exploring M&A and pivoting to blockchain
Korean government dedicates 4.64% of national budget (KRW 29.8tn, USD 26bn) to R&D, 2nd in the world behind Israel
The Bottom Line
Kakao Entertainment finalized its merger with Melon
Deepbrain AI raised $43mm at a $174mm valuation
Upstage and Class 101 both raised more than $25mm from foreign and domestic investors
Hancom is joining the Space Race, launching Sejong I satellite in 2022
Most government agencies in Korea (including public schools) are bound by contract to use Hancom’s software which was notorious in the past for not being compatible at all with Microsoft products (its flagship word processor Hangul uses the .hwp file format). In practice many agencies use both concurrently, creating a jumbled mix of documents and forms in .hwp and .docx.
Ironically, critics argue that Hancom itself is essentially a government supported monopoly. The “royal charter“ granted by the Korean government (see above) is undoubtedly a big factor in the company’s success given that it has the funds available to invest in ventures such as satellites, firefighter equipment and PPE despite numerous ownership changes and embezzlement scandals. The market for productivity software has been penetrated by Microsoft for the better part of 10 years, but Hancom is still mysteriously going strong.