[Edaily Marketin Soyoung Park Reporter] There are certain people who always turn heads at gatherings of domestic defense industry startups: representatives from corporate venture capital (CVC) arms of large conglomerates. Among them, quite a few immediately begin reviewing companies they discover that are currently seeking new investment rounds.

Until now, large conglomerates’ CVCs have primarily focused their attention on the AI-based deep tech sector. They concentrated on identifying relevant startups and exploring potential collaborations with their parent companies. However, as the government has recently stepped up its efforts to foster the defense industry ecosystem, their interest appears to be naturally shifting toward this sector as well. With large conglomerates’ CVCs actively seeking out companies to invest in, the industry’s momentum is also gaining steam.

According to the domestic investment banking (IB) industry on the 27th, corporate venture capital (CVC) arms of major conglomerates—which had been actively investing in deep tech sectors such as AI, robotics, and semiconductors—are now turning their attention to the “defense” sector. In particular, CVCs affiliated with non-defense conglomerates—such as those in gaming, steel, and IT—as well as the strategic investment units of major corporations are actively seeking out dual-use startups. Since the technologies possessed by these startups can be applied to both civilian and defense sectors, they are well-suited to targeting both markets.

For example, Krit Ventures, a venture capital firm affiliated with Com2uS, and NXC, the holding company of Nexon, executed a 60 billion won investment in February of this year in UVify, a company specializing in drone swarm flight and autonomous flight platforms. The investors focused on the fact that the company possesses technological capabilities that can compete in the global drone market and has demonstrated its ability to commercialize its technology. The company has targeted overseas markets since its inception. As a result, it generates most of its revenue from abroad. It has also secured a seat on the board of the DroneCode Foundation, which oversees PX4, the core operating system (OS) of the drone industry.

Another example is Nearslab, a drone and AI company that recently began the process of its KOSDAQ initial public offering (IPO). In its previous investment rounds, the company raised funds not only from financial investors (FIs) but also from strategic investors (SIs) such as Naver and POSCO Technology Investment. Building on its recent success in exporting its self-developed swarm suicide drones to the Middle East, the company recorded its first quarterly operating profit.

Now, CVCs’ interest is expanding from drones to security, manufacturing solutions, data, and communications technology. This is because the scope of defense technology is broadening beyond simple weapons manufacturing to encompass advanced technologies in general. Another contributing factor is that Korean defense companies are proving their business viability by securing overseas projects and achieving success in proof-of-concept (PoC) demonstrations one after another.

The influx of liquidity into the defense market has also served as a catalyst. Last month, the Ministry of SMEs and Startups and the Korea Venture Capital Association (VC Association) held a CVC Council meeting and a CVC Link Day. On that day, plans were announced to establish a “Strategic Industry Open Innovation Fund” focused on sectors such as biotechnology, defense, and beauty. The Ministry of SMEs and Startups announced that it will establish this fund in collaboration with about 10 companies as part of the “Limited Partner (LP) Growth Fund,” which is being created in partnership with pension funds, corporations, and the financial sector. The goal is to recruit fund managers in the second half of the year and raise 250 billion won.

An official from the defense industry said, “Since many domestic corporate venture capital (CVC) firms are subsidiaries of large manufacturing conglomerates, they seem to be focusing on defense startups—which offer numerous opportunities for collaboration—as they seek out sectors to serve as future growth engines.” He added, “While demand is high due to the influx of liquidity, there are practical challenges in selling products and services domestically,” and predicted, “Consequently, investment will likely be concentrated on companies that have already established a foothold overseas.”