Cautions Needed
Giant Chinese capitals are actively pursuing investment opportunities for domestic virtual reality (VR) and augmented reality (AR) start-ups. On the contrary, Korean venture capital (VC) firms is still postponing investment in the VR and AR start-up business, and investment boom is rapidly cooling as it is known that the Choi Soon-sil Scandal was involved in the VR industry. For this reason, voices are being raised that Chinese capital will take control of the Korean VR and AR industries before they bloom although there is an expectation that Chinese capital will be good news to the Korean VR and AR industries.
Nine Chinese VCs, including Hon Fund, Judi VR, Changkeje and Dachen Venture Capital participated in the “2016 Korea-China VR and AR Investment Cooperation Seminar” held at Nuri Dream Square on World Cup North Road in Seoul on December 6.
The volume of China's VC industry was estimated to be the world's largest at US$ 231 billion last year. In the meantime, VR industrial parks are being built throughout China. As the central Chinese government is implementing direct VR and AR policies, Chinese VC firms are having an eye on Korea start-ups to acquire new contents and technology. The investors that participated in the event are managing funds amounting to tens of billions of won to trillions of won and emphasized that Korean VR and AR companies’ contents such as games and entertainment and educational contents outclassed those of Chinese companies.
“In general, Korea has an advanced VR industry as Korea is a leader in the entertainment industry,” said a representative of Dachen Venture Capital, the first ranker in the Chinese venture capital industry with about 3.4 trillion won (US$3.0 billion) under management. “I hope that excellent Korean companies will make a foray into China and implement practical cooperation with Chinese companies."
"As Korean people are very sensitive to fashion, and apart from the hardware aspect, Korea definitely has a big advantage in terms of software," said Liang Yinghong, the chief technology officer of China's largest VR experience franchise company, Judi VR. “They have their own colors, so their content is reliable. The Korean VR and AR industries are entering the early stage of booming, but related startups still have a poor development environment. Moreover, it is difficult for the Korean VR and AR industries to attract investment as it has been rumored that the Choi Soon-sil scandal cuts across the VR industry.
Therefore there is a concern that Korean start-ups will transfer all of their technology and contents to China while attracting investment from China's big venture capital firms.
"Most of Chinese investors and joint ventures want to do business in China with management rights under their control," an industry expert said. "There is a possibility that Korean companies will only lose contents to Chinese companies as Chinese companies can practically control everything in management even though they said that they will jointly manage VR and AR companies with Korean companies."
In particular, since China does not strongly protect intellectual property rights yet. The industry expert advised Korean start-ups to carefully examine contracts when they attract investment from Chinese investors as it is difficult for Korean start-ups to protect their intellectual property rights.