South Korea Expands AI Funding to Strengthen Startups

TLDRs:

• South Korea’s 2026 budget boosts AI and deep tech funding for startups.
• Government allocates $12.3B, including re-challenge fund for failed founders.
• Record R&D spending of $1.61B targets AI adoption in manufacturing.
• Programs aim to scale domestic tech firms for global competitiveness.

South Korea is ramping up its support for artificial intelligence (AI) and startups, unveiling a proposed 2026 budget of 16.8 trillion won (US$12.3 billion), representing a significant increase from this year’s allocation.

The Ministry of SMEs and Startups announced that the budget will focus on AI, deep tech, biotech, and entrepreneurial initiatives, reinforcing the country’s long-term commitment to innovation and startup leadership.

Major Budget Increase for Startups

The proposed budget, slated for submission to the National Assembly on September 3, marks a 1.6 trillion won (US$1.17 billion) rise over the current year.

This includes an increase in venture investment funds, with the country’s main fund-of-funds receiving 1.1 trillion won (US$803 million), half of which will support AI and deep tech initiatives.

A notable feature of the budget is a 1.3 trillion won (US$949 million) “re-challenge fund” designed to assist founders whose previous ventures did not succeed, backed by 800 billion won (US$584 million) in government support.

Record R&D Spending Targets AI

R&D investment is set to reach a record 2.2 trillion won (US$1.61 billion), funding new programs for public-private commercialization and the adoption of AI in manufacturing processes.

By strategically focusing on AI and deep tech, South Korea aligns itself with global technological trends, while maintaining a concentrated government-driven approach. Unlike many other nations that rely primarily on private capital for AI development, South Korea emphasizes direct state involvement to accelerate ecosystem growth.

The government is also expanding secondary and M&A funds to enhance capital recovery in the startup sector. Additional initiatives will aid export-oriented companies and help promising tech firms scale internationally.

Programs such as the “Unicorn Bridge” and the expanded “Super Gap Startup Project” are structured to guide startups through growth stages and increase their global competitiveness.

Sustained Long-Term Investment

South Korea’s decade-long escalation in startup funding demonstrates a strategic, long-term commitment rather than cyclical policy shifts. From a $3.7 billion allocation over three years in 2014 to the current annual budget of over $12 billion, Korea has positioned itself as one of the most aggressive government backers of startups on a per-capita basis worldwide.

Even amid global venture capital fluctuations, the government has maintained a steady upward trajectory in funding, ensuring that startups continue to receive stable support.

The country’s startup ecosystem, consisting of more than 15,000 companies, provides a strong foundation for this investment. Venture capital in Seoul alone grew 9.5% year-over-year to $8.95 billion in 2024, demonstrating the potential for AI and deep tech to drive significant economic growth.

Conclusion

South Korea’s ambitious budget highlights the country’s determination to lead in AI and technological innovation.

By combining record funding, strategic sector focus, and structured growth programs, the government is providing startups with the tools needed to succeed domestically and internationally, cementing South Korea’s role as a major player in the global tech ecosystem.

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