China and South Korea dominate APAC’s metaverse VC deals

China’s new national metaverse action plan and Korea’s government funding will continue to spur VC deals in virtual and augmented reality

The possibility of a global metaverse — a shared, 3D online space — now looks too far out of reach. Meta, formerly known as Facebook, has spent tens of billions of dollars on Reality Labs, its virtual reality (VR) and augmented reality (AR) business in recent years. Yet, its metaverse platform has fallen short of its user target of 500,000, losing 100,000 players in eight months. It also recently laid off 13% of its workforce, or 11,000 employees.

However, in China and South Korea, favorable government policies continue to encourage VC investment in metaverse start-ups, despite smaller deal sizes compared with 2021. China published its first national-level policy document regarding the metaverse on November 2. One of the published aims is to export more than 25 million VR devices, with total value exceeding $48bn, by 2026. VR is listed as a key industry for China’s digital economy in Beijing’s 14th five-year plan. 

Meanwhile, South Korea’s Ministry of Science and Information and Communication Technologies has put $177mn aside to kickstart its metaverse industry. One aim is to build a metaverse platform for its citizens to access public services virtually. 

In 2021, and 2022 year to date, more VC deals in AR and VR have been concluded in China than in the US. South Korea has had 73 deals concluded in 2021, sixfold of the number just four years ago (Fig. 1). China and South Korea dominate the top deals in AR and VR in APAC so far this year. Here are the five largest:

1. Lionheart Studio ($580mn): South Korean games developer Lionheart Studio raised $580mn from Kakao Games in June 2022. It’s well known for its flagship game Odin: Valhalla Rising. The company intends to expand into the metaverse and NFT (non-fungible token) space. Lionheart Studio also aims to file for IPO on Kosdaq later in the year, looking for a valuation of more than $3.1bn.
2. Rokid Corporation ($160mn): China-based Rokid Corporation raised $382mn in total. The largest financing round was series C, where it’s raised $160mn in three tranches from gaming company NetDragon Websoft and other undisclosed investors. Rokid produces VR headsets and smart glasses and operates its own operating system. Rokid’s hardware is mostly targeted at B2B use cases, like enabling remote communication between field works in the oil and gas industry.
3. AI Being ($139mn): China-based AI Being, a spin-off from Microsoft, is a chatbot developer known for birthing the chatbot XiaoIce. XiaoIce, which bears the personality of a sassy teenager, is built with empathic computing framework. She communicates with human social skills acquired through machine learning. AI Being raised $139mn in November 2022 from undisclosed investors. Prior investors include GGV Capital, Northern Light Venture Capital, IDG Capital, and Hillhouse Capital Management.
4. VA Corp ($82mn): South Korea-based VA Corp is a gaming and video streaming platform and visual effects production start-up optimized for the metaverse. It raised $82mn from South Korean venture capital firm Paratus Investment in March, bringing its post-money valuation to a billion dollars and helping it gain unicorn status just 13 months after it was founded. Other investors include global IT company NHN Corp, video game company Com2uS Holdings Corp, and consumer electronics group LG. VA Corp plans to use the new funds to create metaverse-related products such as AI humans, and to build Asia’s largest virtual studio. VA Corp is one of the many Korean media industry players that are building virtual studios to support 3D special effects for metaverse content. Others include entertainment company CN ENM Co. and mobile carrier SK Telecom.
5. Metaverse Entertainment ($81mn): Seoul-based Metaverse Entertainment raised $81mn from financial investment company Hyundai Motor Securities. Metaverse Entertainment has created the first ever virtual K-pop idol, Yuna, with a sing-to-earn karaoke game. Yuna will have her own NFT, and owners can use the NFTs to access future albums and concerts.

Instead of a global, shared metaverse, APAC is more likely to see several local ‘online worlds’. China’s national metaverse action plan will spur developments in 3D technologies, VR integration, and useable VR products, which have applications in cultural tourism, education and training, safety and emergency response, smart cities, and more. In parallel, Korea’s VR-based content market is expected to grow to $9.3bn this year, or fivefold in two years, according to Korea’s Ministry of Culture, Sports and Tourism. The way we access the trendiest Korean music and dramas might look a little different in the near future. 

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