Sokwoo Rhee is head of LG NOVA.
Image Credit: LG
Connect with top gaming leaders in Los Angeles at GamesBeat Summit 2023 this May 22-23. Register here.
LG is one of the world’s biggest tech companies, but it is making efforts to stay in touch with the innovations of startups with its LG NOVA incubator program.
The LG Electronics North American Innovation Center (LG NOVA) kicked off in the fall of 2021 with a pledge to pour $20 million into companies accepted for the accelerator. And it recently showcased a set of new startups at the Eureka Park exhibition at CES 2023. This kind of activity can bring in fast-moving technologies such as generative AI into one of the world’s biggest companies.
Sokwoo Rhee, corporate senior vice president of innovation at LG Electronics and head of LG NOVA, said in an interview With VentureBeat that the company sifted through more than 2,400 submissions (up from 1,300 submissions the first year) before choosing the companies that it believes are advancing a better way of living while improving the planet.
This means it supports technologies for sustainable living, eco-friendly products and an inclusive society. All told, about 40 startups are in the second class, up from 10 in the first year.
GamesBeat Summit 2023
Join the GamesBeat community in Los Angeles this May 22-23. You’ll hear from the brightest minds within the gaming industry to share their updates on the latest developments.
“The general philosophy is what is called ‘outside in,’” said Rhee. “I think about a lot of corporate innovation and how it is organized. And what they want to do is usually is add more value to their existing business. And that’s how they work with startups.”
He added, “In our case, yes, we want to add value to our business. But by creating new business with startups. So it’s a little different if you think about it. Traditionally, startups come in to help the business of the corporation. In our case, we want to co-create. We want to actually brainstorm and create complete new businesses that LG may or may not be even in right now. So that is the core difference. And our philosophy is there are a lot of intelligent people and intelligence experts out there. We want to work with those experts.”
The companies can get up to $100,000 for a joint product or concept development, plus resources and potential investments from LG Electronics, LG Display, and other LG NOVA affiliates that could total in the millions of dollars. And they get a chance to collaborate with LG for potential opportunities to develop multi-million-dollar engagements as new businesses within LG’s global innovation portfolio.
The average check size is about $2 million, though that often comes in the form of multiple checks. The company reserves dry powder to help fund the same startups in their subsequent rounds. At some point in the future, LG might consider acquisitions. But that is a ways off.
“We are not necessarily looking at technology at the moment for technology’s sake,” he said. “Our goal is very clear. We want to create whole businesses. So when we work with startups, we want to see whether those startups have business expertise or a business mindset. Are they really the business partners that we can work with? Initially, you start with technology. But then after a while, they start looking how do they can actually create a real business and generate revenue.”
That means the focus isn’t just solely on early-stage companies.
Rhee said the LG NOVA focused on startups in the digital health, metaverse, gaming, ESG, electric mobility, smart lifestyles and other categories.
Rhee noted that there are more than four million new companies that have been created since the beginning of the pandemic, a sign that innovation is still growing strong, even if the inspirations for it have changed.
Rhee thought that he might see fewer startups during the pandemic at first, but more startups surfaced perhaps because more companies needed to find alternative funding sources. They also probably needed more stable business relationships.
“It’s not just about raising money anymore,” he said. “It’s about proving their business value by generating revenue, profit and so on. I think that makes working with a corporation like LG more attractive.”
Rhee said the quality of submissions improved in the second year, as the word got out to more mature startups and more startups began looking to collaborate during the tough macroeconomic situation.
As it evaluates the startups, LG decides whether to make an equity investment, based on the terms and negotiations with the startups. It also evaluates whether it can do business together with the startup with some kind of commercial agreement.
The tech downturn
As for startups focused on tech like quantum computing or nuclear fusion, he said it is encouraging and optimistic at a time when the world economy is weak.
“In the downturn, it’s not about just having a hard time finding investors. The money didn’t go away. The money is just sitting there and investors are just being more careful because of the interest rate hikes and everything. If you have something tangible with real business value, some startups are finding it easier to find investors.”
There have been a lot of layoffs at tech companies. But the job market may not be loosening up as fast when it comes to the availability of talent. Startups are hiring, but they won’t necessarily find it easy to find the right people to do a particular job, he said.
One of the questions to ponder is whether sustainability investments can pay off from a business perspective. The company wants to do good things and reduce is carbon footprint and eliminate waste. In that way, LG is aligned throughout the company, including with LG NOVA.
There is a particular focus on green energy and power—starting with electric vehicle charging, since the U.S. has about 140,000 public EV chargers in about 53,000 charging stations—compared to 145,000 gas stations. On top of that, a quarter of EV chargers don’t even work.
New solutions range from digital charging services, power management, to innovative service providers to distribute power and expand the availability of electric power for vehicles, homes and businesses. The mix of globalization and innovative tech-focused startups will influence on a large scale.
Digital health startups have also been on the rise over the past few years. Total money raised amounted to $29 billion in 2021 and, despite the looming recessionary period, investors expect dollars in the next year to bring in $15 billion to $25 billion. Technology-wise, health startups are increasingly leveraging virtual reality, AI and virtual platforms to treat conditions, drive data-driven health care and guide patient care in remote settings.
Post-pandemic, the health care industry has shifted. Virtual care and digital solutions will continue to become more commonplace and are here to stay. This new wave of revolutionary care will offer more affordable and easily accessible care, transforming the industry forever. We can expect to see more people opting for at-home treatment with the potential decrease of in-office visits even further, he said.
AI is one of the most advanced tools in technology—resulting in the growth of new market areas for startups to expand technology offering and businesses.
Artificial intelligence systems are becoming increasingly more progressive, and the technology is extending beyond what we’ve traditionally seen in previous years—forging new growth in virtually every business sector.
In fact, since 2020, venture capital investment in just generative AI has surpassed a staggering 425% reaching $2.1 billion — such as the new artificial chatbots like ChatGPT leveraging generative AI that can write poems or programs, and answer intense physics questions.
“Generative AI is going to be used a lot in the metaverse companies we are looking at,” Rhee said. “It’s not just exponentially growing. It’s becoming more and more useful. ChatGPT is amazing. But I also want to figure out what are the additional business values that chatbots can bring. In a specific vertical, what is the specific application scenario where this generative AI can really be applied?”
IBM tried to do that with its Watson technology, but it didn’t really succeed. So the key is finding out where this specific brand of AI will work.
“We know how people want to use it to make their jobs more efficient. They can ask ChatGPT to write a draft of a letter that they can review and customize. That certainly reduces number of hours spent on it. Where can the disruptive value come in? Is it technologically disruptive? Does it have value in real-life applications? I think it’s a little too early to say exactly.”
The metaverse and gaming
LG announced at CES that the startup Oorbit would bring metaverse applications to LG connected televisions. And one of those apps is Auxuman’s Auxworld, which uses generative AI to create multiplayer games from users who simply type in text prompts describing a game.
“When people talk about the metaverse, they think about AR sunglasses or VR,” he said. “But that may not be the ideal modality to deliver the metaverse.”
He added, “One of the biggest issues with the metaverse is that content generation is expensive. And it takes long to do it. There are tools out that already that generate images. Some of these things can be automated. But AI is never going to be 100% perfect. It always needs human intervention, or at least review at some point. And so I don’t think the jobs will go away that easily.”
Asked why the company is interested in the metaverse, he said that the company is doing it because it sees actual market value. It may take a while to realize the value, perhaps more in about five years or 10 years, rather than one or two years. In that way, it is similar to the internet of things (IoT), which Rhee has been working on since the late 1990s.
“If we fast forward to today, I recently counted that the number of connected devices in my home was close to 60,” he said. “So that dream we had probably 15 years ago came true. It’s just that we didn’t see that coming, like creeping into our lives one by one. I think same thing is going to happen with the metaverse. It’s not going to happen overnight.”
Seeing the big picture
Fresh out of grad school, Rhee created his own startup, confounding Millennial Net as one of the first companies that commercialized low-power wireless mesh/sensor networks. He raised multiple rounds of venture funding and sold the company after a few years. Then he started a startup blog and went to work for the U.S. government, which was one of the most bureaucratic organizations in the world.
“When you are in a startup, you see it narrowly,” he said. “When you are working as a government employee as an innovation fellow at the White House, you can see extremely broad perspectives at hundreds of companies. And what I saw was that there is” a lot of innovation but it’s very fragmented.
And that fragmentation is the biggest problem, he said, “as everybody is working in their own silos.” If you could combine some of the technologies, you could see synergies. So he joined LG to see if that could be done, and that a big corporation could move faster in this innovation space, out of its own self interest in making better returns.
Advice for startups
LG NOVA’s advice for startups is to find a product-market fit. Tech is perhaps 30% of the success, he said, and and the other 70% is related to business and how to go to the market. Rhee said he has done his own startup and he knew what it was like to want a big partner that could both invest and be a partner.
As to his comments to all startups, Rhee said, “What I want to tell the startups is that this is hard. It’s very hard. But they don’t need to be alone. And sometimes, or in most cases, innovation comes out of collaboration. And that’s my model. So when you’re a startup, you get to develop knowledge in your lab. Good. But spend your effort and resources and your bandwidth to find the right partners, and to work with others instead of trying to do everything yourselves. That’s what LG NOVA does. It’s why we are here.”
GamesBeat’s creed when covering the game industry is “where passion meets business.” What does this mean? We want to tell you how the news matters to you — not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. Discover our Briefings.