SM Entertainment invests in tech startup, music label

K-pop powerhouse SM Entertainment Co. invested 1 billion won ($774,353) in a local app development startup valued at 20 billion won in June 2022 via its venture capital unit SM Culture Partners, banking sources said on Tuesday. 

Among the startup’s key shareholders is SM Entertainment’s IT business center chief, known to have the surname Choi, sources said. SM Culture Partners joined the Series A funding led by former SM Culture Partners CEO Jang Jae-ho, who is now the K-pop agency's Chief Strategy Officer.

SM Entertainment closed another deal in September of this year. It acquired Seoul-based 10x Entertainment’s management division at 2.2 billion won.

Choi founded 10x in 2020 and is a key shareholder of the small music label. He had been 10x's CEO by the time of the acquisition.

Choi is among those who led SM Entertainment’s management feud early last year, according to sources. Jang, who was not supportive of SM Entertainment's former Chief Producer Lee Soo-man, left the K-pop powerhouse late last year and returned in March as Lee stepped down.

10x manages only one artist, Kim Woo-jin, an ex-member of K-pop boyband Stray Kids. The small entertainment agency logged more than 800 million won in debts and 3.1 million won in cash reserves at the time of the buyout.

SM Entertainment valued 10x at 3 billion won; it is very unusual for an entertainment business managing only one artist to be sold, market insiders said.

It hasn’t been disclosed whether SM Culture Partners, the VC unit, had received approval on the investment from its limited partners before the app developer's Series A funding. It is normally prohibited to execute an investment if there could be a conflict of interest related to employees, but exceptions are allowed upon approval by all limited partners.

SM Entertainment has yet to confirm that Choi hasn't violated the non-competition agreement and that the VC unit has informed its limited partners of the investment in the startup, the K-pop label told The Korea Economic Daily.

Write to Jun-Ho Cha at chacha@hankyung.com

Jihyun Kim edited this article.