Thanks to deep learning, we're in biggest tech boom cycle: GFT Ventures

"We believe we're in one of the biggest technology boom cycles,” said Jeff Herbst, co-founding managing partner of Palo Alto-based GFT Ventures.

In an interview with The Korea Economic Daily, Herbst said the world is finally seeing the untapped potential of data thanks to deep learning – a machine learning technique that imitates the way humans gain knowledge using data.

Prior to starting the venture capital firm, Herbst worked as vice president of business development at US technology behemoth Nvidia Corp. He also created the Nvidia GPU Ventures program, overseeing more than 40 global investments and 20 acquisitions valued at over $8 billion.

This is how he recalls his 20 years at Nvidia: “All along, I had probably the best job in the technology world because I was at the center of this ecosystem.”

So what prompted him to leave the prominent position last July? A business idea from Jay Eum, who also boasts more than 20 years in the investment industry.

“If we focused on AI, data science and blockchain, I thought we could create really interesting venture funds,” Eum said. “Herbst was the only person I wanted to do it with.”

Eum co-founded TransLink Capital, an early stage VC also based in Palo Alto, California. In South Korea, he is best known for his role as the first managing director of Samsung Ventures where he led the chaebol’s US venture capital operations.

In true West Coast fashion, the two met at a boxing gym 10 years ago.

After becoming fast friends, Eum and Herbst jointly invested in a number of startups, including SoundHound. Together, they increased the value of the audio and speech recognition company from $20 million to $2 billion.

TRIFECTA OF AI, BLOCKCHAIN, DATA

​The two founding partners share a passion for and unwavering trust in the value of artificial intelligence, blockchain, and data science.

The way Herbst puts it: “A big wave is coming and you better get on the wave.”

Thanks to Deep Learning, Herbst said he is more bullish on technology than he has ever been.

His reasoning is that there is only so much coding human engineers can pull off. 

The world is awash with data, be it videos, sound, financial data, and most of it goes unanalyzed. Using machine learning technology, the world can now process unprecedented amounts of data and extract immense value. 

In addition to artificial intelligence, the two founders are also bullish on Blockchain technology. 

Eum in particular has been investing in Korea’s first cryptocurrency exchange Korbit since 2013. The 52-year-old did caution, however, against equating digital assets with the technology itself.

“The same way AI can impact every single vertical industry from agriculture to manufacturing, and can change the way that we do business from recruiting all the way to sales and marketing, blockchain can be pervasive across all of these industries,” he said.

Building on the power of digital ledger, the firm is bullish on Web3 as well. The concept is a new iteration of the World Wide Web based on blockchain, incorporating decentralization and token-based economics.

“If you look at Web3, blockchain, distributed internet, and all the other components we are talking about are part of that,” Herbst said.

LOPSIDED FUNDING 

Last year was a heyday for South Korea’s startup ecosystem – especially for the VCs that invest in it. 

In the first three quarters of 2021, Korean startups received a total of 5.3 trillion won ($4.4 billion) from the country’s venture capital firms, a whopping 82% jump from 2.9 trillion won seen the year prior. 

While a growing number of investors worry that the average value of startups has shot up too much, the GFT partners are unfazed.

“In my view, the top five or 10% of the funds get the best deal flow and the rest have a lot of problems,” Herbst said, elaborating that companies with useful AI technology are bound to increase in value over time. 

The VC veterans are against comparing the current startup boom to a dot-com bubble. The logic is simple: The companies they are working with are not faking it like many of the internet-based companies of the late 1990s.

To offset potential losses, GFT Ventures invests in startups before their value increases. The firm’s plan is to invest between $3 and $5 million per company in their Series A funding rounds. 

The household names in the industry hope to be engaged with the startups on multiple levels beyond the financial. 

“We're not cheerleaders, you know, we're value-added investors,” Herbst said when asked about the GFT strategy. “We have to be involved, invest early, and take meaningful stakes in the company, and we have to be able to help them.”

TARGET GEOGRAPHY

Founded last year, GFT Ventures made a total of five investments so far. 

The fundings went to AI-based marketing platform Mperativ, Blockchain infrastructure Figment, NFT exchange Unblocked, and marketing automation company Addressable. It is currently wrapping up funding for a Korean startup in the autonomous truck industry.

In its latest report to investors, GFT said investors have committed more than $80 million and the total funding size is set to exceed the previous estimate of $100 million by March.

A number of South Korean juggernauts, namely Mirae Asset Venture Investment Co., Naver Corp. and SK Hynix Inc. under SK Inc. are anchor investors of GFT Ventures.

Utilizing the investor network Eum has in South Korea, GFT Ventures held a joint investor relations event with SK Hynix at this year’s CES in Las Vegas. SK Hynix manager Chey Min-jeong, the 31-year-old daughter of SK Group chairman Chey Tae-won, co-hosted the event. 

Korean venture capital firms are ramping up their investments in Korean American-owned startups in the US in recent years, mostly in Silicon Valley.

The VC emphasized that staying power backed by ample capital is important as companies on average take at least seven years to mature to a point they can go public or have escape velocity.

“We don't just spray money around. We go to places where we can add value,” said Herbst.

Write to Sang-eun Lucia Lee at selee@hankyung.com
Jee Abbey Lee edited this article.