[Paek Jongmin’s Deep Tech] Startups Headquartered Overseas: Look at Substance, Not Address – The Asia Business Daily

Kazakhstan’s Higgsfield, backed by Nvidia, is headquartered in San Francisco
Jensen Huang praised its model linking Kazakh talent with U.S. capital
Korean-founded companies with overseas headquarters keep quiet amid disapproving views
Policy funds should assess substance, not headquarters address

The faces of Korean startup executives taking photos with AMD CEO Lisa Su at a meeting between AMD and artificial intelligence (AI) companies hosted by the Ministry of Science and ICT on October 7 were lit up with excitement. Everyone there must have hoped the encounter would open the door to the world.

Soon afterward, a similar photo came from Kazakhstan. It showed Jensen Huang, CEO of Nvidia, on his first visit to Astana on October 23, standing alongside Yerzhanat Dulat, co-founder of AI video company Higgsfield AI. The difference was that Nvidia’s investment in Higgsfield was announced in Kazakhstan that day.

Even if the name Higgsfield is unfamiliar, many people have probably seen the dance video for “NEON” by the popular girl group A2O LITE. Countless creators used the company’s service to keep the original dance moves intact while replacing the people in the video with other people or animals. Videos featuring composites of Samsung Electronics Chairman Lee Jae-yong and SK Group Chairman Chey Tae-won even appeared. Of course, they were fictional. The company says it has more than 40 million users worldwide. Imagine if a Korean AI company had led this global trend.

This is where things get complicated. Since last year, the Korean government has secured a large budget to foster homegrown AI models and provide access to graphics processing unit (GPU) resources. Of course, investment takes time to bear fruit. Korean AI services have emerged that attract users overseas, but they still need to build a stronger presence in the global market. What matters is whether our companies are gaining overseas customers as quickly as we are becoming customers of foreign AI services.

To gain overseas customers, companies need to establish a foothold in overseas markets. Higgsfield is Kazakhstan’s first AI unicorn, a privately held startup valued at more than KRW 1 trillion, but its headquarters are in San Francisco, the United States. Its structure connects Kazakhstan’s development talent with American capital and markets. Huang praised this model, saying it brings together the cultures and expertise of the two countries to compete globally. Although the company is headquartered in the United States, Kazakhstan welcomes its success. Higgsfield was an achievement Kazakhstan could showcase to the world during Huang’s first visit.

There are companies in Korea that have chosen the same path. MangoBoost, a startup that attended the meeting with Lisa Su, established its headquarters in the United States to connect with overseas customers through technology that improves the efficiency of AI data centers. MangoBoost CEO Kim Jangwoo is a professor at Seoul National University, and most of the company’s employees are in Korea. To do business with global companies, firms need not only technological prowess but also connections that help them understand local customers’ needs and persuade investors. An overseas headquarters can serve as a base for connecting technology developed at home with larger markets.

A “flip,” in which a company establishes its parent company overseas and makes its domestic entity a subsidiary, is another such option. The legal framework has begun to accommodate this approach. In 2024, a legal basis was established to support companies founded overseas, and in August this year, the Ministry of Government Legislation issued an interpretation that founders’ shareholdings should be combined when determining whether a company incorporated overseas and co-founded by Koreans qualifies as having founders as its largest shareholder.

However, requirements concerning shareholding percentages and largest-shareholder status for recognition as an overseas-founded company remain in place. As a company attracts investment and expands its business, the founders’ shareholdings may decline. Policymakers should also consider whether this creates the contradiction of companies losing eligibility for support simply because they secured funding needed to grow.

Attitudes in the field are also slow to change. Companies that have completed or attempted a flip often keep it quiet because they are wary of disapproving reactions. Mirae Asset Capital also invested in Higgsfield, which is headquartered in the United States, in August. Should a Korean-founded company be viewed with suspicion simply because it is headquartered in the United States? Promising companies should not be pushed to the back of the queue in investment reviews for policy funds, including the National Growth Fund, solely because they have completed a flip.

It is true that flips have sparked debate over the outflow of national wealth. Since public money is involved, companies’ technological capabilities, business prospects, and contributions to the domestic economy must be carefully assessed. But the standard should be substance, not the address of a company’s headquarters. The relevant questions are how many overseas customers it has secured, whether domestic research and development (R&D) and employment have increased, and whether the resulting gains are flowing to domestic partners and industries.

We should respect the choice to go global and ensure that capital supports that ambition. That is how we can foster more AI companies that the world seeks out, rather than remaining customers of overseas AI firms. I hope that one day, founders will look back at that photo and remember it as the moment the door to the global market opened.

© The Asia Business Daily. All rights reserved. Unauthorized AI training and use prohibited.