This structure, consisting of 45% labor costs and 30% R&D, reflects early-stage startups' decisions to secure technological superiority over growth first.
The Whereabouts of $425 Billion
In 2025, the global venture capital market poured a total of $425 billion (approx. 580 trillion KRW) into the startup ecosystem over the course of the year.
According to Crunchbase data, $425 billion flowed into more than 24,000 private companies worldwide in the form of venture and growth investments in 2025, a 30% increase from the previous year, marking the third-highest annual investment scale since the peak in 2021–2022.
So, where is this astronomical amount of capital actually being used? When startups receive investment funds, the money is often broadly generalized simply as 'company operating expenses.' However, as competition intensifies and investors demand profitability more rigorously in the current year of 2026, the use of investment funds has become more strategic and sophisticated than ever before. From labor costs, R&D, marketing, and infrastructure to specific technology sectors, analyzing the flow of startup investment funds is synonymous with reading the direction of global innovation.
In this KBR Analysis, based on the latest 2025–2026 data, we deeply dissect where startup investment funds are utilized the most, broken down by sector and stage.
1. The Largest Single Expenditure: Labor Costs
The single largest use of startup investment funds remains labor costs, past and present. This is not just common sense, but a fact clearly confirmed in the financial data of South Korean startups for 2025–2026.
Looking at the case of the Korean AI startup Moloco, salaries increased by about 40% over a two-year period from 14.4 billion KRW in 2023 to 20.2 billion KRW in 2025, while stock-based compensation expenses surged by about 450% from 2.2 billion KRW to 12.4 billion KRW over the same period. This is interpreted as the result of a strategy utilizing both cash compensation and equity-based compensation simultaneously to aggressively secure AI talent.
This trend appears across global startups generally. According to SaaS Capital's 2025 benchmark survey, venture-backed companies spend 89% more on operating expenses, 80% more on general and administrative expenses, 100% more on marketing expenses, and 71% more on R&D expenses compared to bootstrapped (self-funded) companies. The moment investment capital comes in, the very scale of expenditure changes.
The reason labor costs are large is not simply because the number of hires has increased. In the case of AI talent, high-level personnel with high scarcity must be secured amid global competition, often leaving companies with no choice but to maintain considerably high salary levels. In particular, unlike general platform companies, AI startups have a hiring structure centered on technical talent rather than sales and operations personnel, resulting in much higher labor costs per capita.
At the seed stage, the salaries of 3 to 10 core personnel, including co-founders, account for a significant portion of the investment funds. From Series A onward, as organizations expand rapidly into technology, sales, and marketing, the proportion of labor costs grows even larger. Industry consensus generally observes that for growth-stage startups, labor costs account for 40% to 60% of total operating expenditures.
2. The Second Largest Item: Research and Development (R&D)
The expenditure item following labor costs is research and development expenses. Especially in tech startups, R&D is considered a core investment directly linked to the company's survival.
Looking at the R&D budget ratio by growth stage, an R&D proportion of over 50% of the total budget or 50% to 60% relative to revenue is common at the seed stage. The R&D ratio gradually declines to 30% to 40% in Series A and around 30% relative to revenue in Series B, stabilizing at the 20% to 25% level during the growth phase from Series C to D onward.
Interestingly, there is a significant difference in R&D investment ratios between South Korean and U.S. startups. Korean startups often secure development costs through government subsidies or projects, and their R&D-to-revenue ratio is known to hover around 10% to 15% on average. Under the venture company certification criteria of the Ministry of SMEs and Startups, the software sector is required to allocate 10% of annual sales to R&D if sales are under 5 billion KRW, and 8% or more if sales exceed that. Unlike U.S. startups that pursue aggressive R&D from the beginning assuming a global market, Korea has a structure where domestic-oriented, pragmatic resource allocation takes place.
The contents of R&D expenditures also vary greatly by field. For AI startups, a significant portion of R&D flows into computing infrastructure such as securing GPU servers, building data, and model training costs. In many cases, R&D expenses such as expanding infrastructure like GPUs, servers, and data centers, data construction, and model training are the main causes of operating losses for AI companies. For biotech and healthcare startups, large-scale costs arise from clinical trials, substance synthesis, and regulatory certifications, making it common to endure tens of billions of KRW in R&D deficits even with little to no revenue.
Most innovative companies allocate 5% to 15% of their budget to R&D expenditures. However, the appropriate R&D expenditure ratio for startups varies greatly depending on the nature of the business, target market, and growth strategy, with no fixed figure.
3. The Third Battleground: Sales and Marketing
The area where investment funds are most visibly utilized is sales and marketing. Marketing budgets surge explosively as early-stage startups introduce their products to the market and secure their first customers, or as growth-stage startups rapidly expand their market share.
The most stark contrast between venture-backed companies and self-funded companies lies in marketing and sales. Venture-backed companies spend 100% more on marketing and 89% more on sales compared to bootstrapped companies. Simply put, startups that receive investment spend twice as much on marketing as companies that grow on their own.
The specific patterns of marketing expenditure vary by stage. At the seed stage, performance marketing (search ads, social media ads), content marketing, and PR take center stage. After Series A, branding investments, event participation, and the establishment of sales organizations are added. For B2B startups, the labor costs of the sales team account for a substantial portion of the marketing budget, while for B2C startups, it is common to concentrate 20% to 35% of investment funds on digital advertising.
In particular, for consumer e-commerce startups, the surge in advertising and promotion expenses greatly influences the profit and loss structure. Looking at the financial statements of some Korean consumer e-commerce startups that succeeded in turning a profit, there are cases where profits were realized even though advertising and promotion expenses surged by more than 800% year-on-year, because decreases in other cost items (especially handling fees) offset that increase.
4. Investment Fund Flows by Sector: AI Consumes Everything
As of 2026, analyzing where startup investment funds are used by sector reveals one overwhelming fact: AI is absorbing everything.
Approximately 50% of global venture funding in 2025 was concentrated in AI-related companies, with investments in the AI sector reaching $211 billion. This is an 85% increase from the previous year, marking the highest AI investment scale in the past 10 years, including the 2021–2022 global funding peak.
In 2026, AI startups are expected to absorb about 33% of total venture capital investments. The valuation of seed-stage AI startups is about 42% higher than non-AI companies, the median for Series A has exceeded $50 million, and Series B reaches $143 million.
Within AI, where investment funds are concentrated matters. Since 2023, AI infrastructure and hosting companies have attracted the most AI venture investment, reaching $47.4 billion in 2024 and $109.3 billion in 2025. This is the result of a rapid concentration of funds to build the computing infrastructure essential for expanding advanced AI systems. In other words, a significant portion of AI startup investment funds is flowing into data centers, GPU clusters, and cloud infrastructure.
The second largest sector is healthcare and biotech. The second largest investment sector in 2025 was healthcare and biotech, with approximately $71.7 billion in funding. Investment funds for startups in this field are mainly used for clinical trials, new drug development, AI-based diagnostic systems, and genomic analysis platforms.
Fintech is the third major sector. As of the third quarter of 2025, quarterly investment in the fintech sector maintained a stable level at $10.9 billion, with AI companies accounting for 23% of total fintech investments, recording the second-highest proportion ever.
5. Uses by Investment Stage: From Seed to Series C
Depending on which stage of investment a startup receives, the use of funds changes fundamentally.