Korea: 'Land of the Morning Calm' & now startup hub in NE Asia
There is a renewed interest in entrepreneurship in Korea recently, along with some huge injection of finance from the Korean governmentBy Nathan Millard 24 Apr, 2014
Korea, once referred to as the ‘Land of the Morning Calm,’ is emerging as one of the key startup hubs in Asia. I have witnessed personally, the exponential pace of change in this once conservative and shy nation over the last 10 years, and I am encouraged by the hunger with which local founders are embracing the challenge and opportunity presented by entrepreneurship. As predictable and arduous corporate careers begin to lose their appeal in a country still dominated by big names, such as Samsung, Hyundai, and LG, there are strong signals that innovation will begin to shape the economic landscape in the near future.
After a faltering initial foray into entrepreneurship around 10 years ago, which spawned five successful venture backed companies (NHN, NC Soft, Ahn Labs, Daum, and Nexon), there has been a renewed interest in entrepreneurship recently, which looks likely to have a much further reaching affect. Korea boasts highly skilled developers and engineers, a large pool of business graduates with entrepreneurial flare, a powerful work ethic, and an increased appetite for the unknown and the supersonic rewards that exits like Twitter, WhatsApp and Oculus have proven in the US. Now Koreans want a piece of the action.
Along with the growing enthusiasm, there has been a huge injection of finance from the Korean government. President Park Geun Hye’s administration has already invested large amounts of financial capital and has made a great effort towards legitimizing entrepreneurship as a national aim, as well as branding Korea as a startup nation. Korean startups are now getting global recognition, spurred on by a flurry of activity from both domestic and overseas organizations. In a new trend that looks likely to accelerate overseas VCs from Japan, China and the US are setting up shop in Korea, alongside burgeoning tech companies, all looking to get in on the action, supporting growth and capitalizing on a highly engaged domestic market.
And just in the last few weeks two brand new startup accelerators have been founded in Seoul by Korean entrepreneurs who, following successful exits from their first ventures, are in a financial and experiential position to give back to the ecosystem. This is exciting, not just because it shows that the ecosystem is maturing and beginning to support itself, but because it demonstrates that Koreans can build companies that produce high valuations and successful exits. We are on the verge of seeing the emergence of a virtuous circle of entrepreneurship in Korea, after a decade-long struggle.
Government & Entrepreneurship in Korea
The Korean government has recently pledged $3.2Bn in investment in startups and the ‘Creative Economy’ over the next three years. This funding is being disbursed as direct grants / investments, the creation of innovation centres connected with national universities, and also through agreements with many of the leading venture capitalists and accelerators in Korea. Currently, ten private organisations have an agreement for 1:5 matching funding from the government, meaning that by the end of this year, 50 Korean startups would have received $600,000 in funding under the programme.
While outsiders often comment that the government should stay out of entrepreneurship, one has to understand more of the context of their involvement. In Korea there has been a long and successful relationship between industry and government and its fruits can be seen in the success of some of Korea’s biggest corporations and the enormous success that is the Korean economy, over the last four decades. With a national shift from manufacturing to innovation, results are already beginning to be seen. Public opinion, once firmly siding with conglomerates, has begun to shift in support of entrepreneurship and Korea is beginning to effectively brand itself as a country that fosters innovation, top down and bottom up.
Foreign Interest in Korea & Korean Startups
In a promising trend that demonstrates validation of a strengthening status, foreign interest in Korean startups are also growing, with an influx of overseas investors setting up residence in Seoul. Some prominent examples of this are Cyber Agent Ventures (Japan), Formation 8 and Altos VC (US). 500 Startups has also been making regular trips to Korea, as well as SV Angel’s David Lee and representatives from SoftTech VC. Additionally, with Korea’s standing as one of the most technologically advanced nations (boasting the world’s fastest mobile internet among many other accolades) a number of regional offices have been established in Seoul by small, medium and large global technology companies, including Facebook, Google, SuperCell, Uber, HasOffers, Air BnB, and AppLift.
While we are still in the early stages of ecosystem building, there are determined signs that the miracle on the Han River, resulting in Korea’s economic boom over the last four decades, will translate to a similar startup revolution in Korea, as the nation becomes established as one of Aisa’s top hubs of entrepreneurship.
Korean Startups Can’t Go Global – The Big Mystery?
Korea now has a number of high profile global companies propping up its economy. But look down the ranks of SMEs and the situation is less pretty. In fact, having worked in with Korean startups over the years it is very difficult to identify any company, outside the ‘Big Five’ that has really had any notable success overseas. Even KakaoTalk, which has announced its plans for IPO next May is not a standout global success, despite almost complete support from domestic smartphone users and founding capital of $100M. The only examples seem to be in the gaming space, with a small number of titles, such as SmileGate’s ‘Crossfire’, and most recently Devsister’s ‘Cookie Run, have the golden mix of global appeal and robust revenue.
beSUCCESS, a local tech media organisation aims to discover why Korean startups fail overseas and is trying to remedy the situation, by connecting Korean entrepreneurs to resources abroad that can catalyse their growth. As well as leading a thriving entrepreneurial community in Seoul and actively writing about Korean startups in both Korean and English, the organization holds beLAUNCH, an annual startup event in Korea, which has benchmarked Silicon Valley events, such as TechCrunch Disrupt. The organisers are now planning their third event in Seoul, May 14-15, which will bring together some of the world’s top entrepreneurs and investors and provide an open forum for discussion on a range of current technology trends, while facilitating deal flow between Asia and the US.
As a founding member of beSUCCESS who has worked with numerous startups and organisations trying to expedite their global success, I believe Korean companies must find one remaining piece of the puzzle. Quite simply, it is not enough to want to go global, they have to actually do it. Korean entrepreneurs must be more aggressive in engaging with the outside world, and take the final step into the unknown, in order to reap far bigger rewards. beLAUNCH aims to demonstrate, through proven examples and the advice of successful global entrepreneurs, that to achieve their potential Korean entrepreneurs must get out of their comfort zone and confront their fears. No more sitting on the fence, building products for Korea first. Instead, build a global company from day one or continue accepting mediocrity.
Signs of Success
A few early examples of success, powered by beSUCCESS, have emerged. 5Rocks raised over $2M for regional expansion from Global Brain, a Japanese VC through last year’s event in Seoul. Korbit, a local Bitcoin Exchange, attracted early stage investment from a hot-shot line-up of Silicon Valley VCs through beGLOBAL, the Stateside version of the event. Memebox a beauty curation service graduated from Y Combinator’s winter session this year and plans to take its service regional, having raised additional funding from Silicon Valley. Flitto, a crowd-sourced translation service graduated from Techstars in the last 12 months and has raised capital from overseas investors. Coinplug, a Korean Bitcoin startup has also recently raised its second round of funding from Silicon Valley in less than six months. While predominantly a digital company, it has also now released its first bitcoin ATM in Korea’s biggest shopping mall, COEX, and plans to expand into additional payment areas in the coming months.
The Holy Grail: Korean Venture IPOs on the Horizon
KakaoTalk is small in comparison to almost every other messaging app you could name, but being one of the first to market, it has demonstrated that Korean venture companies can innovate and create valuable innovations. Founded in 2011, Kakao Talk is Korea’s dominant ‘social platform’ and has achieved a respectable 140M global users. The original messaging platform was monetized to great effect with the release of its gaming platform in July 2012 and now boasts a range of social features including ‘Kakao Story’ a popular social feature similar to Facebook. Kakao’s IPO is expected next May at an approximate valuation of $3Bn.
Coupang was founded in 2011 by Korean-born Bom Kim, a Harvard MBA dropout. While the company initially focused on daily deals, it now has a burgeoning e-commerce platform and is seen as one of the stars of the Korean startup ecosystem. It is expected that the company will seek to IPO in the coming year at a valuation of over $1Bn.
Devsisters is a now a leading Korean game developer. While their first game was released ten years ago the company struggled to find success until a year ago when their second title ‘Cookie Run’ was released on the Kakao Games platform in Korea. Since release the game has been downloaded in Korea 20M times and achieved four straight quarters of $20M revenue. The game was released globally on LINE Games two months ago and has already been downloaded 20M times. The company is also expected to IPO within the next 12 months. Its current valuation stands at around $80M, though this is expected to increase substantially, on the recent and highly successful global release.
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