Last week, we published Part 1 of our interview with Taekkyung Lee, Co-founder, Daum Communications. In that article, we wrote that Lee wears many hats — from being an Adjunct Professor at one of Seoul’s top universities to being a venture capitalist. He also runs Mashup Angels, an early-stage incubator.
His love for starting up began in 1995 when he established Daum Communications — the company most well-known for its eponymous web portal and merger with Kakao. Today, Daum is one of the most established Internet firms in South Korea.
After leaving Daum in 2008, Lee found that he loved startups and wanted to help these companies with investment opportunities and financing.
Investing and helping startups
His love for the underdog — weak, lean and without guidance — led him to start investing. He started startup accelerator Primer in 2010, and then a similar entity Mashup Angels in 2015.
While Primer might share many similarities with Mashup Angels, there are multiple differences. Firstly, Mashup Angels only needs two out of five partners’ buy-in when it comes to the decision-making process, whereas Primer requires four or five partners’ buy-in, said Lee, Representative Partner, Mashup Angels.
“But generally, [we have] three or four,” he added.
Other partners at Mashup Angels are Junghee Ryu, YJ Min, Taekhoon Lee and Sanghyuk In. Taekkyung Lee, Ryu and Min were involved in Primer at one point.
“Sometimes, [we can make an investment decision] within one day,” he told me in Mashup Angels’ offices in Seoul. “If the other partners don’t want to invest in that company, they [don’t have to]. It’s simple.”
Secondly, while Primer has many programmes and activities for the general public, Mashup Angels caters to a more exclusive crowd — its own portfolio companies, said Lee.
He shared that Mashup Angels has a cheque size of US$100,000 and that it has put money into 36 companies, like travel platform MyRealTrip.
These companies are typically Internet companies, and can sometimes be Internet of Things (IoT) companies.
However, Lee is not enthusiastic about gaming, even though the South Korean gaming market is massive, be it on PC or mobile. “I believe that gaming is a very specialised area,” he said.
He also noted that Mashup Angels does not invest in hardware startups — unless it’s in the realm of IoT. That is because hardware companies usually need bigger cheques to see their products go live, which is something an early-stage incubator might not be able to provide.
Looking at how the startup scene has grown since he started Daum Communications many years ago, Lee can only say that it is looking optimistic. There is government support, many more venture capital funds being set up to boost entrepreneurship, and incubators and accelerators everywhere you look.
The current keyword is O2O (online-to-offline), said Lee. What’s that? Zack Weisfeld of Microsoft Ventures explained on VentureBeat: “O2O, online to offline, is an e-commerce model that combines offline business opportunities with the Internet. O2O e-commerce platforms attract customers online, but the real consumption of services is experienced by the customers offline.”
Examples of that include Foodpanda, AirBnB and Uber. Go online to find your food, cab and vacation rental. Go offline to actually enjoy them.
Companies working in this category get to dominate a particular market — like Baedal Minjok and Kakao Taxi in Korea, for example — and might find it hard to expand overseas.
Where’s the money?
“Speaking of the funding ecosystem, the biggest problem is the exit,” said Lee.
There are three ways a company can exit: through a merger, an acquisition or going public.
He said that because the market is very competitive in Korea, big companies should acquire smaller companies to enhance their business proposition.
“I think it’s the same in China,” said Lee. “The market is so competitive. But in Korea, we have only two [big companies to acquire smaller businesses]: Kakao and Naver.”
What about Samsung or LG, two massively-staffed and established Korean conglomerates? “They don’t,” he told me. “They never.”
“Sometimes they acquire some foreign companies, but it’s very rare. The problem is the culture,” added Lee.
“In Korea, actually IT industry is more aggressive, but still in IT, we don’t have enough M&A cases,” he said.
“My hope is that Chinese big companies — because they are interested in Asian markets — they would acquire a good Korean startup and then, probably Naver and Kakao should acquire … because they need to compete with Chinese big companies,” he opined.
Before we ended the interview, I asked Lee about the future. Who is the next Daum or Naver? “Actually, Daum was number one until 2005. From 2006 to now, actually Naver is number one. [As for] mobile, Kakao is number one.”
“Probably there will be some big new star player,” he said. “Like a … Naver or Daum.”
“Who knows?” he concluded.