Funding-lead

“We look forward to another success story with startups here in Daejon,” said President Park Geun-hye during a ceremony to launch yet another innovation centre in Korea. While government support for Korean startups has been impressive, is it time for the politicians to take a step back? At some point the ecosystem must be allowed to develop of its own volition and startups surviving off the back of government handouts alone must be allowed to perish. That’s the real world.

At home and away
While most of the focus has been on domestic programmes, there has also been a raft of overseas projects as well. At one point this past summer, I counted almost 50 Korean teams, on more than three consecutive government programmes, stationed at Plug & Play Tech Centre in Silicon Valley. Hundreds of teams have been flown around the world on fact finding missions to Singapore, Israel, Europe and North America. Dozens of other startups have attended global startup conferences. In every case, flights, hotels and even subsistence payment have been made by the government.

While all of these initiatives have at least some value for most participants, there is a distinct lack of an overall strategy, one that could prevent government departments from entering into head to head competition. Only this week, a local event organiser voiced frustration that their event initiative had been copied, with two other government agencies running identical competitions for the same overseas conference.

In the process startups are often left confused by who is offering what, or simply waste time chasing programmes when they should be chasing product/market fit. While early-stage capital and support can help startups get off the ground, too much external interference can divert time away from the job at hand: Defeating merciless odds to build a sustainable business. Pampering in the early stages will not result in companies that have the grit and determination to persevere under normal market conditions. This is a concern for many observers.

Also Read: US$1 billion invested in Korean startups this year

Government led innovation?
Innovation centres have been set up across the country in conjunction with Korea’s major corporations, under the leadership of government agencies. The plan is to have at least one such centre in every major city across the country. The aim is to nurture local startups and venture firms with the assistance of large companies. But are the government, backed up by typically conservative corporations, the right one to be leading, funding and organising startup initiatives? Even in the US, investors and entrepreneurs complain about the involvement of the government.

President Park has stated confidently that these innovation centres “will serve as an incubator for success and that the government will help innovative ideas develop into fruition” (or something). But I wonder how much she, or her aides, really know about entrepreneurship, as a conservative government that until around 18 months ago provided almost unbridled support for family-run conglomerates, as the engines of economic development.

As part of the agreement for setting up the innovation centre in Daejon, SK Group will extend its financial support worth almost US$90 million for startups in the centre, which includes around US$18 million for overseas market entry.

“The government will give full support to excellent companies in the region so that they can be listed on the KONEX or advance into Silicon Valley,” President Park said. While these positive words may warm the heart, insiders in the tech scene wonder how much red tape will be needed to acquire this support, and how much value it will actually have.

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