South Korea, once referred to as the ‘Land of the Morning Calm,’ has emerged as one of the key startup hubs in Asia. Having witnessed firsthand the changes in this once conservative and shy nation, I am amazed at the pace of change and 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 ten years ago, supported by the Korean government, which spawned five successful companies (NHN, NC Soft, Ahn Labs, Daum, and Nexon), there has been a renewed interest in entrepreneurship over the last three years, and this time there are signs Korea is ready. 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 also been a huge injection of finance from the Korean government, which has also put great effort into legitimizing entrepreneurship as a national aim. For these reasons the Korean startup ecosystem has been picking up speed over the last 12 months and the seeds of change are now sprouting. Korean startups are now getting global recognition in the press, from international investors and by an increasingly global user-base, 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.
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, 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 and entrepreneurship in Korea
The Korean government has recently pledged US$3.2 billion in investment in startups and the ‘Creative Economy’ over the next three years. This funding is being disbursed as direct grants and investments, the creation of innovation centers connected with national universities, and also through agreements with many of the leading venture capitalists and accelerators in Korea. Currently ten private organizations have an agreement for one-to-five matching funding from the government, meaning that by the end of this year 50 Korean startups will have received US$600,000 in funding under the program.
While outsiders often comment that the government should stay out of entrepreneurship, something I also fervently believed, 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 in Korea 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 in the last four decades. Public opinion has shifted in support towards entrepreneurship. Korea is effectively branding itself as a country that fosters innovation.
Foreign interest in Korea
In a promising trend that demonstrates validation of the strengthening status of Korean startups, foreign interest in Korean startups is also growing, with an influx of overseas investors setting up shop in Seoul. Additionally, with Korea’s standing as one of the most technologically advanced nations (boasting the world’s fastest mobile internet among other accolades) a number of regional Asia offices have been established in Seoul by small, medium and large global technology companies, including Facebook, Google, SuperCell, Uber, HasOffers, Air BnB, and AppLift, among many others.
We are still in the early stages of ecosystem building, but signs show 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 Asia’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 Korean 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. The only examples seem to be in the gaming space, with a small number of titles, such as SmileGate’s Crossfire, enjoying global appeal and robust revenue.
Some examples of recent Korean startup success
CoinPlug is a Korean Bitcoin startup that is seeing rapid growth. The company has raised its second round of funding from Silicon Valley venture capitalists in less than six months. The company operates a bitcoin exchange, and has 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. Another Korean Bitcoin exchange, Korbit, also recently raised funds from Silicon Valley to strengthen its platform.
Coupang was founded in 2011 by 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. A worrying fact for Korean investors is that Coupang missed out on this opportunity on its doorstep, with all of its venture financing coming from the US.
Founded in 2011, Kakao Talk is now one of Asia’s most prominent social platforms. The company enjoys 95 percent penetration on Korean smartphones and has over 130 million global users. The 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.
Memebox and Flitto graduated from Y Combinator and Techstars in the last 12 months, respectively, and have raised capital from overseas investors. Memebox is a beauty curation service, similar to BirchBox. Flitto is a translation platform getting a great deal of attention from overseas press and investors.
Devsisters is a leading Korean game developer. While their first game was released ten years ago, the company struggled to find success until a year ago. Their second title, Cookie Run, was released on the Kakao Games platform. Since release, the game has been downloaded in Korea 20 million times and achieved four straight quarters of $20 million in revenue. The game was released globally on Line Games two months ago and has already been downloaded 20 million times.
(Image credit: Flickr user Jon Candy)Editing by Paul Bischoff