According to a recent article on Forbes, and indeed my own insight from having worked very closely with Korean startups over the years, “A new start-up powerhouse is on the horizon – South Korea“.
While the US, Israel, and Europe have long led global innovation in the tech industry there is excitement in the startup ecosystem in Korea, with a number of highly notable stories emerging. What is also encouraging is that where Korean companies used to be highly restricted to their domestic market (exept for Samsung and LG), now Korean tech startups are beginning to make waves overseas, both in terms of global customer acquisition, but also, more recently, investment.
As I reported recently Bloomberg News has published the Bloomberg Global Innovation Index that ranked South Korea first in the world on a number of key indicators, such as research & development capability, productivity, tech density and patent activity. This phenomenal achievement, that has never in the past been linked with innovation, is not such a surprise from insiders, who are aware of the huge blossoming in the startup ecosystem, which kicked off for a second time around two years ago, after a failed boost in the early 2000s.
How has this happened?
In recent decades, South Korea has transformed into an economic heavyweight (it now ranks 15th for per capita GDP), having systematically applied substantial resources to research and development. As a result, South Korea has become the world leader in patent activity and information and communication technology. The country has the highest broadband penetration in the world at 97 percent and is a leader in broadband speed with an average peak connection of close to 50 megabits per second. This highly developed high-tech infrastructure is the result of years of investment from the Korean government over the last decade and has in many ways allowed the Korean population to become the most connected on earth.
The success in Korean technology manufacturing, led by Samsung – the world’s leading smartphone manufacturer, has burnished the country’s image as a leader in technology, but the connection goes deeper. Koreans are avid consumers of digital media and apply the lion’s share of their bandwidth resources to online gaming. South Korea is home to the World Cyber Games, the world’s largest video game competition, and has three television channels fully dedicated to eSports featuring professional gamers. More recently highly visual K-Pop music videos, whose success in part is the result of a highly-tuned attention to details and impeccable production quality, are streamed by the millions and have become a significant global export. Home-grown services like Viki (sold to Rakuten for $200M) and Drama Fever have also helped spread legitimize Korean cultural exports to mass global markets.
Image courtesy of Forbes
Growth of an Entrepreneurship Ecosystem
On top of this background of activity and growth, young Korean techies are a building an increasingly robust start-up scene that is led by social mobile services, such as Kakao Talk, mobile game developers like Devsisters, and social media entrepreneurs like the makers of Between. Even Google has noticed this rise of entrepreneurial activity and has taken an active role in nurturing South Korean companies, introducing the most promising to the US market through Korean startup accelerator, Sparklabs.
There is a growing interest from overseas VCs in the South Korean venture ecosystem as well as a rise of angel groups, accelerators and event organizations to promote entrepreneurship in Korea. Softbank Ventures, StoneBridge Capital, and Strong Ventures are a few examples of established VCs moving to get a foothold in South Korea.
Another player in the current boom in startup activity in Korea is the government, which is actively promoting and supplementing private fund-raising and investment in the venture capital market. In 2013, South Korean President Park Geun-Hye announced the desire for a more “creative economy” and launched the new Ministry of Science, ICT and Future Planning. For 2014, the ministry’s budget increased to more than $12 billion, with over two billion going directly into fostering growth for the startup ecosystem along with elimination of many restrictions on the venture industry’s activities. While the government’s activity in determining startup policy in Korea is questioned at times, it is in part a result of government support that Korean entrepreneurship is being noticed across the globe and that startups are now becoming a preferred career choice for many young Koreans, put off by the predictability of a corporate career in a large conservative Korean corporation. While South Korean Chaebols like Samsung, Hyundai, and LG can legitimately be thanked for the role they played in building Korea into a flourishing prominent global economy, their focus on exporting and manufacturing is seen as lacking these days, with a much stronger push across all sectors of the economy to increase innovation in the economy to sustain curent growth rates. It is startups that will fuel the next wave of Korean industry and will act as a much needed backup to the small number of large corporates that currently hold sway in the Korean economy.
Formulating new business ideas and inventing IP is only the first part of the equation. South Korea can ascend to the next level by developing a new venture ecosystem that provides operational support, a broader network and ready access to early stage capital; one that rewards risk taking by Korea’s best and brightest. These entrepreneurs have the opportunity to target new markets but they need to be funded and properly equipped to design their products for localization in new and unfamiliar markets. CEO’s of early stage companies also need access to mentors, those who have ‘been there done that’ globally. In this area Korea stills falls far behind other more established startup hot-spots, but it is an issue that is being directly addressed by a new startup accelerator that is a joint venture between Korean Coolidge Corner Investments and Bootstrap Labs, a Silicon Valley based accelerator with a track record for success bringing overseas startups to the US Market. that can assist them in creating effective pitch presentations and preparing them for exposure to foreign markets and investors. With the right blend of investment and guidance, early-stage Korean companies can take on the US and other global markets and really scale their businesses.
Many of the fundamentals are already in place and Korea looks poised to take advantage of the optimum time to increase its standing in global entrepreneurship and innovation.