South Korea’s startup scene finally looks ready to go international.
The Korean government is extending Korea’s international reach in startup circles through initiatives like its fintech bridge with the UK. It’s also encouraging international startups to enter Korea through programs like K-Startup Grand Challenge.
Seoul city government is also out to attract globally minded entrepreneurs and has established Seoul Global Startup Center to directly support foreigners who want to start up in or expand to Seoul.
And home-grown Korean startups are beginning to realize the benefits of racial diversity in their workforces and are investing more effort into breaking into unfamiliar markets.
The government’s role in improving startup diversity
For the most part, government bureaucrats and entrepreneurs don’t mix, but Korea’s flourishing economy is in large part thanks to large scale government involvement.
In 2013 the Korean government partnered with the nation’s largest conglomerates to boost Korea’s economy and grow its startup ecosystem. Under this initiative $2 billion dollars annually was invested in a raft of support initiatives, including matching funds, startup conferences, overseas acceleration, domestic mentorship programs, and much much more.
Recently K- Startup Grand Challenge provided 40 foreign startups with grants and acceleration in Seoul. Additional funding of up to $130,000 was provided for 20 startups with the highest growth potential.
The newly created OASIS Start Up Visa program has also made it a little easier for foreigners to grow their businesses in Korea.
Influx of foreign investors, students
Business people from Asia and beyond are turning to Seoul in larger numbers than just five years ago. With a top 15 global economy, Korea is now a wealthy market, and the world is investing. Global executives from multinational corporations are now rubbing shoulders with foreign entrepreneurs in the city’s large number of trendy bars, and Seoul is steadily becoming more cosmopolitan.
Korean startups target international markets
Local startups are looking to expand beyond Korea’s borders, but success cases are still rare. Those that are able to capture an international audience often find the most success via crowdfunding. While not all campaigns are successful (non-American companies face various challenges), there have been some resounding successes.
Solar Paper became the first Korean crowdfunding campaign to reach $1 million in August of 2015. Bagel Labs ($1.3 million) and Ripplebuds ($750,000) have also enjoyed success running their campaigns from temporary offices in the USA.
The Korean startup ecosystem is maturing
Five years ago there was one accelerator, a handful of VCs, and a small, discreet angel investment scene. Mentors with exits to their name were rare, because exits were rarer than unicorns.
Much of that has transformed beyond recognition since 2013.
Accelerators like Sparklabs and Future Play, coworking spaces and incubators like Google Campus, Maru180, and D Camp have become plentiful. In fact, at last count there are 20+ accelerators in operation in Seoul. While many are fueled by government handouts, the bustle of activity is a positive sign.
Dozens of funding sources exist for early stage companies, and a sufficient volume of later stage capital is also available.
Along with this strengthening of the entrepreneurial support infrastructure, more powerful and experienced mentor networks also exist. People with relevant skills and a proven track record are giving Korean startups vital skills and knowledge that are improving their chances for success.
But there’s still room to grow
For all its efforts, the Korean startup scene is still young — very young! It has achieved much in a few short years since 2013, but there’s a lot of room for improvement.
The country has tons of startups, but it doesn’t have tons of great investment opportunities or unicorns in the making. It’s simply too easy to start up, so the finite pool of top talent is spread very thinly.
Seoul still struggles to garner the same international attention as places like Silicon Valley, Tel Aviv, London or (closer to home) Singapore. And while Korea has become better at attracting tourists, it is still struggling to convince foreign professionals to set up shop here. For many, Singapore is still the obvious choice in Asia.
Korea’s work culture is also in desperate need of a facelift to attract and retain top international talent. Foreigners don’t typically last long in Korean startups because bosses are often risk-averse, disregard suggestions, and revert to the “Korean way.” Expat forums are salted with stories from foreign hires who have experienced frustration with their work environments.
Young Koreans experience alientation as well. Thousands of Koreans are now educated overseas and many stay on for a year to bolster their resumes. All too often, they return and are faced with a work culture that should have died along with Korea’s last dictator in the 1980s.
Startups that adopt a more open, ‘Silicon Valley-esque’ approach are likely to reap the rewards of a happier, more loyal, more motivated workforce in the long term.
Success cases are changing Korean attitudes toward startups
Until recently, no self respecting Korean mother would let her child join a startup. Why would she when, until recently, there were precious few signs you could make a decent living as an entrepreneur in the country? Youths risked scorn from their families and peers if they didn’t pursue a career at an established conglomerate like Samsung, LG, or Hyundai.
That is now changing. The government has played a positive role in legitimizing entrepreneurship as a career. Several Korean entrepreneurs have returned to their motherland after living or studying overseas. A small number have founded billion-dollar startups. Examples include the commerce portals TMON and Coupang, founded by Korean-Americans Daniel Shin and Bom Kim, respectively.
Kakao Talk’s multibillion dollar IPO has also proven that money can be made in tech entrepreneurship. Even Samsung now runs at least four internal accelerators, one of which (C-Lab) was established specifically to enable employees to pursue startup ideas. Employees who leave the workforce and join C-Lab get support, including seed funding.
Korea’s efforts to promote creativity and bolster its startup ecosystem have resulted in marked success. The country is now legitimately labeled as an emerging startup hotspot in Asia.
But some of it still feels contrived and premature.
There’s a ton of activity, but that needs to be backed up by more actual results. For example, while most Korean startups see China as a primary market, I can’t think of one that’s anywhere close to achieving success there. Likewise, the US market has been a primary target for years but Korean startups have yet to see any real success there.
Korea has every opportunity to emerge as a startup leader in Asia if its entrepreneurs face outward and take logical steps to success. That will take time, and it’s not something the government can purchase with startup grants.
Founders must also begin to reject the seduction of all-expenses-paid safaris to Silicon Valley. A collection of selfies from Facebook, Google, and Stanford are great for your street cred but can seriously damage your startup’s chances of success by diverting resources away from building a product people love and getting customers.
Hiring foreigners is also nice, but they need to be valued for their innovative ideas rather than some sort of bragging right for the CEO. Foreigners played a large and important role in Silicon Valley’s success. They can do the same in Seoul, if they’re given genuine roles and responsibility.
Similarly, foreign professionals can thrive in Korea, but they must understand that Korea’s four-decade fast track to success was not based on a blueprint of diversity. Korea is still homogeneous, has its quirks and its potentially lucrative market has its unique requirements. If foreign entrepreneurs can understand and appreciate these, they could find success and help create a more vibrant startup environment.
I’ve decided to plant my roots and my business in Korea, but I’ve also spent most of the last 10 years here building the critical relationships and knowledge of the market without which my startup marketing firm would definitely not exist.
I’m genuinely excited by the opportunity I see in Asia, through Korea. I’m certain Korea will continue to emerge as one of the region’s key centers of entrepreneurial innovation, as long as the old ways don’t kill the flame.
Nathan Millard is Founder and CEO of G3 Partners.