During my recent two-week trip to Seoul to judge at beLAUNCH (Korea’s TechCrunch Disrupt) and meet Seoul Digital Forum’s Global Hackathon teams, I was lucky enough to chat with 100 Korean companies. That’s 100 companies in 10 days! For some context, I am a Korean-born American who immigrated to the US from Seoul when I was 9 years old. Having been only back once in 2004, this was my first time seeing Korea in 10 years. What started out as just a great excuse to see my home country quickly turned into an eye-opening and surprising experience; I worked really hard to learn as much as I could in about the Korean startup ecosystem in just 10 days.
I believe Seoul is poised to become the hub of concentrated tech startup activity in Asia in the next 3-5 years, much like Silicon Valley in the US. Here are top 6 things (of many!) that I learned about the startup ecosystem in Korea:
1) The Government is All In
In Silicon Valley, the tech ecosystem has already gone through a couple decades of iterations and cycles to naturally produce an environment conducive to tech entrepreneurs. However, most non-Silicon Valley markets (including domestic and international), need support from the government to jumpstart a favorable ecosystem and promote entrepreneurship. Currently, no country in the world has more backing per capita from the government than Korea. In the next 3 years alone, they’ll put $3.7 BILLION into startups in the form of grants and other initiatives.
2) It’s at the Tipping Point
The startup scene in Korea seems like it started just a few years ago. Similar to how YC’s founding in 2005 sparked a startup movement, Primer (started by the Founder of Daum) began its first batch in 2010 and has had the same effect. In general, Korea’s ecosystem seems to have taken off in the last couple of years with top accelerators like SparkLabs, KSTARTUP, and the vertically-focused FT Accelerator. Institutional investors like Kcube (Kakao chairman), BonAngels, and SoftBank Korea, alongside startup focused communities likeD.CAMP run by Banks Foundation for Young Entrepreneurs, are getting involved, too. It’s not only the domestic investors getting involved, investors from Silicon Valley are taking note of the booming Korean ecosystem. SV institutionals like Altos Ventures and BlueRun Ventures already have Korea specific focused funds. 500 Startups is extremely excited to work alongside these awesome organizations to take the Korean ecosystem to the next level.
3) The “9-6” Culture
In Korea, it’s widely known that top engineers and college students want to work for chaebols like Samsung, LG, and Hyundai when they finish school. Many of these same graduates are very risk averse and don’t start companies or join startups. I think a lot of this is due to Korean culture’s emphasis on pedigree – the idea that your place of education and work determines your status. However, it does feel like Korean culture has changed in the last couple years and that many students are now interested in joining or starting a company.
4) The M&A Scene Is Improving
Just 5 years ago, many thought the only path to liquidity was for a company to IPO 10 years after founding. In the last couple of years, companies like Naver, Daum Kakao (merged just last week at $3B), and SK Telecom have started to acquire early stage companies, which provides early liquidity for investors and pushes experienced entrepreneurs into the ecosystem for angel investment and mentoring. Although non-IPO exits seem to be between $10-50M (Kcube and BonAngels having several successful exits in that range), TenCent, RenRen, and other big Chinese players are anticipated to enter into Korea via regional offices, which should give M&A activity in Korea a big boost.
5) Some Things Are Only Possible in Korea
I believe there are unique opportunities in the world that Korea will be able to see before many other markets, and that Korean entrepreneurs will have the first crack at solving what will likely become global opportunities. Korea’s technology infrastructure is years ahead of other developed markets; almost 80% of the country has smartphones, and internet speeds average 50mb/s for the entire country (In the US it’s a paltry 10mb/s). Korea’s population density also creates interesting opportunities for startups – Seoul area represents 1/2 of the entire country’s 50M population, which makes it easy for the masses to adopt and spread new technologies very quickly.
6) Korea is the World’s Mobile Commerce Powerhouse
Mobile is Korea’s strongest suit. For every 5 people in Korea, 4 have smartphones, which is almost 50% higher than the smartphone adoption in US. Mobile commerce makes up 28% of total online sales (compared to 13% in US), and continues to leave other developed markets behind as it grows at an astounding rate of 156% year-over-year. Today, 44% of the country shops on mobile, and mobile sales in 2014 are projected to hit $14B. Per capita, that’s $280 in annual mobile spend in Korea vs. $105 for US and$45 for China. Korea seems the best market for investors and founders who are looking at mobile opportunities, and it continues to move farther ahead as other countries try to catch up.
Korea is still a relatively new place for startups, but it has all the right ingredients to be the next big tech hub. A lot needs to happen in the next 3-5 years for this ecosystem to rise to the next level, but as an investor or entrepreneur in tech, you’d be foolish to overlook the global opportunity that Korea represents. 500 Startups certainly is all about #500Kimchi.
Here’s to drinking more 소맥!