SEOUL

THE GOVERNMENT COUNTER-ATTACK

The career of Kim Beom-Su, who is nowadays one of the richest South-Korean perfectly matches with the ideal of the American “self made man”. After having grown up in a modest family in a poor neighborhood, he succeeded thanks to his ambition and eagerness by creating Hangame in 1998, one of the two companies at the origin of Naver, a web giant in South Korea. He launched his second start-up in 2010 : Kakao Corp. This company now ties with his first one for the award of first Korean unicorn. As a former employee of Samsung, Kim’s path obviously reminds those of Sachin and Binny Bansal from Bangalore who resigned from Amazon to create FlipKart. Unfortunately for the Seoulite ecosystem, the comparison with the Indian ecosystem doesn’t go further.

Indeed, the Bansal are always a great source of inspiration for the Indian youth that is eager to launch projects. Nevertheless, after more than fourty interviews of entrepreneurs, investors and incubators and incubators in Seoul, Kim Beom-Su has not even been mentioned once. All in all, this shows the weaknesses of the local entrepreneurial spirit : it is far from representing the Korean ideal of success. How could we explain the weakness of entrepreneurial spirit in a country that used to be described as an Asian dragon and that has acted as an engine for the entire region.

 

Structures that should however lead to a powerful ecosystem

The fact is that the main innovations come from the big corporation and Korea is far from having a cooperation between big companies and entrepreneurship. Those famous « chaebols » obvisouly have a strong economic impact as the 5 main corporations represent 60% of the national GDP but also a political influence. They are mainly known for their practices of nepotism, monopoly, brutality towards subcontractors and cannibalism towards young entities, which are scarcely punished and appear to be dissuasive of any entrepreneurial greed.

                    

To reach the Asian market, South Korea not only benefits from an ideal geographical position but also from some of world’s best infrastructures. Means of transport of men and information are incredible. For instance, internet and mobile connexion is anywhere one of the fastest in the world : metro, office, streets, cafés.

                  

Human ressources represent as well a great strength. Education is at the center of debate in Korea. Students are the most hard-worker in the world in regards to hours spent and the 2014 OECD report highligths a overrating of long studies.

Hence, the entrepreneurial landscape is influenced by doctors that work on high-technologies projects. Brian Yong Wook Chae is one of them. This doctor in neurosciences is currently developing a helmet that’s able to analyze and formalize the willingness through ocular movements and brain activity. As told at the CES of Las Vegas in 2014, the use of the device could differ from video games, to army and even to health sector. It will soon be commercialized. However, this overqualification comes from the importance of social status and family influences that are both conditionned by the professionnal situation. Thus, all those talents traditionnaly often offered their services to big corporations (called Chaebols in Korea) rather than dedicating themselves to entrepreneurship.

Chaebols and lack of entrepreneurial culture

In 2013, South Korea was ranked 2nd country with the most developed entrepreneurial culture it’s not the feeling that local actors give talking about it. Han-Byeol Lee who is a Manager at DSC Investment, a VC fund, complains about a risk aversion that’s still too high in this ecosystem.

Job security and fear of unemployment keep on being emphasized in society. Asaph Kim, co-founder of Kamibot explains that :

« Start-ups have a negative connotation here. My parents were opened as they have lived in the United States but the rest of my relatives kept on telling me “No ! Find a stable job in a big company such as Samsung“ »

Asaph Kim

Co-Founder, Kamibot

The fact is that the main innovations come from the big corporation and Korea is far from having a cooperation between big companies and entrepreneurship. Those famous « chaebols » obvisouly have a strong economic impact as the 5 main corporations represent 60% of the national GDP but also a political influence. They are mainly known for their practices of nepotism, monopoly, brutality towards subcontractors and cannibalism towards young entities, which are scarcely punished and appear to be dissuasive of any entrepreneurial greed.

« The fact is that many big conglomerates in Korea copy ideas from small companies and then make them fail» Hannarae

Project Manager, D2 Startup Factory

During the prosperous period of full employment that Korea lived, this situation was permitted and enhanced. Nowadays, the trend is reversing and the historical trust towards chaebols is jeopardized. With a young unemployment rate reaching 12% at the end of 2015, many started to question this domination and its implications in the Korean social landscape. S a witness, the buzz that happended around the hashtag « Hell Joseon » (Korea is hell).

« The sitation is not easy. We are trying to make start-ups the next engine of growth but those conglomerates are responsible for what Korea is nowadays.We cannot just kill them and hope that entrepreneurhsip will take over. Eugène Kim

Manager, Sparklabs

Symbol of this transition, Sparklabs is hence hosted at Maru 180, which is a big entrepreneurial complex that was founded and financed by… the Hyundai foundation.

An entrepreneurial dynamism that is forced by the government

In this context, the new government of Park Geun-Hye that came to power in 2013 carries a program that aims at reforming the Korean professionnal landscape. The ambition is to create a « creative economy » that promotes the developement of innovation and more importantly entrepreneurship.

 

Firstly, this policy relies on heavy investments. Park’s administration among other things gave an new impulsion to the Korean Fund of Funds, which was created in 2005 to encourage a balanced and sustainable development by small companies. The entity nowadays provides more than 40% of investments needs in capital risk.

 

In a 3-year plan designed by Park’s administration, innnovation centers have been created in 17 cities. Gyeonggi Center symbolizes the launch of the program. Start-ups benefit from relevant assistance : technologies, innovation, development advisory, financing, low-interest rates. Those centers represent the willingness of the government to to decrease the domination of the chaebols. They support the costs and learn to collaborate with start-ups. Among others, large projects are launched to fight unfair competition, promote a better repartition of R&D funds and implement a taxation policy that encourages entrepreneurs.

 

Moreover, being an entrepreneur requires come skills : creativity, proactivity and responsibility. However, even though the Korean education system is renowned worldwide, the emphasis put on rote learning doesn’t enable the development of such skills. Therefore, the government took the initiative to incite students from 8 to 18 years to spend one semester out of school and devote themselves to other activities. There are also some private initiatives such as Makersvill which offer initiation seminars to entrepreneurship, coding , 3D printing in the buildings of Tipstown public institution.

« If we decide to invest $100 000 in a start-up, it can get $700 000 thanks to this program » Oh-Hyoung Kwon

Investments Director, Futurplay

All in all, creative economy aims at offering to start-ups an environment that is not as harsh for them. Nevertheless, this initative that is essential because of the lack of entrepreneurial culture appears to be quite weak. As chaebols and the government are the main financiers, many are reluctant towards the sustainability and independence of this young ecosystem.

Seoul’s ecosystem raises a question that will require time to be answered : Could the entrepreneurial development of a country come from the top ? Could an ecosystem be created artificially and imposed in a culture that seems reluctant to such a change ?

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