Getting funding from investors in Korea can be difficult. Many entrepreneurs are passionate about solving real-world problems not only in their region but around the world. This was not always the case. For example, in Korea, Koreans were content with working for one of the big conglomerates like Samsung and having a safe office job that pays the bills. Sure there was little passion but it was a steady income. However, since 2010, more and more Koreans have been fed up with the low ceiling these corporate jobs brought. In addition, they wanted to have a passion for their work. This was when the rise of the Korean startup scene happened. Koreans started their startups and were motivated/inspired by other successful startups that were finding great success. Furthermore, building their own company, brought many young entrepreneurs in Korea meaning and purpose to their work.
However, these startups in Korea can not thrive without the support of investors, angels, and accelerators in Korea. In addition, startups from all around the world are now looking to Korea to find new investors. But, how do you find the right investor in Korea for your startup?
Finding Investors in Korea
If you are a startup, you probably understand how difficult it is to get that initial seed investment to kick-start your company. Seoulz interviewed Samuel Hwang the CEO of NPX Capital, an alternative investment firm, and he said that was the top question entrepreneurs asked him. Korean startups and global startups don’t know where to turn to try and raise money from investors in Korea. There is very little information online which is why we hope this article can give you some tips on the fundraising process in Korea.
Seed funding for startups is crucial as they need to build fast and for less. While at the same time competing against other entrepreneurs. Korea is filled with startups that are looking for seed funding. With this in mind, we not only interviewed Samuel but also the partners at NPX Capital to give us some in-depth insights into getting funding from investors in Korea. This applies to not just Korean startups but also startups from outside of Korea. Investors in Korea are eager to invest in all startups all around the world. These are the 10 tips every entrepreneur needs to know for getting funding from investors in Korea.
10 Best Tips for Getting Funding From Investors in Korea
1) Investors in Korea Focus A LOT on the Team
Investors in Korea look closely at the core team. They want to know if the team will be able to execute the idea and solve industry-specific problems. Each member of your team should complement each other. In addition, investors in Korea consider where the founders went to school. Unlike the United States, where many tech CEOs drop out of universities, in Korea, where you went to school plays a very important role. In Korea, there are three universities that are considered the best of the best.
SKY Universities
These universities are called SKY Universities (Seoul National University, Korea University, and Yonsei University). Having graduated from one of these universities, in the eyes of many investors in Korea, is equal to graduating from an IVY league university in the States like Harvard or Yale. Furthermore, the top technical university in Korea is KAIST the “MIT of Korea”. A tip for startups in Korea is to target investors who are alumni of their universities. They would be inclined to help a fellow graduate succeed. In addition, there are many startup accelerator programs offered at many of the top universities in Korea. These are great places to find talented entrepreneurs looking to get into the startup scene. Korea University, for example, has KUBS Startup Station which is an entrepreneurial program that offers young entrepreneurs a chance to start their own company from the ground up.
Imagine having a few founders from SKY and a CTO from KAIST. That would be a very attractive team for any investor in Korea. Furthermore, don’t try and raise money just to hire a CTO. Tech talent is very hard to find in Korea and very expensive. A better way could be to find a full-stack developer from Google, Facebook, Amazon, etc, and convince them to join your company by providing them with equity. If they believe in your company, it will be worth it for them to leave their job and move to Korea to purpose something big.
2) Focus on the market need and problem you are trying to solve with your product or service
For entrepreneurs looking to start their own businesses, it would be wise to have a “problems” list rather than an “ideas” list. The same kind of problems happening around the world might not necessarily be the same in Korea. You will need to convince investors that there is a certain problem and you are the most equipped to solve that problem. Therefore every pitch needs to start with a well-articulated problem statement. This will help give validation to investors that your team is building a product or service that customers need and more importantly are willing to pay for. Knowing your target customer is key.
If the problem you are trying to solve does not exist in Korea, it might be difficult for the investor who probably has lived in Korea for his/her life to understand your company. Therefore, make sure you explain WHY the problem exists in your country and if possible explain how it could happen in Korea.
Many Korean startups can not decide whether to target the Korean market, the Asian market, or the global market. If the product or service only works in Korea, this will be less attractive to investors in Korea. The starting point should be Korea, but make sure you have a plan to expand your services globally in the future. Make sure you clearly explain how you will scale in your deck.
3) Perfect your Pitch in Korean
If you are a native Korean this should not be a problem. However, if you are a foreigner, pitching in English will not be as effective for investors in Korea. It might be shocking to hear but most investors in Korea have average to below-average English competency. Some might not be able to speak English at all. You don’t have to master the Korean language but master your Korean pitch. If you can’t speak Korean, it should take you a month to memorize your 5-minute pitch deck in Korean. This also applies to Korean startups looking to raise funds in Silicon Valley. If your English speaking level is below average, an investor will lose interest no matter how great your product or service might be.
The bonus here is that a foreigner that can speak Korean and pitch in Korean is looked at in a very positive light by investors in Korea. There have been many foreigners in Korea who have been hired just to pitch because Koreans are fascinated by foreigners who speak Korean. The good news is that even if you are not perfect, the effort alone will go a long way.
4) Join an Accelerator/Incubator in Korea
A bit similar to graduating from one of the SKY universities, graduating from some of the top accelerator/incubator programs in Korea will give your startup credibility. Many of these accelerator/incubator programs take on startups from outside of Korea as well. Furthermore, these accelerator/incubator programs have a large network of investors in Korea. However, they also provide industry experts as mentors. They will help guide you through developing the right business model and how to prepare for pitching to investors in Korea. If your product or service looks promising, the mentors will make the intros for you.
In addition, there will be a greater chance for partnerships with established startups in Korea as well as large enterprises associated with that particular program. Many of these mentors have worked for some of the top companies in South Korea like Samsung, Hyundai, etc. Therefore, these can be alternative investment avenues.
5) Smart/Strategic Capital is the Key
Not all investments are valued the same. There are many investors in Korea that just want to invest because all they care about is the return on their investment. The bottom line is all about growth and how much they can “pump up” the value of your startup for the next funding round. Therefore as a startup, you need to align yourself with the right investor. Think of them as your partner and make sure they can bring value and has the same vision. As a founder, you will be tempted to take the money no matter what. However, sometimes the added value brought on by an experienced investor could be worth more than the investment itself.
If you take an investment from the wrong investor, it could lead to your company making unethical moves. As well as, cutting corners to inflate your company’s value more than it is. In the short term, this will keep your startup alive, but in the long term, a vast majority of startups will fail.
6) Start off with a Small Investment
Entrepreneurs make the mistake of asking for a large seed investment. In reality, a smart startup should be able to build a valuable business without seed funding. There are many startups in Korea that have bootstrapped their way to success. It is easier to scale when you start off with a seed investment. However, the ability to show investors that you can scale without that investment is even more impressive. Therefore a great tip would be to ask for a small investment. Show what you can do with that money and the investor will be inclined to invest more. Also, a small investment means less risk for the investor and means you will be able to get the investment. Many startups use the strategy by focusing on 4-5 investors, each for small investments, for their seed round. An added incentive for these investors might also be to put them on as board members. This will help you attract more funding in the future as they will be able to add them to your deck.
7) Sell your Business, not your Product or Service
Make sure you are building a business, not just a product or service. Products will get ripped off. Patents in Korea are a waste of time. New technologies could make your service obsolete.
“It doesn’t matter how great your idea for a product or service is, if you don’t build a great business, then your product or service will not last,” said Samuel Hwang.
Of course, you need a product or service, but these in and of themselves are not enough to scale. Startups need to know how to pivot. Selling your startup to investors in Korea solely on your product or service is a huge mistake. Show that your startup will not die on its product or service’s success. Show investors in Korea that your startup has the ability to adapt to the ever-changing market. If your product or service is for a small market, a tip would be to position your company as more of a “platform” business. This will allow for the creation of multiple products over time. The key is not knowing what worked or is working, but what WILL work.
8) Incorporate the Latest Tech Trends
Investors in Korea love the next big tech trend. Proof of that comes with the huge amounts of investments into unproven Blockchain startups in Korea. Many “Blockchain” startups were able to raise millions of dollars because investors in Korea were looking to ride the wave of the Blockchain boom in Korea. Find out the most profitable sectors and see if they fit in your roadmap. Incorporating machine learning might not be the plan now but it could be the plan in the future.
The same goes for cloud computing, robotics, Metaverse, blockchain, and 5G. In addition, there are strategic investors in each sector who can help you navigate hard-to-open doors in the Korean VC community with their industry connections. If you get intel that a particular investor you are looking to meet is interested in a certain industry. It won’t hurt to have a slide incorporating the latest hot trend for that industry.
9) Have at least an MVP or pilot customers
Startups will find it hard to get a seed investment without an MVP. For startups offering a service, make sure you also have pilot customers. The quickest way to get an investment for investors in Korea is to be able to tell a story through your MVP. Ideas are worthless, but customer-validated ideas are valuable. If your customers are big named brands the better. In addition, startups can leverage their customers who might be startups themselves. A nice tip would be to find out info about their investors. If the startup is happy with your service, they might be willing to make an introduction to their network of investors. These intros will carry a far bigger weight than a cold intro via email.
10) Build the Right Working Culture for Investors in Korea
This tip is for those that have already raised their seed investment and are now looking to raise their Series A round. Investors in Korea want to see that the founders are working around the clock as they prepare for their Series A round. This means long hours and keeping your burn rate low. Try and live on a small budget. Investors will see just how much you were able to do with the seed investment and will be more willing to join the Series A round. This “Korean style” working culture is unsuitable as it will get harder and harder to hold on to talent. However, after raising the Series A round, the CEO can change the culture and focus more on innovation and a more free working atmosphere.
