The Korean Startup Ecosystem in 2023 looks bright after the impact of COVID during parts of 2020 and 2022 and much of 2021. t may surprise some that South Korea’s economy is now the 4th largest in Asia. They have one of the best wireless infrastructures, yet Korea is still globally not recognized as a startup tech hub. Their rise from one of the world’s poorest countries to a highly developed country in just under 60 years is not commonly known. South Korea’s success proves that good economic management is far more critical than natural resource wealth in determining the success of a nation. 

South Korea remains a mystery. This is because South Korea is only 1 of 3 countries (Russia & China) worldwide, where Google is not the primary search engine. Therefore the world does not have access to information related to South Korea since most of the content is on Naver, a search engine not used outside of South Korea. However, despite this, South Korea continues to be one of the fastest-growing developed countries in the world.

Korean Startup Ecosystem

Post-Korean War

After the Korean War, South Korea and North Korea were dirt poor. Many don’t know North Korea was economically better than South Korea after the Korean War. North Korea controlled most industrial infrastructure, while South Korea mainly relied on agriculture. North Korea had great support from Russia and China, while South Korea didn’t get much support from its ally, the United States. A third of the South Korean population was homeless, and the government depended on the little help the United States provided. However, North Korea has struggled to advance since the war, while South Korea has been an economic powerhouse. How on earth did this happen?

Things started to turn around for South Korea in the mid-1960s. During the Vietnam War, the United States and South Korea fought together. South Korea contributed over 300,000 men to the war in Vietnam. In return, the United States gave South Korea foreign aid. This meant South Korea had the cash flow it needed to build the infrastructure it needed to transform its country. Most of the foreign assistance went into modernization efforts and the creation of schools. 

President Park Chung-hee’s Plan

President Park Chung-hee is the man most responsible for South Korea’s economic success. His plan for South Korea was to have the Korean government give full support to the top leading Korean companies and help fund them through government loans. Therefore many of these companies were able to get loans at low-interest rates. The Korean government tended to give massive tax breaks to these Korean companies, allowing them to compete with the rest of the world. These Korean companies like Samsung and Hyundai were able to put the massive Korean population to work and work they did. In addition, focused on creating modern technology on the level that it could compete in emerging global markets. Therefore international competitors had difficulty competing with South Korea’s massive educated workforce. 

Government Corruption 

While the Korean government’s support for large corporations has gotten South Korea to where it is now, it doesn’t come without some negatives. While Korean companies could directly compete with their global competitors, not all succeeded. However, those that did, like Lotte, Samsung, and LG, are now giant corporations. South Korea also moved into very capital-intensive industries like ship manufacturing. Today, South Korea is the largest shipbuilder in the world, the 3rd largest car manufacturer, the 2nd semiconductor market, and one of the leaders in IT. South Korea’s GDP at the end of 2022 was $1.798.  

The Conglomerates of South Korea – The Chaebols 

The power of these corporations is still very present today. These are family-run mega-corporations such as Hyundai, Samsung, and LG. Hyundai dominates the automotive/shipping industry, while Samsung and LG dominate the consumer electronics sector. These three companies alone are responsible for 66% of the Korean economy. Below are some of the top conglomerates in South Korea. 

Samsung Group

Samsung Group is a South Korean multinational conglomerate specializing in electronics, finance, and construction. Founded in 1938, the company has become one of the world’s largest and most successful companies. Today, Samsung Group is known for its popular smartphones, televisions, and other electronic devices.

Hyundai Motor Group

Hyundai Motor Group is another South Korean multinational conglomerate specializing in the automotive industry. The company was founded in 1967 and has since become one of the largest automobile manufacturers in the world. Today, the company is known for its popular Hyundai and Kia brands.

LG Corporation

LG Corporation is a South Korean multinational conglomerate specializing in electronics, chemicals, and telecommunications. The company was founded in 1947 and has since become one of the largest and most successful companies in South Korea. Today, LG Corporation is known for its popular smartphones, televisions, and other electronic devices.

SK Group

SK Group is a South Korean conglomerate specializing in energy, chemicals, and telecommunications. The company was founded in 1953 and has since become one of the largest companies in South Korea. Today, SK Group is known for its popular mobile carrier, SK Telecom.

Lotte Corporation

Lotte Corporation is a South Korean multinational conglomerate specializing in retail, chemicals, and hospitality. The company was founded in 1948 and has since become one of the largest and most successful companies in South Korea. Today, Lotte Corporation is known for its famous Lotte Department Store and Lotte World Theme Park.

Hanwha Group

Hanwha Group is a South Korean multinational conglomerate specializing in aerospace, defense, and finance. The company was founded in 1952 and has since become one of the largest companies in South Korea. Today, Hanwha Group is known for its aerospace and defense products and financial services.

Many Koreans look to these companies for employment. This is why many young Koreans dream of working for one of these corporations. Thus there was no authentic culture of entrepreneurship in Korea. For young people with talent, their choices were to become a doctor, lawyer, government worker, or work for these major corporations like Samsung. Not until recently has entrepreneurship been a real option for some of the top talents in South Korea.  

Korean Startup Ecosystem

The Korean startup ecosystem did not exist just 20 years ago. The Korean government was trying to grow and find new ways to create economic jobs. They started to realize that entrepreneurship was the key to job creation. It was the main factor in a growing and innovative economy. When you look at the Korean startup scene today, the community is strong and growing. As of 2023, there are over 15,000 startups in South Korea. Over the past few years, over 550 million dollars a year has been funding late-stage startups. There is a lot of potential in Blockchain, Fintech, Biotech, IoT, Beauty, Fashion, and Korean entertainment, which are key growth areas for Korea.

It seems the culture has changed, and more and more young Koreans are looking to get into entrepreneurship. They have seen many successful Korean entrepreneurs build successful startups over the last decade. 

The Seoul city government plans to nurture 10,000 workers to prepare them for the 4th Industrial revolution and to help with unemployment through startups. Their Innovation Academy will train 2,000 young Koreans to play a leading role in the 4th Industrial revolution. Seoul already doubled the number of spaces for tech startups in 2022. In addition, Seoul has cooperated with the justice ministry to introduce a fast-track startup visa for young foreign entrepreneurs who want to start their businesses in Seoul. 

Korea’s New Deal 

South Korean President Moon Jae-in introduced the Korean New Deal in July 2020. The plan involves investing over $130 billion to create over 1.9 million jobs by 2025. It is based on two central policies: the Digital New Deal and the Green New Deal. The aim will be to combat the highest unemployment rate in Korea among the youth. The government will train 100,000 people in new technologies, such as AI, to establish energy-saving homes, buildings, and electric cars. Furthermore, the Korean government will make 140,000 sets of state data public to promote the big data industry in South Korea. The Korean New Deal will also offer unemployment insurance for many workers, including freelance and part-time workers. 

These policies are still in place even though South Korea has a new president, Yoon Suk Yeol. He has also stressed that the Korean government will support Korean startups so that innovative technologies can enter new markets and go global. 

FOLLOWING THE SILICON VALLEY MODEL

Silicon Valley became successful because the United States opened its doors to skilled foreign workers. In 1990, President George H.W. Bush signed the Immigration Act of 1990 called the H-1-B Visa. This new visa system allowed many global, highly skilled talent to work temporarily in the United States. The industry that was most affected was the tech centers, mainly in Silicon Valley. Many tech companies were able to recruit the best of the best from China, India, and so on. For example, the India Institute of Technology in Mumbai’s most elite engineering grad students moved to the United States.

Most ended up in Silicon Valley, becoming the top destination for global science, math, and computer science. Many immigrants played a crucial role in creating top tech startups, creating hundreds of thousands of American jobs. 

The E-7 Visa

Korea has its form of an H-1-B Visa and an E-7 Visa. This allows employers to hire skilled foreign workers to work in Korea. These workers aim to help fill a critical worker shortage in Korea. As well as allow Korean companies to remain strong and competitive globally. This will ultimately lead to thousands of jobs for Korean workers. However, the Korean government did not consider Korea’s working culture, which demands brutally long workers and an overload of work. Not many workers were willing to move to Korea and conform to Korea’s working culture.

Most foreign workers in Korea have bad experiences in the Korean workplace. Many leave or, at most, stay for only a few years until they can get a better job in a more western-style company. Therefore while they are Visa options for foreigners looking for work in Korea, many don’t stay long enough to make a real impact. 

Entrepreneurs in Korea

The number of startups in South Korea in 2023 was close to 15,000, with over 50,000 startup employees. Just 20 years ago, the number of startups was below 2,000. A vast majority of these startups are in Seoul (Gangnam District). This helps drive trends and word-of-mouth about new products and services very quickly. Seoul is a single-market city within a conservative culture that is slowly adapting to entrepreneurship.

Thanks to so many startups in Korea, many Koreans now have an alternative to working for a big conglomerate like Samsung, Hyundai, or LG. The older generation is starting to embrace entrepreneurship a lot more than in the past. Now young Koreans have the alternative to being an entrepreneur and running their own business. Many government programs in Korea help nurture new business ideas. In addition, there has been a rise in startup accelerators and incubators across Korea in many sectors. 

Foreigners working in Korea

One of the issues South Korea has been having has been retaining foreign talent. On the internet, you will find many horror stories of foreigners who have worked for big corporations like Samsung. Usually, when foreigners join a Korean company, they will work with Koreans. Many times they will be the ONLY foreigner in the company or team. Therefore, lately, it is prevalent to see job postings from Korean companies that require you to speak business-level Korean. Therefore, Korean companies will not have a wide selection of talent.  

It is natural for many foreigners in Korea to feel isolated, as most blame/responsibility will fall on them. Add this to the lack of communication due to language barriers, and you have a terrible working environment. Therefore foreigners need young Korean entrepreneurs with a global mind to bridge the gap for a productive working environment. Foreigners working for Korean startups have better experiences because these younger Korean CEOs understand that the rigid working styles of past generations will not work in this fast-paced, innovative working environment. 

The Korean Working Culture

In 2023 there is a proposal to increase the maximum workweek to 69 hours from 52 in South Korea. This has drawn intense backlash from younger workers and sparked a raging generational debate about work-life balance. The proposal from President Yoon Suk Yeol’s administration has claimed to give workers more flexibility, quality of life, and time with their families. The argument was that by calculating overtime caps monthly or annually instead of weekly, workers could bank more overtime when it was convenient for them to work.

Therefore, they could use the saved-up time during other parts of the year to take extended vacations or parental leave. However, after much outcry from the youth, the government is revising the proposal. Many workers in Korea who grew accustomed to working less or from home during the pandemic are rethinking their willingness to return to the Korean working culture they were used to. Thankfully young Koreans and foreigners are slowly moving away from this archaic Korean working culture.

Korean Government Support for the Korean Startup Ecosystem

The Korean government has encouraged more Korean entrepreneurs rather than foreign startup entrepreneurs. For example, the TIPS (Accelerator Investment-Driven Tech Incubator Program for Startups) in Korea offers the Korean government supports to share the risk of business failure. However, it requires the startup to have at least one Korean startup founder in the company. This is why you don’t see a lot of foreigners working in Korea starting their businesses. We have a full article on Korean government support agencies for startups, so check that out. 

Startup Funding in Korea

Funding in South Korea started to take off in 2014. It went from $71 million in funding in 2013 to $949 million in 2014 and $1.8 billion in 2015. In 2022, investments in Korean startups were over $5.2 billion. All this shows that Korea has a large and diverse range of investors, Korea-based funds, corporate VCs, Angels, and crowdfunding systems, to name a few.

Accelerators in the Korean Startup Ecosystem

South Korea has many Accelerator programs, Angels, and VC firms. Some of them include the following:

Softbank Ventures

Softbank Ventures Asia, formerly known as Softbank Ventures Korea, specializes in IT startup investments. They opened a brand in Singapore in early 2019. Now have offices and investment managers in Singapore, Shanghai, Seoul, Beijing, San Francisco, and Tel Aviv. They are famous for their $1 billion investment in Coupang. They have a $500 million fund and will focus on early-stage startups.

Stonebridge Capital

STONEBRIDGE CAPTIAL, which now goes by Stonebridge Ventures, has been responsible for private equity since 2017. They currently manage a private equity fund worth over $1 billion. They focus mainly on the biotech industry. Their assets are worth over $350 million with an annual rate of return of around an impressive 25%. Their CEO is Yoo Seung-woon who headed Kakao Ventures and is well-experienced in the IT industry.

Korea Investment Partners

Korea Investment Partners, the leading venture capital firm in Korea. They made headlines in late 2018 for investing in TEMCO, a blockchain-based supply chain platform. This was their first-ever investment in blockchain. KIP (Korea Investment Partners) manages over 40 funds with assets under management totaling $2 billion. Since 2010, KIP has liquidated 12 funds with an average internal rate of return of 18% and no net loss on any fund. KIP backs, on average, 120 companies every year.

MBK Partners

MBK Partners, the largest and most successful independent private equity firm. They have gotten bad press due to the labor issues of one of their holding companies, Homeplus, a discount store chain in Korea. MBK bought Homeplus in late 2015 for $6.2 billion. Due to online retailers and Costco, Homeplus has lost much value. They have five offices in Seoul, Beijing, Hong Kong, Shanghai, and Tokyo, with over 60 investment professionals.  

Sparklabs

SparkLabs, is a Seoul-based accelerator for early-stage Korean startups that want to go global. They also have a cybersecurity and blockchain program in Washington, D.C. Sparklabs has a dedicated blockchain fund called SparkChain Capital. Sparklabs Group is a network of accelerators and venture capital funds that have been active investors in Fintech since 2013 across Asia, Europe, and the U.S.

Find more accelerators and incubators in Korea. 

Corporate Support for the Korean Startup Ecosystem

I have not mentioned some big corporations that have started their startup hubs, like Lotte’s Accelerator Program, Samsung’s C-Lab Space, or Naver and their Startup Alliance. Many big corporations in South Korea actively invest in local startups and help support open innovation in Korea. However, there is still a large talent gap compared to the United States. We are talking about talented programmers, engineers, and developers.

Top graduates want to work for global companies like Apple or Google. Most gifted students in Korea want to study abroad in the UK or the US. Once there, they usually don’t come back to Korea. Many corporations in South Korea have started their accelerator programs to find talent and new innovative ideas. 

Korean Startup Ecosystem Infrastructure

Currently, there are over 100 co-working spaces in Korea. Some of the big names include WeWork, Fast Five, Fab Lab, Google Campus Seoul, Maru 180, and the most recent HEYGROUND. South Korea also has over 150 accelerators, incubators, and Innovation Centers. HEYGROUND impressed us with its community of changemakers managed by ROOT IMPACT. Their facility is also great with its high-end design, open-concept workstations, and a restaurant and bar on the bottom floor.

K-Startup Grand Challenge

The Korean government also assists in programs to help the startup ecosystem. South Korea has the highest government backing per capita for start-ups. I mentioned TIPs earlier, but the K-Startup Challenge promotes collaboration between domestic and foreign startups. All companies from the K-Startup Challenge work out of the Pangyo Global Startup Campus. The Campus was opened in 2016 by the Korean government as part of a new startup hub. The K-Startup Grand Challenge focuses on bringing in foreign entrepreneurs to start businesses in South Korea. If they are successful, they can hire Koreans, increasing jobs in Korea. 

Korea’s Strengths/Weakness

Korea’s Strengths – Korean culture

South Korean popular culture is growing every year. Korean beauty products are thriving thanks to successful Korean startups like Memebox. There are over 8,000 K-Beauty brands in South Korea. Korean K-pop is bigger than ever, thanks to BTS, BLACKPINK, TWICE, etc. Korean Dramas are still being watched by fans worldwide, which helps drive the latest trends in Korean Fashion. In addition, some of the biggest hits on Netflix were produced in South Korea, such as Squid Game and Physical 100. 

The rise of Korean content can be attributed to how well-connected digital Korea is to the world. The Korean IT infrastructure is one of the best in the world. The country has the best internet connection, and most Koreans own smartphones. Koreans are early adopters of new technologies and early trendsetters in fashion and beauty. Companies are always looking for the newest platforms to distribute their content worldwide. Korean influencers have found much success on YouTube, Instagram, and TikTok. 

Korean Startup Ecosystem – Fintech

Fintech is also huge in the Korean Startup Ecosystem, as Korea is becoming the cryptocurrency exchange and services leader. Korea looks to become the leader in global financial centers. Soon Seoul will become the FinTech hub of Asia. One of the top Fintech startups in Korea is Viva Republica. They are the developer of Toss. A mobile payment tool is looking to go global after much success in Korea. Fintech startups in Korea will help Korea become a cashless society if it is not already there now. 

Korean consumers

The Korean startup ecosystem benefits from a great consumer market. Their middle class is the majority. Most people living in Korea have smartphones and credit cards. They have the highest GDP per capita, wireless penetration, infrastructure, and fast LTE. All these elements combine to make a great home market to grow your startup.

This is why Korea can support companies and startups in Korea that are focused only on the domestic market. Korea has 50 million very tech-savvy residents. That is one of the main reasons why Korea can support a massively scalable business. Examples include companies like Naver, Coupang, and Ticket Monster, focusing solely on the Korean market.

Korea’s Weakness

Cost of living

The Korean Startup Ecosystem has weaknesses they have to work on. The cost of living in Seoul is very high, especially in Gangnam, where you must deposit $10,000 and a monthly payment of at least $600 just for a one-room studio. Therefore most Korean startup entrepreneurs commute in and out of Seoul to avoid the high living cost. Office spaces are also expensive, so many Startups are moving into co-working spaces. Starting a startup is hard enough for Korean entrepreneurs. The last thing they want to do is spend their money on rent. 

Things have gotten to the point that Gyeonggi-do, a province in Korea, recently implemented a UBI in Korea called the Youth Basic Income program, where every 24 years old in the area gets 1 million won per year. The 2020 Korea Basic Income Fair expressed the need to help support the youth as they look to enter the workforce or start their own business. UBI is a very progressive idea. It has become a hot topic in Korea since the COVID-19 outbreak. Koreans got a disaster relief income for all citizens for the first time, which has been widely praised. 

Finding the right investor

Investors in Korea need more education about investing in startups. There is a lot of “old” wealth in Korea, from real estate and family inheritance. Most of these old investors WANT to invest in tech startups. The problem is that they don’t know a lot about it. Hopefully, this will change as successful startup entrepreneurs give back to the community.

Korea still holds a corporate mentality. Therefore it is up to the 2nd and 3rd generations of traditional Korean startup entrepreneurs to the ranks of their family hierarchy. This is the only way Korean startups will be able to go global. They must throw away the old Korean corporate mentality and bring fresh minds. The lack of global know-how for Korean startups holds back the development of the Korean Startup Ecosystem.

Conclusion of the Korean Startup Ecosystem

South Korea must continue investing in programs to help the Korean startup ecosystem. Entrepreneurship has proven time and time again to be the #1 driver for job creation and economic growth. South Korea will never be able to compete with Silicon Valley or Shanghai. However, they can leverage their unique assets to create innovative startups.

As long as they push to bring more international talent into Korea, Korean startups will likely have the chance to go global. Korea’s potential is there, and many countries are recognizing it. I fully believe that the Korean startup ecosystem will continue to accelerate. At the same time, it will produce global startups and, hopefully, more Korean startup Unicorns.