In our first Korea blog, we touched upon the general personality of the Korean innovation ecosystem, including the investor landscape, structural barriers and sector specific opportunities. In this post we take a closer look on the practicalities of accessing the market and finding the right partner.
The Korean startup ecosystem is characterized by a general paradox. On one hand, Korea is one of the most advanced societies on earth in terms of education level and technological sophistication. On the other hand, the startup ecosystem is very much in its nascence, and the market is only just beginning to open up to foreign companies and investors. Therefore, to take advantage of the opportunities in South Korea, it is crucial to have a strong local partner.
Within the last couple of years the Ministry of SME’s and Startups (MSS) has launched a number of funding programs that are open to foreign startups. Considering the fact that the government is a key player in the innovation ecosystem (see previous Korea blog), these programs are key to foreign startups looking for partners in Korea.
KISED’s TIPS Town Accelerators Global Accelerating Program for Startups (GAPS) provides a maximum of USD 46,400 in funding to startups for developing test products and marketing. The startups receive visa application guidance, education programs and business mentoring from the Korea Techno-Venture Foundation. There is also office space provided in the institute’s Seoul TIPS Town building in Gangnam.
The K-Startup Grand Challenge Program is a 3-month acceleration program based in Gangnam, with a large collection of mentors thanks to the Google for Entrepreneurs’ network. This program offers mentorship from leading Korean tech companies Samsung, Hyundai, SK, KT, Naver and LG. Startups that qualify for the program all get seed funding and free co-working office spaces. All 80 startups in the program each receive about A$ 15,655 to cover living expenses in equal instalments over 3½ months. The top 40 startups are eligible to receive a total of A$ 31,940 each, based on their performances at ‘Demo Day’ and the Settlement Evaluation.
Introduced in 2016 by the Seoul Metropolitan Government in Yongsan District, central Seoul, the Seoul Global Startup Center runs the Born2Global Accelerator Program for the recruitment of foreign technology startup entrepreneurs in Korea. 40 foreign participants are selected every year, and are selected from a variety of sectors including cosmetics, childhood education and travel. The programme offers a 10 million KRW funding, office space at the startup centre, legal and accounting consulting and 1:1 mentoring. All 40 startups in the program each receive about A$15,060 (KRW 12,250,000) to cover living expenses in equal installments over 3½ months. Participating Korean accelerators will make equity investments in the most promising startups. As such, startups will have access to other VC’s and investors who may choose to invest.
Hiring local talent is a prerequisite if you want to expand your company into Korea: It is needed for navigating Korean business culture. Besides, most government programs require this for being part of the program. This may pose a challenge for startups, as Korea isn’t exactly a low-cost labour market (even though it still might cost less to hire an engineer in Seoul than in Silicon Valley).
On the plus side, Korea is one of the highest-educated and best performing OECD countries when it comes to reading literacy, math, and science. 68% of Koreans have completed tertiary education, the largest proportion of adults for any OECD country.
Many universities have specific programs supporting startups and entrepreneurship. The best program for entrepreneurship education, at Yonsei University, teaches courses in both English and Korean, and has a proportion of international students (link).
A number of Danish universities already have collaborations with universities in Korea, and can provide an entry point for reaching out to these universities. The Innovation Centre Denmark in Seoul has collaborated with all of the top 5 university government-funded programs in Korea, and is well-positioned as a point of entry for startups looking to hire local talent.
Understanding the ecosystem
For entrepreneurs looking to scale into a new ecosystem, it is important to try to understand the dynamics of a new area. There are some helpful startup-related media from Korea that are also available in English, that can be a good starting point for entrepreneurs curious to learn more about the ecosystem. They are:
- Startup Radar: http://startupradar.asia/
- SeoulSpace: http://seoulspace.com/
- Tech For Korea: http://www.techforkorea.com/
- Pulse: https://pulsenews.co.kr/ (Business media often covering startups)
This post was written with research assistance from the Danish Innovation Centre Seoul.