It’s -5⁰C in Seoul, Korea, and everyone is running from building to building in long padded jackets. But in Coex, a large exhibition center, the heating is turned up so people can walk around comfortably in t-shirts and hoodies – the quintessential startup uniform.
Coex was the venue for Startup Festival 2017, a three-day tech conference hosted and funded by the newly created Ministry of SMEs and Startups. Held from November 30 to December 2, it was attended by over 3,000 people.
Increased support from the government is good news for young entrepreneurs experiencing the ups and downs of starting their own business. These measures, however, won’t mean much until they make a substantial impact on people’s lives. Here’s what’s happening on the ground and how a young Korean startup is faring.
Road to reform
In 2016, Korea was swept by a huge corruption crisis that involved Park Geun-hye, its first female president, and chaebols or family-run conglomerates – the country’s dominant economic players, including electronics titan Samsung. This triggered mass protests, and Park was eventually impeached and ousted from office.
Human rights lawyer Moon Jae-in ran on a platform of reform and won by a landslide, toppling a decade of conservative rule.
The “people’s president” appears to be making good on his promises such as his vow to crack down on chaebols. Moon’s economic policy also involves raising taxes for the wealthy and the elite.
That the new president seems intent on delivering reforms is significant for job creation and the startup ecosystem, sincechaebols have been accused of smothering entrepreneurship.
Out of US$7.5 billion from Ministry of SMEs and Startups’ 2018 budget, the government has pledged to spend US$412 million on startups and venture businesses alone. Moon’s administration thinks a dynamic digital economy that includes jobs for young people and thriving small and medium-sized enterprises can help the country grow equitably.
“In our foundation, we have two major missions. One is the dissemination of science culture. The second mission is nurturing talents in young people. We need to make new jobs. This is a necessary and urgent mission,” says, Park Tae-hyun, president of the Korea Foundation for the Advancement of Science and Creativity (KOFAC). They co-hosted Startup Festival 2017 in Seoul.
In fact, Startup Festival 2017 was jointly organized by 500V2 – a startup. Just a few years ago, it might have been unthinkable for a startup to outbid a conglomerate to organize a global conference.
Ordinary Seoul Life, an influencer marketing platform startup, is one of the new businesses that could benefit from these initiatives. Tech in Asia talked to the people behind the company at the matchmaking zone in Startup Festival 2017, where startups could meet with the media and investors.
Both heaven and hell
“We’re living like beggars,” says Park Mun-soo, Ordinary Seoul Life’s founder and CEO with a rueful laugh.
Run by a bunch of “passionate 20-somethings” straight out of college, the startup wants to help brands connect with social media influencers in China and Korea. The core team of four consists of Park and his friends from his hometown and the army. The fledgling venture has been up and running for since mid-2017.
Ordinary Seoul Life and its Chinese partners, like social media influencer network Parklu, have over 20,000 influencers on social media. It hopes to help brands go viral and increase sales.
The young founder cites Alibaba founder Jack Ma as one of his inspirations. Park points out how Ma spent three years alone, preparing to launch his startup without making any revenue.
Park says he hit rock bottom in January 2017 – he qualified for government assistance. “Like, I’m in the bottom five percent.”
The standard of living in South Korea is high, with GDP per capita expected to overtake France’s in 2020. Life expectancy is high as well.
But the country’s income inequality and low employment rate among the youth mean that the effects of sluggish growth are felt strongly by the poor and the young.
In fact, the number of young households living in poverty is soaring. They’re also more likely to live in poor housing conditions, especially those in Seoul.
“The economy is going really badly; people don’t want to take risks to do startups. They want to have stable lives,” shares Park.
Still, he says his friends who’ve joined conglomerates are “like robots.”
But the general perception about startups in Korea is also changing. “Well, it’s not that positive to join a startup, but it’s not that negative to join one, either.”
A dreamer in slow growth
Park says he started voraciously reading after his father passed away. “When I was in my twenties, I read 500 books and received inspiration.”
With shaggy hair, Park looks like a hippie dreamer more than a startup founder. His “English” name, Demian, was taken from a coming-of-age tale by German novelist Hermann Hesse. In the novel, the protagonist is “finding his true self through his journey,” Park says.
Park is doing the same thing. In his journey, he deliberately seeks challenges. For instance, he could have qualified to rent an office in a building in Seoul, but he chose to work out of a small apartment.
“I wanted to start my startup in a garage, like Steve Jobs,” Park explains. The rough life is his ideal, but he also says that “land in Korea is so fucking expensive.”
In the most telling example of how he wishes to challenge himself, Park joined the navy special forces – one of the most demanding units in the Korean military – during his compulsory conscription. “It was torturous,” he says.
During his stint with the navy, he met Kim Woo-jae, the creative director and “Chinese specialist” of Ordinary Seoul Life. Kim speaks Korean, English, and Mandarin. He’s the go-to person for the startup to access the Chinese market.
Kim describes Park as “a guy who’s really responsible for what he says.” He adds, “When [Park] says something, even if it’s a small matter, he tries to put it into action. I admire his attitude.”
Kim says that Park would use his breaks to read books or exercise, instead of sleeping or resting. “He always keeps his word.”
“Maybe if my father [were] around, maybe I would do a startup. Maybe I won’t,” Park says. “But my dad was always supportive of what I do.”
At Startup Festival 2017, Park said private investors were interested in Ordinary Seoul Life.
Despite the language barrier and other challenges, Park thinks they’re “doing extremely well.” He continues, “It’s rare for a Korean startup to have a contract with a Chinese or other foreign companies. It has been only [seven] months since we established our company, so I think we did a wonderful job.”
The visible hand of the government
Park plans to take advantage of government regulations that are in their favor. “We’re preparing the documents to apply for this research and development fund,” he says. The money will help them develop their service into a viable product.
Eric Kim, co-founder and managing partner at Goodwater Capital, explains the advantages of these efforts. “The Korean government realized that the economy has been dependent on Korean conglomerates. They see startups as a great way to diversify the economy and help job creation. For instance, Kakao started from 10 people, and now they have thousands of employees.”
Goodwater Capital is a consumer-tech focused fund and has invested in big names like instant messaging player Kakao, ecommerce platform Coupang, and cosmetics ecommerce site Memebox.
He adds, “The key change in 2017 was that there were a lot of alumni from companies [who] have grown up and learned a lot from the critical phase of startup development. Now they’re doing their own companies.”
For example, Dino Ha, Memebox’s CEO and co-founder, was from ecommerce company Ticket Monster. “It’s part of a great virtuous cycle in the ecosystem,” says Goodwater’s Kim.
“Previously, startup companies in Korea had a difficult time because they had a ‘death valley’ [stage] about one to three years into starting up”, says Kevin Kim, CEO of Pacemaker, a seed-stage accelerator in Korea.
He adds, “Companies didn’t make it because of lack of financial support and had to take out loans. A lot of companies find themselves in financial collapse.”
But his outlook for startups in 2018 is optimistic, given the government’s efforts. “Moon will provide support for prototyping and marketing. There will be possibility of startup survival.”
To 2018 and beyond
Current gaps in the ecosystem include later-stage support for maturing startups.
Kim of Goodwater explains that conferences like Startup Festival can help widen the country’s talent pool. “A team in its early stages that has a more global talent pool tends to have higher chances for long-term success. These festivals and accelerators promote cross-border hiring and bring talent to South Korea.”
Startup Festival 2018 will see further matchmaking opportunities. Apart from providing media exposure and one-on-one sessions with VCs, the organizers plan to add an accelerator and an online jobs platform to their offerings.
Pacemaker’s Kim says that he’s pushing for legislation related to secondary funding and helping mid-sized companies and incubators for mature startups.
Others, however, believe that there’s nothing more the government can do.
“Anything beyond an initial push is up to the startup to accomplish on its own. My take on these programs is that the government can place startups in situations where [they] can go execute and win contracts, funding, and whatever else. At no point should anyone expect government programs to walk startups [from] start to finish for deals and funding,” says Sejung Yun, general manager at Cloudike and Tech in Asia’s city chapter head in Seoul.
It’s early days yet, so while these proposed changes are eagerly anticipated, it’s hard to say what effect they will actually have.
When asked how he’d rate President Moon on the delivery of his promises to the startup ecosystem thus far, Ordinary Seoul Life’s Park had this to say: “For startups, I will give the president 90/100. Moon just announced [the new policies,] but [he hasn’t] put his words into action yet. We have to wait and see.”
He concludes, “If he makes it work in the future, the 10 points will be added.”
Converted from Korean Won. Rate: US$1 = KRW 1086.96
This is the final part of the coverage of Startup Festival 2017, a government-sponsored tech and startup conference held in Seoul, Korea, from November 30 to December 2. The 2018 edition will be held around early December. Stay tuned!
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