South Korea is world renowned for its Chaebol, the family owned conglomerates which became the driving force of the nation’s economic might in the early 1960’s. The companies in this elite group — Samsung, LG, Hyundai — have become global household names over the last few decades, and the country owes much of its prosperity to these giants of worldwide industry.
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Move over Chaebol
Domestically and more recently however, Korea’s business scene is in the throes of a serious shake-up. In a culture in which risk is avoided, failure is unacceptable, and stability is revered, it’s hardly surprising that generations of parents have pushed their children to aspire to one day work for the Chaebol. It has been the safe option for an entire generation but at a cost. Business development at home has suffered as the Chaebol monopolised the hiring of South Korea’s best and brightest.
More than 80% of Korean high school graduates go on to attend university, the highest rate in OECD countries. The resulting “education bubble” coupled with the global economic slowdown has led to swelled university graduate unemployment. The reality has set in that the chances of working for the Chaebol are not quite what they used to be. The youth of Korea is thus increasingly taking matters into their own hands –- they are beginning to start their own businesses.
It’s quite ironic that two big names of the Chaebol — Samsung and LG — are actually enabling the new generation of rising entrepreneurs in South Korea through their mobile and hand-held devices… perhaps history will deem it iconic.
Boasting a robust growth from 15 000 startups in 2008 to 28 000 in 2012, it’s worth sitting up and taking notice of the lessons from the new Korean entrepreneur.
1. Spot the Gap
Koreans live in what they call a “pali-pali” culture. “Pali” translates to “fast” in English. One needs only an hour in the high-paced, technology-integrated mega city of Seoul to realise that Koreans are on a constant quest for efficiency in every sphere of their daily lives.
The majority of Korean entrepreneurs’ product offerings are naturally technology-based, catering to a market which boasts the highest smartphone ownership rate in the world.
Every smartphone-equipped Korean has his or her favourite app for booking a movie, doing the grocery shopping, chatting with friends, navigating the subway, watching sport, jamming to tunes, organising food delivery, managing loyalty points, booking getaways, and even live monitoring of disputed territory with Japan. Oh and wait, you can even locate your partner with an app — 11 000 Koreans can’t be wrong.
Lim Ji-hoon of K Cube Ventures summed it up well when speaking to the Wall Street Journal, “People like buying new apps. That’s one reason for the booming startup scene.”
2. Employ hindsight
Korea was at a great economic disadvantage after the war ended in 1953; catapulted decades back in time. There was little infrastructure to speak of. Today, it’s hard to believe when standing in modern day Seoul or Busan.
What the public and private sector did so well at that time of desperation was to draw on the lessons which the developed world had to offer. Implementing classic latecomer strategies, it leapfrogged and copycatted its way boldly into the roaring 1980’s where it was suddenly one of the big players on the international scene.
The Metro (underground) of Seoul and Busan is a classic example of how project development visionaries selected the best traits from existing subway systems around the world, pieced them all together and developed what is now regarded as the finest on the planet.
I traveled the Korean metro daily for three years and I would often notice the similarities with other subway systems; the borrowed elements, designs and processes. It needs to be said though however that the Koreans added their unmistakable trademark — convenience and comfort. Free wifi, climate-controlled seats and massive touch-screen tourist guide maps are but a few of the features that make the metro so admirable.
There should be no doubt that the rising tech-entrepreneurs and SMEs will employ similar principles. A prime example is the instant-messaging giant Kakaotalk, which emerged in 2010 to rival existing instant messaging apps such as WhatsApp.
3. Develop Foresight
It’s important to keep in mind that the Chaebol were once startups themselves. Each had the ability to predict the direction in which industry and lifestyles were heading, and then went about creating a product that catered to the foreseen demand.
Hyundai Heavy Industries, the world leader in ship building, is the prime example. Following the Korean War, Korean business leaders knew the country needed an international market for goods to pull itself out of destruction and to one day prosper. Container shipping would transform world trade and the conglomerate understood the vast potential of being at the forefront of possibly the most formidable industry of the 20th century.
The ongoing investment into tech-based startups indicates that Korea is once again onto something big, this time for the 21st century. Could this new generation of tech-entrepreneurs be the Hyundai’s and Samsung’s of the future? Either way, entrepreneurship is becoming less taboo as Korean parents begin to see value in their children’s dreams.
4. Be Seen
Both at home and abroad Korean startups look to showcase their products not only for additional reach among consumers but also in the hopes of attracting additional funding from keen investors.
Korean startups are representing for the motherland at large scale events such as SXSW in Austin as well as at more custom-designed conferences like the beGlobal event in Silicon Valley.
Domestically, the public and private sector are coming to the party by launching entrepreneurship programmes aimed at assisting aspiring business folk in getting off the ground and staying off the ground through fostering “a business spirit in young people.”
The Asan Nanum Foundation was founded in early 2012 by the Hyundai Group. The venture capital fund hosts a startup competition which provides seed funding to winning teams.
A slightly more established programem is The Youth 1 000 CEO project that was started in 2009. It selects one thousand of the best new business entrants annually who stand to receive up to R10 000 ($950) in grants for injection into their business operations.
If Korea’s tech startup community’s international aspirations are to be a good gauge for its development, it can be said that it stands on the precipice of a mountain of potential: the US market. As the relationship around funding with New York continues to develop, Korean companies such as Memebox and KnowRe are poised for international success as discovery sessions uncover previously unrealised cross potential in respective markets.
In Singapore, ten Korean startups, under the Kcellerate acceleration programme, have been hard at work establishing partnerships with investors to facilitate growth into international markets.
The situation is bitter-sweet for the Chaebol. On the one hand, it is no longer promised as many of Korea’s whizz kids fresh from University. On the other hand however, it knows well that a fresh injection of unrestrained innovation is needed to aid in the challenges that lie ahead in dealing with South Korea’s worryingly ageing population as well as help leverage its dependence on export-led growth.
