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Screw Samsung and LG, Korea’s real tech legacy could be as a startup nation

Think of the world’s great startup hubs and you think Silicon Valley, Tel Aviv, Sao Paolo and Bangalore. If you’ve spent some time on the African continent, you’d probably throw Cape Town, Nairobi and Lagos into the mix too. Chances are South Korea probably won’t even cross your mind.

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If you’re anything like most people, when someone mentions technology and Korea you probably think about its two hardware giants Samsung and LG. If you’re up to scratch on the instant messaging space, you might be aware of the massive user base accumulated by the likes of KakaoTalk or Line, which despite being Japanese is owned by Naver, a South Korean company.

In the next few years though, that may well change. Sure the economy is still dominated by the small group of family-run megacorps, but things are starting to change and, if it gets it right, then Korea could well be one of the world’s next big startup hotspots.

While I can’t pretend to any kind of expertise on the Korean entrepreneurial space, the few days I recently spent at the Global Mobile Vision conference in Seoul showed that there’s plenty of optimism and more than a few startups building world class products.

There are however a few barriers that it will have to overcome, but they’re far from insurmountable.

Beating the odds

Before you can get an idea of the potential held by Korean startups, along with the challenges they face, you need to get some sense of where the country’s come from and how it got to where it has today. In 1964, the country had a smaller GDP than the likes of Cameroon, Chad and Mauritania. Today, there are only 13 or 14 countries with larger economies. Not bad for a country with only around 50-million citizens and a relatively small amount of land to play with.

It did this, for the most part, through sheer, bloody-minded will power. Referred to as the Miracle on the Han River, Korea’s post-war economic boom came about through policies involving equitable land redistribution, rapid industrialisation and a focus on ensuring it had top quality exports to send out into the world. A large portion of that growth took place under military dictatorship, but people whose grandparents barely scraped by on small plots of lands now compete for high-level jobs at some of the world’s largest technology companies and car makers.

The Han River has been the heart of Korea’s transformation.

Over the years, the kind of industrialisation that the country focuses on has changed. A massive government-led effort to get the population online, for instance, means that South Korea has some of the fastest average internet speeds on the planet.

As a highly industrialised country with lightning-fast internet, world-class infrastructure (you can get from most places in the country to Seoul by train in a couple of hours) and some serious business role models, South Korea has a lot of the right ingredients for becoming a startup nation, so what’s holding it back?

Breaking the shackles

A part of the problem is the self-same megacorps that should be acting as role models to aspiring tech startups.

Those companies, refered to as “chaebols“, are often family-run and control most of the Korean economy. According to Forbes, the top 10 chaebols accounted for some 84% of the country’s GDP in 2012.

Rather than trying to build companies that can one day compete with the likes of Samsung and LG, Korea’s best and brightest all too often find themselves competing for spots at these companies. Once there, they’ll most likely work insane hours (with little improvement to productivity), meaning that they don’t have the free time people in other countries do to work on the kind of side-projects that often grow into scalable startups in other countries.

Within the companies themselves, there doesn’t seem much scope for innovation. One former Samsung employee described it has having a military-style structure. I also heard numerous reports of CEOs with no marketing experience nixing ideas put forward by their employees in favour of their own ideas. Add in a heightened sense that elders deserve veneration and respect at all times and you have a scenario where it’s all too easy to get stuck in the kind of rut where you look incredibly busy, but don’t really achieve much (an experience familiar to many employees in large Western corporations too).

Things can only get better

Things are however starting to change. A mix of Westerners entering the country to teach English, Korean Americans returning to their ancestral homeland and Korean students spending time at US universities has seen a change in the way many young Koreans think about their future prospects.

That attitude shift is in part thanks to a new breed of startup heroes like TicketMonster’s Daniel Shin who arrived in Seoul in 2010 with a vague plan to start a company and today employs more than 700 people or Bom Kim who dropped out of Harvard Business School to start Coupang, a curated daily deals site and one of the world’s fastest growing ecommerce properties. Even instant messaging service KakaoTalk offers a way of thinking outside of traditional Korean business models.

People like KoakaoTalk’s Sirgoo Lee helped provide Koreans with a fresh approach to making money through tech

AT GMV I encountered a slew of startups, all trying to capture a slice of the Korean market but all with an eye on the world stage. Given that the conference had a mobile theme, it should hardly be surprising that most of them are working in the mobile space. Given South Korea’s highly mobile population (at least 73% of people in the country own a smartphone), it’s an ideal platform to launch from. Get the right traction at home and you have a solid base from which to expand internationally.

While there was a marked difference between the startup founders who’d spent time in the US — their pitches were snappier, they got that you need to market yourself at all times and they weren’t afraid to ditch formal attire for branded T-Shirts — the same can’t really be said of the viability of their products (and with enough good products hitting the international stage, that startup swagger will likely come on its own).

The flurry of interest from some of the world’s top investors in Korean startups bears that out.

Speaking at GMV, Han J Kim of VC firm Altos Partners noted that a few years ago, he was flying out to Korea once a month to chat to startups. These days, the demands on his time from Korean startups are so high that he’s moved back to the country and flies back to Silicon Valley once a month to go over deals. So committed is the company to the East Asian country’s future, that it’s just raised a US$60-million fund aimed specifically at Korean startups.

It’s not alone either. Dr Ade Mabogunje, the Associate Director for Stanford’s Center for Design Research, believes that Korea has the right ingredients to be the Hibiscus bridging Western Capital and and the rainforest of the next Silicon Valley. What he means by that is that it can draw from its own experiences of adapting to Western capital as well as exploring previously untapped and fertile markets to create a beautiful ecosystem.

Interestingly, given the traditionally close ties between the chaeblons and the state, it appears that government is on-board with this kind of thinking. Last year, it announced a US$2.97 billion fund aimed specifically at helping fledgling startups grow.

The final pieces of the puzzle

Even as people talk about all the things Korea needs to get right to become a real startup nation, some of the crucial pieces appear to be falling into place. There are funky co-working spaces (although the number is relatively small for a city as large as Seoul); there are startup meetups (including a local chapter of the international StartupGrind movement; as we’ve already seen, there’s plenty of VC interest; and very importantly, there are big startup events and competitions.

Startup Battle Korea, which formed part of the GMV conference, had judges from a number of countries including the US, Israel and the UK as well as few homegrown ones. BeLaunch meanwhile has been going for a couple of years now and aims to serve as a platform for Korean startups and at the same time enable people and organisations outside Korea to tap into Korean entrepreneurship. Every year, it attracts hundreds of startups, competing across a variety of categories for cash prizes as well as learning to pitch in English.

Grabbing the opportunities

All that remains then is for Korean entrepreneurs to take a look at what works in Korea and figure out how to make it work for an international audience. To an extent, companies like KakaoTalk have managed that, particularly with expansion efforts into South East Asia.

In the past, some of those opportunities have been missed. At GMV, Y Combinator Kevin Hale pointed out one of the most obvious ones: “I don’t understand why Twitch wasn’t built in Asia,” he says. He has a point, South Korea has at least two channels dedicated to games of Starcraft. Surely it should’ve given people the opportunity to broadcast their own games?

As Korean entrepreneurs get more practiced at their craft though, that will happen less and less frequently and just as we no longer automatically think IBM and Xerox when we think Silicon Valley, so it seems likely that there’ll come a day when the first tech companies that come to mind when someone mentions South Korea won’t be LG and Samsung.

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