Recently renowned global news outlets have been blazing news coverage about the supremacy of the Korean startup ecosystem and how the next great thing is going to come from there. Despite that some of these articles are visibly sponsored content (by various government organizations that are running end-of-the-year conferences or competing to be chosen as Expo hosts), I do agree that Korea is an exciting market to watch.
But is it going to be the next Silicon Valley? Let me present a few counter-arguments and a few ideas where the local startup community can head from here to flourish.
Driven by government, not the business
It is agreed by experts that a healthy startup ecosystem has at its core startups and entrepreneurs, with the rest of the players (public institutions, investors, accelerators/incubators, academia, corporates), intertwined in a network, supporting the venture businesses in their development and growth. There is a substantial amount of discussion about how much involvement there should be from the government side: there are ecosystems where its completely hands off and those where it is very involved in the growth and scalability of startups. In the center of the Korean startup ecosystem is not the entrepreneur but the government and its multiple institutions and agencies. Not only does it bind the market with frequently severe regulations (like for the mobility industry) but it also fuels the system with a variety of support and grant programs for both startups and accelerators. One of the by-products of this is the infamous ‘zombie startups’, which exist for years without a real product or business model but thanks to good application writing, matching whatever ‘flavor’ of the year the government picks for the most promising innovation industry. On the other hand, a significant amount of the local accelerator and VC funds also comes from government support programs and ‘super funds’. Again, it means that their investment decisions are more often than not tied to the greater schemes decided by government officials, rather than by the market needs and opportunities. On top of all that, government support programs mean a huge amount of paperwork and bureaucracy, usually requiring a new hire just for that task. That is very strenuous for startups, which are dealing with already very limited resources.
In the initial stages of forming the Korean startup ecosystem such government control and strategy curation was helpful – there is no denying that. It did so too 60, 50 years ago when the Miracle on River Han was taking place. But the key to success is letting go at some point and allowing the market to regulate itself and see who really is fit for survival or not. It’s telling that most of the most successful startups (so-called unicorns) have avoided most of the public support programs.
In the dark and long forgotten history of Korea’s supergiants like LG or Samsung, there was a time when they were renowned for stealing blueprints from their Western competitors and corporate espionage. And even when they didn’t, looking at their products it was hard not to have the impression that it was a slightly modified copy of something from the US or Europe. There are historical reasons for that (shielding off the Korean economy from imports) but it hasn’t been until recently that these corporations have started being truly innovative.
One cannot shake off the impression that something similar is happening now on the startup scene, albeit for different reasons. A number of companies seem to be replicating already existing ideas from other markets’ startups (e.i. Amazons, Ubers, Delivery Heros etc.), as the regulator and the hermitness of the market successfully make it nearly impossible to enter and penetrate the Korean market. And while making replicas, focused on the local market, is not a bad thing on it’s own, the Korean startups show limited interest and motivation in taking their products abroad, even when they are truly innovative.
Because despite the copycat craze and making ‘AirBnB for cats’- sort of ‘copy paste’ schemes without really researching if the end consumers need such a solution, there really are some interesting, promising ideas, coming from young entrepreneurs, engineers and developers who are not afraid to step in front of the ranks and present their solutions. Because another thing about the traditional company culture here is that it’s unpopular to have an idea that’s not your bosses and to dare to be disruptive. As a lot of companies are led by middle-aged males, who previously worked in traditional corporations, those startups tend to take on a similar approach to employee creativity and enthusiasm.
That being said, there’s a beam of hope coming from ventures led by young (20s, early 30s) entrepreneurs, who have a more global mindset and worldly approach compared to their older counterparts. But still startups like that are few and far apart.
What is lean?
Founders’ past corporate/traditional business experiences contribute to the top-down management style, intertwined with Gantt charts, long sit-down meetings and reports the size of Tolstoy’s ‘War and Peace’. Quick sprints, user-testing, pivots are still things that Korean startups tend to shy away from. Rather than a flat communication pipeline, everything needs to be reported to one or the other higher-up. Similar to public institutions, if you want anything done, you have to identify the key decision-maker or a ‘knight-in-shining-armor’ – an employee that’s enthusiastic about your project/product/request and will be willing to push through hierarchy barriers to have your case be heard. But more than for the outsider, such a strict environment is stifling for the creativity of a startup’s employees. It is not a fun, dynamic atmosphere where ideas can be freely thrown around to test and learn from.
There is a valid reason for such micro-management practices – Korean companies are more often than not risk averse, meaning every little thing has to be doubled, checked, in control. Before being signed off by a person of authority and experience. And that’s not a bad thing in itself. But with limited resources and a time-crunch a startup has to be quicker and bolder.
Diversity? Maybe not.
I’ve grown so used to being the only woman as a speaker at conferences, in a room during a business meeting, at a MOU signing event, that when I do see another fellow female entrepreneur or startup hustler, I can barely hide my shock. It’s not only the gender imbalance – I’m no spring flower, but I am usually the youngest one in the room. Most decision-impacting events are run by middle-aged and older males. And all the respect to them – these are the people that built Korea into the power house it is today, through sweat, tears and sacrifice. But there is a reason that they are called ‘kkondae’ (꼰대) – because of their position meetings with them are usually along the lines of ‘my way or the highway’. There is an art to conducting a meeting or event with such gentlemen and not all of us possess that skill. Secretly, everybody yearns to see gatherings full of youth, women and foreigners that would bring the forth mentioned creativity and lean mentality into the business world in Korea.
Quo vadis, Korean startups?
Though still stifling and micro-managed, there is a gleam of hope for the Korean startup ecosystem. Namely in the new generation of 20-, 30-year old entrepreneurs, who posses not so much a global exposure and mindset, as a open and driven startupper spirit of bushy-tailed MZ generation. They chose not to rely heavily on public grants, rather going for bootstrapping or private investments, also from abroad. And that’s another thing – this new generation of entrepreneurs are building their businesses to be global from day one, not just focusing on localizing to the limited Korean market, but setting their sights high and beyond. At the same, they see the importance of building an ecosystem that’s more than a close-knit network of same old faces that function along the lines of ‘I scratch your back, you scratch mine’. There is a steady push to build an inclusive community that supports not only Korean but also foreign entrepreneurs looking to expand and venture into the Korean market. Such global influx will surely spur not only healthy competition, driving the technology innovation, but also pressure public institutions and corporates to open to collaboration beyond their own backyard. Is this my wishful thinking? I do hope not – Korea can achieve the ambitious goal of being a global startup hub, but only when that growth comes from the bottom, from the entrepreneurs, not from KPI-reporting civil servants.