South Korea Offers a Growing Startup Industry
The South Korean government’s support of the startup industry and delicate changes to the industry model are making it easier for small businesses to borrow money; guaranteeing a large portion of bank loans. Korean Export data shows the culture exports industry trade is higher than home appliances now. South Korea’s economy was more reliant on the chaebol (which means, a large industrial conglomerate that is ran and controlled by owners or family). However, the Korean government is encouraging banks and other large firms to diversify the economy and also co-opted those conglomerates into the strategy to invest their own money into launching their own startup incubators.
“The chaebol-led growth model is broken” says Randall Jones of Columbia University. “Improving productivity means moving towards a more startup, digitalized model.” How has COVID-19 affected the South Korea industry?
The country’s airlines had 92% fewer customers during the second week of March. Shops, bars and restaurants are expecting a drop in sales of up to 80% for the first quarter of 2020. Delivery companies like Coupang, by contrast, have struggled to keep up as demand for home deliveries has soared by nearly 50%. Korean confirms factory closures in China, where industrial output fell by more than 20% in January and February following the covid-19 outbreak. Hyundai, which makes more than half the country’s cars, saw a 13% drop in global sales in February compared with 2019, according to The Economist. To respond to the COVID-19 damage, the government launched a stimulus package of 11.7 trillion won, a financing plan worth 100 trillion won to help small businesses and a fund to stabilize the bond and equity markets, South Korea’s development has been swift. Five years ago, there were only 80 startups that had raised more than $1m from investors. Today there are nearly 700, including around 200 that have raised more than 10m and ten “unicorns” valued at more than $1billion. In 2019, investors poured more than 4trillion won ($3.3bn) of venture capital into South Korean startups, triple the amount they invested in 2013, according to The Economist.
“Ten years ago, no Korean mother would have wanted her child to set up a startup” says Nathan Millard of G3 Partners, a consulting firm. “That has changed.”
Venture-capital investment accounted for 0.36% of the GDP in 2018.Now there are many prominent examples of entrepreneurs who have made serious money.
Do you want to start up your own business in South Korea?
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