One of the Moon Jae-in administration’s primary goals has been to create jobs and rejuvenate the economy. However, failing to gain momentum, the Korea ’s conventional growth engines, such as semiconductors, smartphones, and auto businesses are sputtering, while the unemployment rate has hit record lows.
Since it looks like these industries aren’t likely to get back on track soon, the government has turned its eyes toward startups, hoping that the industry will be a spark to bolster the cooling economy.
|Startup employees work at one of coworking spaces run by office-sharing firm Fast Five in Seoul. (Fast Five)|
According to market reports and experts, the startup sector will likely be more vibrant this year, as more money from both private and public sectors are expected to be injected. Furthermore, some industry watchers have predicted the arrival of additional unicorns — startups with a valuation of $1 billion or more.
Money pours in
The amount of investments earmarked by around 100 venture capital firms for startups this year has already surpassed 2.68 trillion won ($2.40 billion), according to Korean Venture Capital Association. The total amount will likely increase in the coming months.
“It seems that great breakthroughs in the startup sector are forthcoming, considering the increasing investments in diverse segments,” an official from the organization told The Investor, adding the funds could help foster the birth of more domestic unicorns.
The entire amount of investments made by VCs last year increased 40 percent on-year to 3.4 trillion won, according to KVCA. Of this, some 700 billion won went to startups in the biotech and medical segment, outpacing the information and communications technology sector, which attracted around 640 billion won.
Korea is home to five unicorns and one decacorn — startups with valuation of $10 billion or more. The list of unicorns include: Woowa Brothers, which operates mobile delivery service app Baedal Minjok; Crafton, formerly named Bluehole, the developer of survival shooter game “Playerunknown’s Battlegrounds”; Yellow Mobile, an alliance of fintech, edutech, and health care startups; L&P Cosmetic, a maker of beauty products; and BigHit Entertainment, the agency behind boy band BTS.
Viva Republica, which runs money transfer service Toss, is the latest unicorn. Thanks to funding by global investors like Kleiner Perkins and Ribbit Capital in December, its valuation has reached $1.2 billion, a tenfold increase from March 2017 when it raised a $48 million investment from a group of investors led by US payment giant PayPal.
Leading e-commerce firm Coupang became a decacorn after attracting 2.26 trillion won in November from Softbank Vision Fund, a fund led by Japanese conglomerate SoftBank CEO Masayoshi Son.
|Employees of coworking space firm WeWork handle front desk duties at the firm’s Ark Hills South location in Tokyo. (WeWork)|
As more money pours into the startup sector, Korea is likely to witness the birth of more unicorns. Those close to the unicorn club include Hyperconnect, an operator of video chatting service app Azar, budget hotel booking firm Yanolja, real-estate app company JikBang, online grocery delivery firm Market Kurly and Besipin Global, a cloud management firm.
Coworking space firms, such as Fast Five, will likely continue to receive the spotlight as startups or even established companies increasingly want to utilize shared-offices to save overhead costs, according to market watchers.
The crypto businesses, on the other hand, will continue to be on the wane due to the falling value of digital currencies.
“The crypto market is not considered as an attractive investment destination anymore since investors have lost trust in recent months,” said Kim Kyung-soo, CEO of crytop marketing and research firm Ether Lab.
“Having said that, players in the field will try to roll out more realistic and practical blockchain services down the road.”
In order to vitalize the startup sector, the government has also vowed to spare no efforts to increase support and relax regulations that hamper growth.
“The government will try to create extra funds in addition to the planned 4 trillion won this year,” said Minister of SMEs and Startups Hong Jong-hak in a recent interview.
He also said the government will change policies that limit conglomerates from acquiring emerging startups, mentioning Silicon Valley tech giants, like Google, which have grown on the basis of taking over startups.
Some critics have called for the broader implementation of the so-called regulatory sandbox, which allows companies in new sectors to offer their services first before related rules are established.
“Because of the outdated transport regulations, car-sharing companies, which were at the center of controversy last year, have been offering limited services or shut down,” said an employee at a car-sharing firm.
“Regulations may have to change with the times.”