By Kanga Kong
South Korea’s obsession with quick results helped it become Asia’s fourth-largest economy, but that impatience and an aversion to taking risks are now proving to be stumbling blocks for creating startups.
- Bloomberg News
- South Korean national flags fly outside the government complex in Sejong, South Korea, on July 16, 2013.
The country is looking at startups to provide new growth engines, as it seeks to reduce its reliance on the manufacturing industry.
With that in mind, the government is making a push to encourage more young people to create their own businessesinstead of looking for traditionally safe jobs at large corporations or in the public sector.
The government has pledged $2.9 billionin funding for venture companies, particularly in the technology sector. Total resources committed to venture investments in the first half of this year totaled 10.4 trillion won ($93.1 billion), compared with 10.5 trillion won for the whole of 2012, data from the Korean Venture Capital Association shows.
But the nation still has a long way to go before it sees own version of Silicon Valley. South Koreans are not hampered by the lack of capital when it comes to developing startups further, but rather by a culture that emphasizes a quick return on investments.
“Ventures needs patient and courageous capital,” Greg Moon, chief executive and president of SoftBank Venture Korea, said at a recent seminar in Seoul, referring to Koreans’ tendency for seeking quick returns.
Venture capitalists and bankers who were at the seminar on startups also said insufficient space for entrepreneurs to network with each other and with venture capitalists, and an inability to attract the smartest brains to startups were big problems.
“In Silicon Valley, channels linking venture capitalists and starting entrepreneurs are well developed,” Go Young-ha, president of Korea business angels association, said.
The cost of failure is also high in South Korea as entrepreneurs get labeled as credit defaulters if their startups fail.
“I find hope (in the outlook for Korea’s start-ups) here, but see there are also plenty of difficulties to realize that hope,” Shin Je-yoon, chairman of South Korea’s financial regulator, said.
