After some high-profile success stories like Coupang and Toss, going global is an ultimate goal for South Korean startups -- but many of them are still struggling to tackle decades-old regulatory hurdles and hostile financial investors, even at home.
SMEs and Startups Minister Lee Young, who took office in May upon the inauguration of the Yoon Suk-yeol administration, vows to create a more investment-friendly startup ecosystem, saying getting funding should be the starting point of their overseas expansion.
“Going global is no longer an option, but a matter of survival for Korean startups,” the minister said in a recent interview with The Korea Herald.
“Those who make a foray into overseas markets with strong digital capability and groundbreaking ideas will survive.”
Lee, one of the nation’s first-generation venture CEOs in the early 1990s, admitted that outdated regulations that had originally aimed to prevent monopolies are now hindering the growth momentum of smaller businesses -- not to mention startups -- unlike other countries that offer generous tax cuts and policies to support them.
The nation’s unique industrial structure, which is heavily reliant on big chaebol groups, may have also influenced rigid government policies. But more recently, large conglomerates are increasingly investing in promising startups, seeking synergy with their extensive global networks and business know-how.
“It is also my role to encourage big tech companies to work with SMEs. In partnership with local conglomerates, smaller firms could use their well-developed global networks, a boon for their crucial overseas reach,” she added.
Lee stressed adaptability as the key strength of Korean startups amid ever-evolving technological trends.
“Korean startups are notable for their strong adaptability to the fast-changing market and finding new business opportunities. They take root in the notorious ‘ppali ppali’ culture (of getting things done quickly),” she said.
Despite their competitiveness, many startups, especially research-focused firms, face greater challenges in finding investors due to time-consuming research work leading up to their commercial debut.
“Private investors like venture capitals tend to take a conservative stance on funding hard-tech startups in particular, because they require a longer time to develop the technology itself. It is also difficult for them to evaluate the long-term success of nascent technologies,” she said.
According to the ministry, it takes at least two to three years for R&D work for non-memory chip areas such as chip design and processors, with funding worth about 1 billion won ($767,000). Meanwhile, the research period more than triples for biotechnology and health care startups.
Understanding the seed-stage struggles, the SMEs Ministry recently rolled out a 2 trillion won package plan funding “deep-tech” startups in futuristic fields such as future mobility, next-generation nuclear power plants and quantum computing. About 300 startups are expected to benefit from the scheme annually.
Laying a stepping stone toward overseas markets, the ministry also expanded the size of its “global fund” – government funding that invites foreign venture capitals to invest in promising Korean startups from the previous 6.3 trillion won to 8 trillion won.
Despite jittery markets, Lee said Korean startups are posting robust performance in recent years. The number of SMEs with 100 billion won in revenue surged 16.7 percent on-year to 739 last year. Their combined revenue has reached 18.8 trillion won, hiring some 278,000 employees across industries.
The minister, however, voiced concerns for women-led startups, saying that 41 percent of SMEs here are led by female CEOs as of 2020, but only 4 percent of the nation’s total investment made goes to those to those companies.
In a move to crack the glass ceiling, the ministry looks to expand funding for women-led firms to as much as 13 billion won.
“As the first venture CEO-turned-minister of the SMEs Ministry, I feel heavy responsibility to better respond to the needs and challenges fellow entrepreneurs go through,” Lee said, adding she has made a total of 87 on-site inspections since her appointment.
“One of the top priorities is creating a resilient ecosystem even during economic recessions. I’ll ramp up efforts to push private capitals to more actively invest in startups and create synergy with government funding.”
Prior to leading the SMEs Ministry in May, Lee won the proportional representation seat of the conservative Future Korea Party at the 21st National Assembly election. Between 2015 and 2017, she was the 9th chairman of the Korea Venture Business Women’s Association. In 2000, Lee founded an IT security startup called Teruten, serving as the CEO until 2020.
