Silicon Valley, New York, Los Angeles … and Seoul? In some circles, South Korea is getting buzz for being a potential new hotspot for startups.
The country’s rapid actions and stringent rules against COVID-19 allowed the nation to get back to business swiftly, and companies there are operating almost normally, even as many other nations still have lockdowns in place. In addition, the IMF projected that the South Korean economy will grow significantly by 2021, with the growth rate rebound projection of 3.4 percent. With nearly 60 percent of Korean startups located in the capital of Seoul, it creates an ecosystem value of $5 billion. That's why the Startup Genome 2020 Global Startup Ecosystem Report ranked Seoul in the top 20 this year.
The South Korean local startup community is benefiting from its ability to bring COVID-19 under control, helping the country attract entrepreneurs from around the world who are eager to grow their businesses. Check out the measures that the nation has taken to build a thriving local startup ecosystem for foreign entrepreneurs.
K-Startup Grand Challenge
The World Bank’s Doing Business 2019 report ranked South Korea as the fifth easiest place in the world to do business. K-Startup Grand Challenge is the highest outreach acceleration program of South Korea, supporting 60 foreign startups every year to establish the brand in the Asian market. It is a three month, all-expense-paid program and the first of its kind in Asia.
All 60 startups that are included in the program receive free office space, living expenses for 3.5 months, Korean interns, administrative support and many more advantages. The top 30 startups receive $10,840 funding, and the top five startups receive prize money ranging from $10,000 (fifth place) to $120,000 (first place).
Supporting Government Policies
The South Korean government has designed many policies to help tech startups flourish. The country is now a world leader in patent activity since strong intellectual property laws in Korea protect new innovations. Korea has also established a patent law system so startups can bring their creative ideas under government protection. In addition, the government has reduced the patent fees for startups and the banks that provide IP financing for small and mid-sized enterprises (SMEs).
To attract more foreign-led startups, the government has created a simple visa program called the E-7 Visa for startups. It provides fast-track visas for foreign entrepreneurs who want to start their businesses in Seoul. The E-7 Visa also allows employers to hire skilled foreign workers to work in Korea. The government offers low-interest loans and expanded co-working spaces to international startups. These government policies are part of the plan to stimulate innovation by removing hurdles for foreign startups.
Stable Corporate Support
South Korea has a vast and diverse range of investors, corporate venture capitalists (CVCs), angels and crowdfunding systems for startups. There are numerous accelerator programs both by government and private organizations for startups to develop their businesses in the country.
A significant number of major Korean companies are collaborating with foreign startups to provide them with the needed initial motivation and support to innovate in the country. Many of the high-ranking universities located in the country can provide talent for these research-innovation programs.
The Korean government is continuously striving to develop a successful startup ecosystem and has planned to invest $12 billion to boost its startup economy during the next four years. Leading global investors are also actively investing in Korean startups. There are around 200 local venture capital and CVC firms in the country.
In March of 2020, the Korean government announced that it would spend $39 billion to provide financial support for small businesses struggling due to COVID-19. The government will also provide $724 million to help 520,000 workers in SMEs to maintain employment. These policies are not only supporting Korean startups, but foreign startups are also enjoying funds and benefits of such targeted acceleration programs.
Availability of High-Tech Infrastructure
The South Korean government is investing aggressively in technological innovation for infrastructure and logistics so startups can benefit from optimal support and an appropriate environment. The region offers startups special tech zones and numerous fully equipped co-working spaces and labs with several cost advantages.
There is huge potential for startups in South Korea, as accelerators, venture capital funds and government institutions are ready to support them as they grow. The Seoul metropolitan government provides foreign entrepreneurs with access to a large number of local support services, including incubators, maker spaces and startup information centers.
With the highest number of broadband services per capita globally, South Korea is one of the most connected countries and is a leader in broadband speed. The country has one of the best wireless infrastructures and 100 percent LTE coverage. With the existing IT infrastructure in the country, Korea has the potential to become the next big startup tech hub for various global businesses.
Secure Market and Smart Consumers
A system that encourages innovation and a government that nurtures the startup ecosystem make South Korea a very favorable business destination for international startups. The South Korean domestic market has high purchasing power and an interest in adopting new technologies and innovations. Korea was also ranked number one in the Bloomberg Global Innovation Index in 2019, a position it has held for the last four consecutive years.
With almost half of the Korean population in the capital, Seoul provides a great place to perform consumer testing. If you are planning to target the Asian market, Korea can be a great place to plant roots so you can expand your business to other parts of Asia.
Thriving Startup Ecosystem
With about 30,000 startups, South Korea has what it takes to become the next big startup tech hub in the world. And the government is making many efforts to increase the number of unicorns in the nation. The startup ecosystem of Korea is attracting investors, accelerators and incubators from all around the world. Check these five reasons why international startups are coming to Korea:
1. Strong support from the government
2. The emergence of startup communities, such as event venues, co-working spaces and free office spaces
3. The growing number of aggressive venture investors
4. One of the fastest internet connections in the world
5. The enormous purchasing power of consumers has made the country an ideal spot for user testing
Public-Private Sector Collaborations
South Korea's public sector plays an active role in promoting and operating several programs to support startups. Tech incubator program for startups (TIPS) is a long-running initiative of the government that provides funding for startups to enter incubators and accelerators funded by private investors.
Partnerships to Advance Startup Ecosystem
The Seoul metropolitan government has partnered with Startup Genome and committed an investment of $1.6 billion over the next three years to advance the growth of the nation’s startup ecosystem. The government will collaborate with the company to identify the key development opportunities in emerging technology sub-sectors and traditional industries, and the resulting data-driven insights will provide local innovation policymakers with a plan to accelerate the success of the startup ecosystem.
Dong Cho, Deputy Mayor for Economic Policy for the Seoul metropolitan government, said, "This partnership would build a globally competitive and open platform city inviting anyone to open a startup, invest or seek support."