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The N Seoul Tower and the city skyline at night. Image credit: sepavo / 123RF Stock Photo.

Korea has been in the news for the wrong reasons. President Park Geun-hye’s impeachment trial has started. The country’s top business leaders were summoned for questioning on corruption.

Still, Korea can be a land of opportunity. Korea has a homogenous population, and about 50 percent of the population lives in Seoul. Trends can spread rapidly.

It’s also easy for tech startups to monetize in South Korea. According to the Pew Research Center, 94 percent of South Korean adults use the internet or own a smartphone. Disposable income is growing. Koreans are used to spending money in mobile apps.

Accelerators, funding, and government initiatives

The South Korean startup ecosystem is well-financed. South Korean President Park Geun-hye’s administration recognized the need to rely less on conglomerates such as Samsung and LG for economic growth. Touted as the “creative economy” initiative, it’s investing in innovative alternatives to the conglomerates so as to improve employment rates. In 2014, a plan was underway to nurture startups.

The government injects US$2 billion every year into the South Korean startup ecosystem. A further US$65.9 billion in spending was planned for 2016, and much was on developing Pangyo, an area south of Seoul hosting Korean tech firms such as Kakao. 17 innovation centers were also built around Korea as part of the government’s initiative. Each center has its own theme and specialty, with a corporation in charge.

The plan has seen early success. According to Tech in Asia’s data, the total funding amount grew by 6 percent from 2014 to 2016. Top funded startups over the past year include MelOn, Podotree, Yello Mobile, Baedal Minjok, and Viva Republica. They span vastly different industries.

Nathan Millard, founder and CEO of PR firm G3 Partners, shared with Tech in Asia that “there are incubators and coworking spaces across Seoul, over 20 accelerators at last count, an established VC ecosystem, active angel investment community, and very extensive government support.”

Despite active criticism of creative economy initiatives due to murky links to corruption, the Centers for Creative Economy and Innovation are likely to continue operations, having secured new funding from central and municipal governments. In fact, the Korean government announced new policies to boost growth focusing on artificial intelligence, information technology, and virtual reality in 2017.

Picture credit: Startup Alliance by Naver.

A developed ecosystem for foreign startups

On top of financial assistance, the government started an accelerator called the K-Startup Grand Challenge (KGC) in 2016 targeted at foreign startups, with focus on areas like gaming, information security, smart devices, and big data.

The accelerator is a big plus for foreign firms who wish to get a headstart in Korea, especially if they’re unsure of how to localize their product or marketing. Entrepreneurs also get funding and support accessing the market. Kenneth Lee, founder of travel chatbot developer and KGC participant TravelFlan, says that they received visa help and also networked with industry leaders. Other centers include the Seoul Global Startup Center, which provides space to work, funding, and operational assistance.

Korea’s developer communities can be found both online and offline. KLDP and OpenStack Korea are good places to start. Also check out this useful list of communities. Korea Community Day, which ran its fifth meetup in January 2016, offers developers an opportunity to meet in person as well.

Jason Minkee Kim, senior associate at startup accelerator ActnerLab, also describes the process by which the government grants support to startups.

Key challenges in Korea

A strong gaming culture and a willingness to spend in-app makes revenue generation a realistic goal for mobile apps in Korea. (For example, localized emoticons are cash cows for apps like KakaoTalk.)

1. Chaebols are still talents’ top choice

Chaebols (Korean family-run conglomerates) are favored places to work because of their domination over Korea’s economy and job market. To be a “Samsung Man” is to be respected, admired, and powerful in Korean society. While the traditional belief still holds, more and more workers are looking to work in startups.

Photo credit: ximagination / 123RF Stock Photo

Today, Koreans struggle to cope with the demands of work, social immobility, and rising youth unemployment at 8.2 percent. Some feel like they’re back to the Joseon dynasty, where a feudal system prevented the lower classes from achieving socioeconomic mobility. Groups like Hell Chosun are forming to rebel against the traditional 60-hour work week.

“A lot of startups have former Samsung and LG employees. The reasons for leaving big corporations vary from the pursuit of adventure or just doing something personally rewarding,” says Sejung Yun, who has worked closely with startups in South Korea as part of G3 Partners.

For foreign startups looking to hire talent, Sejung has these words of advice: “With money saved up from chaebol jobs and government grant programs, you’ll find a lot of ex-chaebol people out here in the startup ecosystem. Know how to be competitive with your offer.” If you’re able to confidently pitch your product and your vision, hiring talent should not be an obstacle.

Younger workers also have different views on work practices from their parents. They’re less likely to tolerate being ordered to start work an hour earlier, or abide by stringent dress codes. Startups may offer less stable careers than large corporations, but are able to employ a flexible and progressive work culture due to their smaller sizes and novelty. For example, Kakao enjoys a flat structure where they welcome employees to freely discuss new ideas.

2. Put effort into building good relationships with chaebols or the government

Companies may face high barriers when building a network in Korea. Symbiotic relationships between the government and chaebols may also create an economic environment unfavorable to smaller businesses. Even with the support of an accelerator, startups still have to go through lengthy and extensive relationship building.

“It’s all about who you know. It’s not about bribery or corruption, but you need to develop high-level relationships, and that takes time,” Nathan says.

Building good relationships can be vital for success. Nathan advises that startups who want to broker a deal with chaebols offer something of tangible value.

“Large Korean companies are not startup-friendly, so you need to spend a ton of energy making sure that what you are offering is of value, otherwise you simply won’t get a meeting,” says Nathan. “It’s about thinking: how can I add hundreds of millions of dollars of value to this conglomerate?”

Cloudike’s CEO Sun Ung Lee says it pays to spend time and effort on developing high-level relationships.

“Once you do get the paperwork out of the way, the partnerships are highly beneficial and are almost a badge of approval to other major companies.”

Startups have to spend the same amount of time and effort on preparing to meet chaebols or governmental organizations as they would for a meeting with a VC or investor in Silicon Valley. It’s all about making the time and effort to make the right connections in South Korea too.

3. It’s important to be in the country.

While there’s definitely a language barrier, Sejung says that it isn’t impossible to overcome.

“Even if you go to Korean startup events, I would wager that a good portion of the crowd can communicate with you in English, so the opportunities are certainly there,” says Sejung. “And if you look at the statistics, or just meet people here, you’ll find a ton of people who have either lived or studied abroad in English-speaking countries as well so again, language shouldn’t be a fear.”

“Someone always knows someone who knows someone else,” says Asaph Kim, chief design officer at 3.14 and co-founder of KamiBot. He thinks building a network shouldn’t be too hard, but it does require you to be physically present in Korea.

Most founders who have successfully set up shop in Korea have lived there for a while. For example, Nathan spent seven years in Korea before setting up G3 Partners in Seoul.

Kenneth mentioned that having a local partner would be ideal, especially when sourcing for news on government sponsored programs. Indeed, Asaph says that he learned the most about Korea after 21 months of compulsory military conscription.

King Sejong in Gwanghwamun Square, Seoul. He invented Hangeul, the Korean alphabet. Image credit: Pixabay.

4. Don’t rush head-first into the market.

Founders we spoke to cautioned against rushing head-first into this market without doing any research. On one hand, Koreans hold conservative views, but on the other hand, they are extremely willing to try out new tech. Nathan says Korean consumers are very savvy about consumer goods.

Asaph also notes that Koreans “are driven by how they appear to their peers, and this ultimately drives nearly all of the social dynamics in Korea.” One example is that Koreans judge you for eating alone. This might not be surprising if you understand the face-saving culture and how this is applied specifically in Korea. Face saving includes maintaining a carefully crafted image in front of others. When this image is shattered, such as appearing to have no friends by dining alone, the person may feel guilt or shame.

Marketing also has to be done differently. As the top search engine in Korea is Naver (Google doesn’t even come in second, with only 10 percent of the search engine market share), you need to adapt your search engine optimization strategy.

Foreign app developers, such as Candy Crush, have succeeded in Korea by localizing their app and ads, such as featuring eye-catching candy popping out of the television, as well as slapstick humor.

It’s easy to forget that Korea is entirely different from surrounding countries like Japan and China. Korea has its own history and traditions. In recent times, Korean soft culture such as pop music and fashion has become increasingly recognizable and popular.

It’s important to understand these nuances, or well, risk losing face.

If you want to find out more, fill in the form below and we’ll send you our Market Expansion Ebook. It’s designed to give you basic information on each tech and startup ecosystem. It can serve as a guide on how best to get started with your company’s expansion. We share with you what you need to know about the region’s cultures, government regulations, hiring practices, business relationships, and so much more.

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