Secteurs & marchés

[Report] The Korea start-ups index is out!

With the support of the Korean Ministry of Science, Born2Global published in July its 5th annual report on the status of the Korean startups' ecosystem.

In this index for the year 2018, Born2Global explains the landscape of Korean startups and compares them with global startups ecosystems. For example, the startup environment rankings by country. Korea is the eleventh country in world with the best habitat to launch startup (whereas France is at the 30th rank). This ranking takes into account different parameters such as the overall economic environment, the average time to settle a startup and investor's protection.

The 2018 Korean startups index also highlights several investments trends in Korea:

□ Venture Capital

In various fields from health, IT, manufacture to video games, venture capital investment in companies reached a record high in 2018 with 3.42 trillion KRW which represent a rise of 43.8% in one year. According to the Korea Venture Capital Association (KVCA), 1399 new companies received investment from VC firms in 2018. Since 2015, the amount of new venture capital investment in Korea is breaking records every year, due to rising government funding.

Despite the global market growth uncertainty, Korea has a favorable ecosystem currently: the country is an open door to the Asian market thanks to its strategic position. And the Korean government has created several programs the last decade, due to the former government's policies and the current Moon Jae-in’s plan to invest 10 trillion KRW during his mandate.

□ Business Angel

Business Angel investment is in a rebound after years of decline since “the startup bubble” burst in 2000. The situation started to change in 2011 after a decade in the desert. According to the Ministry of SMEs and Startups, the total angel investment in 2018 - including investments by private investment funds - recorded 439.4 billion KRW.

□ Exit

The exit method, used by VC firms to capitalize the money invested in startup, is categorized in three means: 

  • OTC

The favorite mean of Korean VC firms and angel investors to recover their capital through market sales is over the-counter (OTC: securities traded via broker-dealer network). KVCA (Korea Venture Capital Association) and the Ministry of SMEs show that 52.1% of Korean VC firms used OTC in 2018. But OTC involves a high level of uncertainty and unpredictability in terms of receiving full price.

 

  • IPOs

Initial public offerings (IPOs) are the most effective means in the western startup ecosystem that allows investors and startup founders to recoup some of their investment to reinvest it in the company growth promotion. But in Korea, it is still quite rare and viewed as unusual for startups to go public. It is used by 32.5% of VC firms. 

  • M&As

Mergers and acquisitions (M&As) is a mean employed by Global venture capital firms to earn returns on their investments. But like for IPOs, M&As action is rare -even rarer- in Korea.

 

□ Crowdfunding

As a new way of earning money, crowdfunding is a trendy mean. Especially equity crowdfunding, which has been gaining attention as a type of crowdfunding where backers receive equity share in the company, differentiating it from donation-based crowdfunding.

 

The Born2Global index also reveals that, in parallel with the rise of foreign tourism since the last few years, the proportion of foreigners hired in a Korean startup increased. In 2016, 16.3% of foreigners were working in a startup in Korea whereas they were 20.4% in 2018 . This rise shows that the Korean enterprises have becoming more open-minded than the traditional Korean companies.

 

Born2Global gives several examples of successful Korean startups members of its center, which show the rising interest in the Tech4Good theme (technology for common good) like JLK Inspection.

JLK Inspection has an AI-based medical platform called AIHub, short for “AI Humanity Benefit”. AIHub is a solution that analyzes various types of medical images and clinical data through a big data-based AI algorithm. It can detect and diagnose 33 medical conditions in 14 regions of the body, which is the largest number of any existing medical diagnostics device in the world.

I felt that improving the technology for diagnosing strokes would improve people’s quality of life and also reduce the related social costs, since Korea has become an aging society” said the CEO and founder Kim Won Tae.

In 2019, JLK Inspection expects to take its first quantum leap since its founding, planning an IPO on KOSDAQ, underwritten by Korea Investment & Securities.

Created 7 years ago, Born2Global hosts a center that welcomes global advancement of promising technology companies. Every year, more than 100 startups with technological capacity and business potential are selected to be members. Born2Global provides them a range of services to help them improve their product, grow their business and conquer the global market thanks to several programs.

You can discover more on Born2Global 2018 Korean startup Index here: https://bit.ly/2LWlLRD.

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