Courses & Events

Korea and the Global Entrepreneur

Tuesday, Apr 23, 2013

04:15 pm - 05:30 pm

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By Riva Gold, M.A. Candidate, Department of Communications at Stanford University

When Stanford alum Sherman Li founded his first company in Korea in the 1990s, it didn’t all go exactly as planned. The “freemium” business model he was using, now successful for many local gaming companies, wasn’t bringing in a lot of revenue.

And worse, “after two years, our entire time had to go to the Korean military,” he recalls. “This was something we did not anticipate.”

Li, now the President of Enswers America, a company that helps devices recognize content, was joined by Google’s Asia Pacific founder David Lee to speak about Korean entrepreneurship in a mock fireside chat.

While the ecosystem for entrepreneurs is young in Korea, Li feels the last ten years have been “all growth” in terms of buildings, working culture and technology development. Lee, who runs an accelerator in Seoul, says about a third of his applicants are now international, and it has become easier for foreigners to start businesses in Korea.

The key, Li says, is to respect the hierarchy of age and titles, which is built into the language. As a Chinese-American, Li found that learning the local culture was very important to his professional success. “Korean business has its own rules,” he says.

In Korea, Li and Lee agree that the working style is much more frantic. “It’s not so much that you work late, it’s that you need to be always available,” Li says. “There is not a time in your day you shouldn’t be able to be reached.”

This rapid pace, in many ways, can serve as an advantage for entrepreneurs. “Koreans are constantly iterating,” he said. Workplace bonds are also often much stronger, with more emphasis on face-to-face interactions. Employees typically go to lunch together and build very strong human bonds. “In Korea, you’re expected to stay out all night doing karaoke with your team members.”

Lee adds that these relationships can be leveraged into business advantages “You’re just included,” he says. Work is more intertwined with people’s lifestyle, which “forces you to be interconnected.” This, in terms, helps employees feel more motivated.

In Korea, young companies often get their first round of funding from government sources. The country’s new president, Park Geun-hye, has pushed government agencies to finance start-ups, and offered support to funds that invest in tech firms. Her goal is support new industry growth from small and medium-sized companies.

In Li’s view, this government funding can be tremendously helpful for young companies. “It’s the first round of funding you get, and there are no strings attached,” he explains. The advantage, he adds, is that government sources can provide money, incubator space and resources without taking shares of the company.

At the same time, Lee warns that there are certain risks with government-funded projects. Deals aren’t vetted like a regular investor would, creating what he calls “zombie companies.” Many start-ups, he says, get government funding and run for a year. When they turn to real investors for further funding, many are told their business models have been wrong all along and they should never have existed.

Outside of government funding, Li says “the venture ecosystem is very young.” When he started his first company in Korea ten years ago, angel investors barely existed, he says. Today, there are a few, but it’s still “very new.”

When entrepreneurs do look for outside funding, Li encourages them to choose their venture capitalists wisely. “By the time you wrap up with your company, you can be liable to work for them ,” he cautioned. Term sheets should be read carefully, and private loans avoided wherever possible.

Another factor at play for entrepreneurs in Korea are the chaebols, or large business conglomerates like Samsung or LG. “Everything in your life can be Samsung,” Li jokes, including your life insurance, car, and apartment. “For start-ups, that means the approach to strategic investments is different.” If you take money from Samsung, you likely won’t get bought by LG. Li warns entrepreneurs to be careful about becoming just a development shop for larger companies.

Ultimately, the goal is to maximize the advantages of the Korean work climate. With its engineering talent, consumption patterns and innovative payment models, is Korea becoming more attractive for entrepreneurs?