Letting start-ups thrive

The government touts start-ups as the new future growth engine of the country. President Moon Jae-in repeatedly promised policy support and deregulation for them. But the start-up ecosystem remains primitive. According to a study by the Federation of Korean Industries (FKI), venture investment totaled 3.4 trillion won ($2.85 billion) last year, just above 1 percent of total start-up investment. Early investment in Seoul-based start-ups also stopped at one-third of the global average. That’s not all. Seoul scored one out 10 in early-stage start-up growth.

Investment remains lackluster due to difficulty getting capital. Investors resort to initial public offerings (IPOs) rather than mergers and acquisitions (M&As) to cash in on their investments. To fuel life in the start-up industry, M&As must fuel growth. Multinational IT names like Google and Facebook could become behemoths by scaling up through M&As of promising start-ups. But few remarkable M&As have taken place in Korea. Among the top 30 start-up M&As across the globe from 2010 to 2018, U.S. firms were involved in 22, while Samsung Electronics was the only Korean name on the list.

It may not be that few Korean start-ups are appealing for M&As. It may also not be that Korean companies lack capital or M&A experts. Actually, state policy funds to back start-ups are abundant, and young Koreans are some of the brightest people in the world. But many are wasting their potential studying for government employee exams to land safe and less rigorous jobs in the public sector.

The government needs to create the right environment for start-ups. But the grooming work should be left to the private sector. Large companies cannot freely invest because of layers of regulations and anti-corporate sentiment. Under such circumstances, few large companies want to invest in promising start-ups. Although the government energetically promotes the introduction of regulatory sandbox to accelerate the development of new technologies in the fourth industrial revolution, Korea cannot move as fast as it desires because of various complications, as seen by the bottleneck over the ride-sharing business.

Israel has grown to be one of the one most innovative countries in the world and gained the moniker “start-up nation” thanks to its unique spirit. The boldness from immigrant minds has added fearless drive to its innovations. The Korean government must also draw up a mid- to long-term plan to stimulate an adventurous spirit in the private sector.

JoongAng Ilbo, June 3, Page 30