An awful start-up environment

CHANG CHUNG-HOON
The author is a deputy industry 2 team editor of the JoongAng Ilbo.

Why are local start-up companies unsuccessful in Korea? Of course, there are successful companies that have grown to be industry giants like Naver, Kakao and NCSoft, yet they were established more than 20 years ago. Now that venture capital investments and the talent pool have increased, why do I rarely hear stories about successful start-ups? Start-up businesspeople had a discussion on this issue last month. The Korea Entrepreneurship Foundation hosted an event titled “What is Entrepreneurship?”

Minister of SMEs and Startups Park Young-sun attended the event and gave a speech encouraging start-ups. What caught my attention at the conference were the words of Park Sang-il, founder and CEO of Park Systems. “There are fewer successful ventures because the vested interests of the market and regulations optimized for the vested interests became reinforced,” he said.

I paid special heed to Park among the many business leaders, because he had the unusual experience of making successful ventures in both Silicon Valley and Korea. Park started a business in a garage while studying in the United States and sold it for $17 million after nine years. He returned to Seoul, set up Park Systems in 1997 and made it into a leading company for atomic force microscopes.

Park claimed that start-ups were a fight against regulation and vested interests from the start, and lately, the fight is intensifying, so it is not easy for a new venture to emerge. Naver, Kakao and Park’s company were established in the ’90s. He argued that start-ups haven’t been as successful because regulations increased and large corporations in the market kept the new arrivals in check.

In fact, according to the Korea Creative Economy Research Network, regulations on start-ups — which were 7,000 in the late ’90s during the Kim Dae-jung administration — increased to 15,000. Each administration advocated deregulation, but, ironically, regulations nearly doubled in the past 20 years. Start-up leaders at the conference blamed the triangle of politicians, bureaucrats and conglomerates for the critical setback to our start-up habitat.

First, politicians do not hesitate to propose regulatory bills that will help them win votes in elections. At the 20th National Assembly, over 2,400 of the 13,700 proposed bills were related to regulations, according to the Regulatory Reform Committee. Bureaucrats instinctively tightened regulations to maintain their budget, organization and manpower. Conglomerates increase entry barriers to keep their market interests. As a result, the venture success stories we know are from two decades ago. If you want to hear another start-up success story, you first have to listen to the demands of the businesspeople about our outdated regulations.

JoongAng Ilbo, June 5, Page 29