The startup dilemma

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The startup dilemma

The launch of new “innovation centers for creative economy” by conglomerates, small and mid-size companies and startups in 17 metropolitan cities and provinces across the nation is a new experiment and meaningful challenge for our stagnant economy. Despite a startup boom over the last two decades, it failed to really go anywere in this country. In the meantime, American startups like Apple, Microsoft, Google and Amazon all became global powerhouses in the IT sector. Japan is no exception. Uniqlo, Softbank and other venture businesses have contributed to the enrichment of Japan’s industrial habitat in a remarkable way. But success stories of startups are still confined to the Internet-related businesses and online games here.

In order to build a virtuous cycle of startup businesses, industry needs to have deep soul searching from now on. Creativity matters, and losing isn’t something to be terrified of. Given the unrivaled strength of U.S. venture businesses, what’s most urgently needed is M&As by so-called angel investors and big companies. In Silicon Valley, a myriad of far-sighted angel investors are channeling funds to promising startups from the earliest stages by playing the role of a de facto mentor for these fledgling firms. Moreover, large companies wrap up the virtuous cycle of investment, profit, divestment and re-investment by aggressively buying out successful startups. But our angel investors have been under fire for putting their stakes on only retrieving their investments. Even conglomerates’ acquisition of startups has been an issue that polarized people rather than creating value.

Dr. John Hawkins, author of the best-seller “The Creative Economy,” points out that the secret to the success of Israeli startups is a close-knit network between Jewish capital and the American market. Yigal Erlich, the founding father of the Israeli venture capital industry and one of the most prominent figures in the Israeli high-tech area, recommended to his Korean counterparts to “capitalize on the strength of global conglomerates.” As startups have strength in innovation and big companies in the global market, combining both could be a short cut to the success of Korean startups, he stressed.

We take special note of the innovation centers for a creative economy that Samsung Electronics, Hyundai Motor, LG and SK are pulling up their sleeves to establish. If big companies with strong regional backgrounds play the role of mentor to local startups and help them advance to world markets, a Korean equivalent of the virtuous cycle will take root here.

Joongang Ilbo, Sept. 16, Page 34

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