Start-ups shown how to accelerate business

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Start-ups shown how to accelerate business

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Behind the recent boom in start-ups, there are business accelerators who assist in their survival.

Nine out of 10 start-ups close down within two years, which is why this phase of development has been dubbed “Death Valley” among industry insiders. An accelerator’s job is to help them steer safely through that crucial period by ensuring they have enough funding and support.

Nam Sung-tae, 38-year-old CEO of Zip Fund, a real-estate crowdfunding platform, recently visited officials from two of the nation’s most renowned accelerators, Primer and Mashup Angels. “I thought over the good and bad of my business model during the consultation,” Nam said.

For start-ups to succeed, the heads of star accelerators advise them to drop the arrogant belief that “their business model has been verified.”

“Start-ups are a temporary organization,” said Kwon Do-gyun, head of Primer, Korea’s first accelerator, which was set up in 2010. Kwon, 58, has incubated 86 start-ups through Primer. Previously, he founded online payment software companies Initech in 1997 and Inicis in 1998, and listed them both on the secondary Kosdaq market.

Verifying the potential of a new company, however, is only the beginning.

After being awarded in various start-up idea contests or being spotlighted by the media, many start-ups take it as a sign that their business model is safe to pursue. However, Kwon says, “That’s completely mistaken.”

Start-ups are also advised to avoid trendy business ideas. “Start-ups should come up with business ideas that are of their own interest and abilities, even if others say no to that item,” Kwon said.

Lee Taek-kyung, 47-year-old head of Mashup Angels, advises start-ups to always have a plan B in case of failure and to also look for a good partner when founding a start-up.

“The most important factor in founding a company is to have a good partner,” Lee added. An important criteria for him in selecting which start-ups to invest in is the constitution of people in management.

“It is rare for start-ups to succeed with their first business idea,” Lee said. “They need to be agile and come up with new business plans, and having a good partner who can execute those changes is very important.”

There are also accelerators that invest in start-ups in a particular business area, such as Future Play, which focuses on nurturing technology business start-ups.

“In this sector, it’s obvious whether the people asking for funding know about business or not,” said Ryu Jung-hee, the 43-year-old head of Future Play. “People need to be clear as to why they are starting a business.” After graduating from Korea Advanced Institute of Science and Technology, Ryu established a start-up named OlaWorks and sold it to Intel at 35 billion won ($30.7 million).

“It can bring about the worst of results when start-ups say ‘yes’ to unfavorable demands by investors, right to their faces, and then they don’t put them into action later,” he added.

The accelerators all emphasize that start-ups should study who their customers are. “Reflecting on customer suggestions about business plans greatly raises the business success rate,” said Lee Taek-kyung.

“For start-ups that become open in their field after two months of basic training, I make them meet more than 200 potential customers and ask for their suggestions,” Kwon said.

Accelerators, which used to be dominated by first generation start-up operators, have recently diversified.

Lee Han-joo, co-founder of SparkLabs, the most prominent accelerator of 2015, is a U.S.-born Korean. Lee focused on start-ups that have the potential to enter overseas markets. He chose Memebox, Nori, Mango Plate, StyleWiki and Stayes, which have all seen success so far.

There are even some professors who operate accelerators. One of them is Byun Kwang-joon, a professor at Ajou University, who runs K-startup. K-startup invested in the largest local bitcoin exchange, Korbit, and various others.

Conglomerates run accelerators, too. Retail giant Lotte Group founded Lotte Accelerator, an investment corporation that provides start-ups with seed money and guidance. Similarly, Hanwha manages Hanwha DreamPlus. “An increasing number of workers at conglomerates seek out existing accelerators for advice on incubating a start-up,” said one start-up business insider.

While accelerators are a hot business, one recent misappropriation case shook the industry. Ho Chang-seong, CEO of The Ventures, was arrested for stealing billions of won in government subsidies meant to support start-ups.

BY CHO YOUNG-TAG, CHOI EUN-KYUNG [kim.jeehee@joongang.co.kr]


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