Korea has lots of 'unicorns' and no way for them to fly: FKI
One of the most notable moment in the U.S. stock market this year was the Nasdaq listing of so-called unicorn start-up Airbnb. Korea’s unicorn start-ups, on the other hand, are yet to see a single successful acquisition or initial public offering (IPO).
The term “unicorn” refers to unlisted firms valued above $1 billion. The Federation of Korean Industries (FKI) released a report Wednesday that studied 501 unicorns worldwide to evaluate where Korea stands. According to the report, Korea has 12 unicorns, which places it sixth in the world.
In the start-up ecosystem, a successful exit — meaning a start-up is either acquired or goes public — is considered crucial for the entire industry as experienced founders and early investors will re-invest in new start-ups.
Korea has no such cases. Woowa Brothers, the operator of the country’s largest delivery app Baedal Minjok, announced that it would merge with Germany’s Delivery Hero in December 2019 but is still waiting for the Fair Trade Commission to green-light the move.
The report mentioned complaints from venture industry sources that going public in Korea entails heaps of regulation and external monitoring at a stronger level than in other countries.
Exits through mergers and acquisitions (M&As) are uncommon as well. This is largely due to a shortage of venture capital firms with experience and the capacity to give an accurate valuation of a start-up, as well as a negative public perception of M&As.
“A virtuous cycle where founders and investors can develop a business, receive investment and re-invest is a must to see more unicorns grow and encourage exits — and yet Korea has a very weak market in this realm,” said Kim Bong-man, the secretary general of the FKI's international management institute.
“With an ongoing boom in the stock market and higher interest in IPOs, it is time regulators devise ways to ensure management rights for start-up founders after a public listing and ease regulations on corporate venture capitals.”
In the report, the business advocate group also noted that the scope of industries that Korea-based unicorns were involved in is much narrower than ventures from other countries as well.
“We’re seeing rapid growth of unicorns based on AI technology […] but none from Korea,” the report said. “Experts say Korea has a weak base for AI businesses to succeed, like strong regulations, difficulty to raise large-scale funds and a shortage of AI technology experts.”
BY SONG KYOUNG-SON [firstname.lastname@example.org]