Survival of the deficit-ridden
The author is the deputy head of the industry 1 team of the JoongAng Ilbo.
I went on a business trip to Israel 10 years ago. It was the time when “Start-Up Nation” (2009), a book about Israel’s success, was popular. I toured the prestigious Tel Aviv University, the Technion and science parks across the country. I also met with the best Israeli “serial entrepreneur.” He introduced himself as an entrepreneur who started more than 20 businesses and sold two successfully. He was already a billionaire.
The secret to his success was unexpectedly simple. He said he came up with promising ideas and found investors. He also said that it was not his job to turn the idea into a product. As I thought the beginning of starting a business was presenting something functional, he seemed like an unreliable person. I still vividly remember my shock at the time.
Coupang went public on the New York Stock Exchange. A day after its IPO on March 11, the stock price went up by 40.7 percent from its $35 offering price to $49.25. The market capitalization surpassed 100 trillion won ($87.9 billion), the second largest after Samsung Electronics’ 494.3 trillion won. Some argue whether Coupang’s value is really greater than Lotte Shopping’s 3.59 trillion won or E-mart’s 4.98 trillion won and even bigger than Naver at 62.5 trillion won and Kakao at 42.7 trillion won. But a company’s value is determined by the market. If it’s too much, it will go down. If it’s doing well, it will grow even bigger.
Coupang’s IPO clearly tells us that we need to acknowledge the start-up and management methods the Israeli entrepreneur advocated 10 years ago. In fact, Coupang has never had a surplus since it was founded in August 2010. It endured with investors’ money despite a 4.55-trillion-won deficit. It sold goods and services below reasonable prices to increase the number of customers, and the loss was transferred to the investors. It is a method that existing corporations cannot follow. In the past, a company like Coupang would have died already. But Market Kurly, an online grocery service launched in May 2015, is preparing for an IPO and more companies are likely to go Coupang’s way.
Traditional retail giants Lotte Shopping and E-mart are perplexed. It is survival of the fittest despite the deficit.
Established companies may feel that it is unfair. But they need to compete with a new breed of businesses. It is hard to survive today with the mindset of “Is it possible to start a business without a complete product?”