Starting a business in Korea is an administrative nightmare for international entrepreneurs

K-campus

Published: 04 Sep. 2022, 07:00 Updated: 03 Mar. 2023, 17:53

Starting a business in Korea is an administrative nightmare for international entrepreneurs

Marta Allina, bottom center, poses with participants at the Busan Startup Weekend Big Data for Good hackathon. [MARTA ALLINA]

Launching a business is rarely easy and doing so as an expat in Korea comes not only with financial hardships but also with the ever-changing and complicated immigration laws foreigners must abide by to stay and legally start a business in this country.

In recent years, the Korean government has introduced many programs to attract foreign talent. Among these programs are the K-Startup Grand Challenge, which provides various benefits, from generous funding to project space, and the Overall Assistance for Start-up Immigration System (Oasis) program for tech startups, which offers seminars in Korean business laws and grants a 2-year D-8-4 visa upon the program’s completion.

But despite the government’s efforts to foster a nurturing environment for aspiring business owners, foreign entrepreneurs believe more help is desperately needed.

Finding investors

Gulmira Yussupova, a 26-year-old woman from Kazakhstan, established Search Seoul, a company based in Seoul that exports Korean skin care products to Central Asian countries. According to her, the key to setting up and making a profit in Korea is finding a niche that makes you stand out.

Gulmira Yussupova

After graduating with a master’s degree in international commerce from Seoul National University, Yussupova applied to major Korean conglomerates but did not find much success, so she decided to try something different.

“I thought that even if I had to leave Korea, at least I could say I did everything I could do,” said Yussupova. “So, I decided to start my own venture.”

She saw an opportunity to make a profit by introducing her potential Korean investors to an unexplored yet promising market. The customer base in Central Asia was interested in K-beauty, but did not have easy access to the best products.

The Korean government is also interested in promoting Korean products and content abroad, so immigration officials had an incentive to support her efforts. This formula worked, and the company is now steadily turning a profit. However, finding initial funding in Korea was extremely challenging.

“It’s hard to convince Korean investors, even more so because I’m a foreigner,” she said. “They believe that at some point, a foreigner may just leave Korea.”

Yussupova found her first Korean investor, who subsequently became her mentor, during her early days working at a startup, and from there she was later able to find some more investors back home in Kazakhstan. For most people, it depends on luck, your persuasion skills, knowledge of Korean and the size of your network. In Yussupova’s case, it was all of those things combined.

Yussupova is still actively searching for potential Korean investors. Her eyes are set on D.CAMP, a Korean startup incubator. Based on the experience of her friends who are already a part of the organization, the incubator is catered more toward Koreans and has yet to produce a successful foreign startup. Yussupova wants to join them and become the first foreigner to succeed.

Social networking

Marta Allina

Marta Allina, a 34-year-old social entrepreneur from Poland, strongly recommends all foreigners who are looking into opening a business in Korea study the language.

“Tell all of your Korean friends that from now on, you’re not going to speak English. You’re going to speak in Korean,” said Allina.

After graduating from Yonsei University with a masters in business administration, Allina worked in the Networks Business division of Samsung Electronics for around four years and then quit due to burnout.

“I had a typical mindset that if you want to be successful, you should be working for a good company, like LG or Samsung,” said Allina. “Long story short, I turned into a vegetable.”

But the experience of working at the conglomerate did open up opportunities for her even after she quit.

While briefly working as a bartender after quitting Samsung Electronics, she encountered many CEOs of startups. Upon learning her background, the CEOs asked her to do mini global marketing freelance jobs for them. Eventually, she found herself naturally slipping into the Korean startup scene.

But for most foreigners trying to start business here, networks don’t come so easily due largely to language and cultural barriers.

According to Allina, although the government and investors understand that it is not about the countries the startups are from but rather about technology and competency, they still prefer Korean startups to foreign ones.

For those wishing to expand their network in hopes of finding investors and like-minded people, Allina suggests being on the lookout for hackathons, events where designers, developers, or anyone involved in the startup ecosystem gather to discuss ideas, collaborate on projects, and present their prototypes.

The Korea International Trade Association (KITA), a major local business lobbying group, and Seoul Global Center, a multilingual governmental organization providing foreigners with various services including business consulting, are also helpful to reach out to.

In fact, Allina’s business is centered around helping young foreign talents start their business here in Korea.

“A healthy startup ecosystem should have entrepreneurs at the center, with the government, academia and accelerators supporting them,” she said. “But in Korea, the government dictates what happens in the startup scene. It limits the potential this economy has to offer.”

She established Seoul Startups, one of the biggest international startup communities in Korea with more than 3,000 members, with the hope of becoming the link between the Korean government and other players while influencing the ecosystem to become more foreigner-friendly.

According to Allina, the community offers insight into the Korean startup scene from other foreigners who already have plenty of experience.

Jonathan Moore hosts a startup pitch event at the 2020 ASEAN-Korea Startup Week. [JONATHAN MOORE]

Obtaining the right visa

Even with the right networks and investment, what remains a great hurdle for every foreign entrepreneur in Korea is the country’s legal infrastructure, which is often confusing and inconsistent.

For instance, there are many types of visas that allow foreigners to open or work for a business, all with different requirements and periods of stay. Among them are the D-series investment visas, the F-series for families and long-term residents and the E-series for various types of employment.

However, it is not simply the sheer number of options that makes visa issuance a traumatic experience, but the process of getting it done.

Jonathan Moore, a 39-year-old entrepreneur from the United States, graduated from Seoul School of Integrated Sciences & Technologies with a master of business administration and has been living in Korea since 2006. During his stay, he built a long career of advising and co-founding multiple business entities here.

Jonathan Moore

Together with a Korean business partner, Moore first delved into the Korean startup scene by launching BeNative, a learning app that teaches business English to the Asian customer base.

Later he moved on to other companies, utilizing all of his experience in marketing at Iyuno-SDI Group, a media localization service provider that creates subtitles and dubbing for Netflix and Disney+. At G3 Partners, a startup marketing agency based in Korea and Singapore, he co-founded Roborus, a startup aiming to provide better customer service through AI and facial recognition technologies.

Now, he wants to start his own company. But even with his career background, visa problems are making it difficult.

“There’s the investment visa, but you need to put down a hefty sum of money," said Moore. "The F-5 visa for long residency has become out of reach for most people. I may pursue the investment visa soon, actually. I know someone who did it recently. They had to put down 500 million won and their transfer fees were about 100 million won. I can’t justify losing so much money on a visa to live in Korea.”

The only solution for him right now is to renew his E-7 visa every year. Each time that he must renew it, he needs to request documents from the company he is working at. He wishes there was a more accessible visa option for foreigners who have been living in Korea for more than five years, but he has not found a workaround for this issue yet.

It is up to each person to figure out the most suitable visa for their case. The D-8-4 visa is specifically aimed at startups, which requires you to have a bachelor’s degree and follows a system that allocates points depending on the documents you provide, such as various intellectual property rights, but it has its limitations. For instance, it only supports people with a tech background when there are a lot of entrepreneurs who don’t have an engineering degree.

“The officials don’t want to leave you with no answers, so they will give you information even if they don’t know the answer,” said Moore. “The information published on various websites in English is often outdated.”

Other entrepreneurs understand how difficult it is to deal with the immigration office.

“It all comes down to the immigration officer you get,” said Yussupova. “Say two people apply for the same visa. One of them may be asked to submit more documents while the other one gets approved even though the two have similar cases.”

The smallest difference in the education background may affect your chances of getting your visa application approved. Yussupova, who got her master’s degree from a Korean university, knows people who did not get their applications approved because they got their master’s degrees outside of Korea.

“I believe the government wants to foster a better system, but they need to get better advice and talk to more foreigners who actually experience these issues,” said Moore. “There needs to be a rehaul of the application procedure for long-term residents.”

“At the end of the day, it is Korea that is going to suffer if the immigration laws discourage entrepreneurs from coming here,” said Allina.

Right now, the foolproof course of action to go through a slightly smoother visa application process is to hire a lawyer to monitor all changes. Other than that, foreign entrepreneurs can only hope that the Korean government reconsiders its immigration policies.

☝What to consider before opening a business in Korea

What kind of visa do I need to open a business in Korea?

You can apply for a D-8 investment or a D-9 international trade visa. There are also F-5 long-term residency and F-6 marriage visas that allow people to operate a business, but the former has an especially tough application process and the latter requires you to be married to a Korean citizen.

Currently, an F-2-7 visa also allows you to start a business, but it is currently under review and that may change. In 2021, the government faced backlash over policy changes to this visa as immigration briefly stopped recognizing businesses owned by foreigners holding this visa if they did not earn a certain annual income. The changes were rolled back because many foreign business owners signed a petition against this rule change, but there are still talks it may be reimplemented this year.

All of these visas have different requirements and periods of stay. Make sure to frequently contact the immigration office for updates if you are looking into any of them. Changes to these visas often escape public attention because of how frequent and minor they can be.

How do visas vary depending on the type of employment?

If you are looking into specifically opening a business in Korea under your name, the above-mentioned visas will allow you to do so. If you are not interested in running your own business but want to take a senior role at a local company, an E-7 visa may be another option for you.

With an E-7 visa, you are assigned to a specific role within the company. Korean companies headhunt for foreign talent to boost their competitiveness and typically offer this visa first. If you provide sufficient paperwork as requested by the immigration office, you can make it work so that you are allowed to perform the responsibilities of an advisor, director or co-founder. Your field of expertise should match the company’s business. This visa does not allow you to own a business under your name.

How long does it take to get these visas approved?

It depends on each case. The minimum waiting time is usually three weeks, but it may also take you over a year to get your visa approved. The immigration office needs time to review your finances, business model and all related documents. The officers may request more documents without immediately specifying what they are and without telling you all of them initially.

How much money would I need to get my visa approved?

The amount of capital you need to invest can range from 100 to 500 million won depending on the type of visa, which is primarily what makes applying for these visas so challenging. These numbers are simply unattainable for most budding entrepreneurs, and even if you have that much money, transferring it from your home country to Korea will result in heavy fees.

Do I need to hire Korean employees?

You need to hire a minimum of three Korean citizens for at least six months.

Will having a bachelor’s or master’s degree from a Korean university raise my chances of getting a visa to start a business?

Although officially it does not matter which university you graduated from, a degree from a Korean university may bring you some benefits compared to applicants who graduated from universities abroad during your visa application process.

You can also gain extra benefits for some visas if your university falls into the top 500 universities on the QS World University Rankings.

BY ARUZHAN AIMANSHINA [aimanshinaa@gmail.com]