Bleak Outlook
The Korea International Trade Association announced on May 25 that the number of startups in Korea increased 12.1 percent from a year earlier to 84,697 last year. But many of them are failing to overcome Death Valley, which can be defined as their third to seventh years when they face difficulties in terms of financing, market penetration, and other problems.
In Korea, the ratio of those startups surviving their third year stood at just 41.0 percent in 2013, which was the lowest among 17 OECD member countries. The percentage was the highest in Luxembourg (66.8 percent), which was followed by Australia (62.8 percent), Israel (55.4 percent), the United States (57.6 percent), and Italy (54.8 percent).
In Korea, three-fourths of newly-established corporations went out of business within an average of five years, and the ratio of those continuing with their businesses was limited to approximately 8 percent. This implies that it is relatively easy to get into the market, but competition is very intense, and many startups fail to realize the economy of scale.
Sixty-three percent of startups in Korea were found to be those producing little added value, while the ratio of those securing an opportunity was only 21 percent. The percentages were 13 percent vs. 58 percent in Israel, 26 percent vs. 54 percent in the United States, 30 percent vs. 53 percent in Britain, 22 percent vs. 46 percent in Japan, and 42 percent vs. 43 percent in China.