A number of venture firms in South Korea are striving to achieve their dreams at this very moment. The Korea Venture Business Association (KOVA) is dedicated to helping them in their challenging journey. The following is the Business Korea’s recent interview with KOVA chairman Chung Joon.
What has been the focus of the KOVA since you were appointed as its chairman last year? And what is the current progress of its major projects?
The top priority of the association lies in the creation and enrichment of venture ecosystems in South Korea. We are trying to make improvements by listening to academic and research communities as well as our member companies. We are advising the government to eliminate unnecessary regulations in the industry and improve its venture firm certification system in pursuit of technological R&D and diversity instead of one based on loan guarantee following its policy for the soundness of venture firms. In addition, incentives for attracting talents into the industry have been beefed up in the form of substantial and effective stock option, tax law revision and the like. More and more platforms for M&A promotion are getting ready while loans with no guarantee have been made available for firms in their early stages. Although we have successfully dealt with urgent tasks to facilitate a second chance, we still have more things to do.
What are the member companies’ most common difficulties and complaints with the ongoing slowdown of the domestic and global economies affecting the business conditions of many small and medium-sized enterprises and venture firms?
There is no doubt that global economic conditions are deteriorating nowadays and its impact is affecting South Korean companies as well. Even in the Silicon Valley, which is the heart of startups around the world, rumors about restructuring and redundancy are continuing to go on. Fortunately, though, South Korean venture firms and startups are continuing to grow both qualitatively and quantitatively and take an important role in national economic development and employment. Still, one of their most common headaches is the supply of manpower. We need to come up with more incentives so that more talents can find their places in venture firms. In addition, we are working on more measures for the promotion of investment in fledgling firms in that investment in such firms still has a far way to go in spite of the adoption of various systems such as crowdfunding.
What are the remaining requirements venture firms should meet to globalize themselves? And how is the KOVA trying to assist in the globalization of South Korean venture firms?
We are planning to launch the Global Venture e-Platform to link venture firms and startups to supporting agencies abroad via professional coordinators. The Global Venture e-Platform is a type of around-the-clock intermediation platform introducing venture firms and startups wishing to expand their business abroad to global customers and patrons. The first phase of the project for key registration data management regarding enterprises and supporting agencies was completed last year and four intermediation-handling systems for intermediation handling, contract signing, follow-up management and statistical analysis are slated to be established before the end of this year. The International Network of Korean Entrepreneurs (INKE), which is a KOVA agency, will provide matching between startups and venture firms in South Korea and its members in 47 countries by dividing the members associated with its 78 offices in the 47 countries into different fields of business.
Dasan Networks, which is led by former KOVA chairman Nam Min-woo, is about to become the fifth-largest telecom equipment supplier in the world through its acquisition of Zhone Technologies. What are other examples of globalized venture firms comparable to Dasan Networks?
The examples can include IDIS, Humax and Celltrion. IDIS, the global number one security solution provider, is well known as a leading developer, producer and seller of digital video recorders (DVRs) as a key component in the image security market. Not settling for its title as the top premium DVR manufacturer of the world, it made inroads into the camera market in 2007 and has turned itself into a total security solution supplier covering CCTV.
Humax, in the meantime, developed the first digital video broadcasting (DVB) set-top box in compliance with the European standards in Asia in 1996. It has provided high-quality set-top boxes with a variety of built-in conditional access systems, ranking with industry leaders such as Pace, Philips and Sony.
Celltrion, which is engaged in protein drug research, development and production and produces different protein therapeutics such as anticancer medicine based on biotechnology and animal cell mass culture technology, has had its Remsima, the world’s first antibody biosimilar for the treatment of rheumatoid arthritis, approved in 2012. In addition, it is dominating the global antibody biosimilar market by developing and having a lot of follow-up products such as Herceptin, CT-P6 and CT-P10 approved. This company has sales networks and manufacturing facilities all around the world.
How many members does the KOVA have now? What is the current ratio of venture firms and small and medium-sized enterprises in South Korea to its economy as a whole? And what goals does the association have with respect to the number and the ratio?
According to the government’s in-depth survey report on the domestic venture industry for 2015, the combined sales of South Korean venture firms amounted to 210 trillion won or so last year with the average at about 7.2 billion won. For reference, the Samsung Group posted 248 trillion won and the SK Group recorded 165 trillion won in sales according to the Fair Trade Commission’s data released in April 2015. They recorded a higher year-on-year sales growth rate than large corporations and small and medium-sized enterprises. At present, approximately 700,000 people are working for venture firms, equivalent to 4.7% of total employees in the country. They are making a significant contribution to job creation, too. Specifically, the number of employees working for an average venture firm was about six times the number of employees working for an average small and medium-sized enterprise. In celebration of the 20th anniversary of the first venture firm in South Korea, the association came up with a new 10-year slogan for the domestic venture industry last year, which reads South Korean venture firms create new waves to have an impact on the entire world. When it comes to visions for the next 10 years, the South Korean government is planning to create at least three million jobs in the venture ecosystem while raising its GDP contribution to at least 50% and the ratio of venture firms doing business abroad to 70%.
What should be done for South Korea’s venture ecosystem to become comparable to the Silicon Valley?
Many people say we need to do what the Silicon Valley has done, but I believe we can outpace it by means of bold and systemic reform and innovation and we can be a role model of the Silicon Valley. In fact, South Korea has created one of the world’s best venture ecosystems back in 2000 in a different way than the Silicon Valley. At that time, the private sector led the fast growth based on a special act governing venture business and the number of venture firms topped 10,000, second only to the United States. South Korean venture firms caught up with their American counterparts’ 50-year accomplishments in just five years, and the KOSDAQ ranked second in the world. Even Israel and China were eager to imitate them. Now, however, things have changed and South Korea is trying to take a leaf from their books. Now is the time we need to have a mindset for setting up a unique ecosystem, rather than imitating the others, so that we can be a role model to be followed.