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S. Korean Venture Firms Have Relatively Short Lifespan
Low Survival Rate
S. Korean Venture Firms Have Relatively Short Lifespan
  • By Cho Jin-young
  • February 16, 2017, 03:30
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62% of venture firms in South Korea could not survive for three years during the past 10 years.
62% of venture firms in South Korea could not survive for three years during the past 10 years.

 

The Korea Chamber of Commerce & Industry (KCCI) announced on February 15 that 62% of venture firms in South Korea could not survive for three years during the past 10 years.

As of February 14 this year, the number of venture firms doing business in South Korea is 33,387. It was 14,015 a decade ago. The increase in the number has been led by startup infrastructure improvement. According to the World Bank, the number of steps and the length of time required for startup registration in South Korea decreased from 12 to two and from 22 days to four days between 2006 and this year, respectively. For reference, the latter is 5.6 days in the United States, a startup heaven.

Still, the ratio of venture firms in South Korea surviving for more than three years is as low as 38%. This is much lower than in the other OECD member countries such as Sweden (75%), Britain (59%), U.S. (58%), France (54%), and Germany (52%).

The KCCI attributed the lower ratio to a shortage of private-sector investment in venture firms and so on. Specifically, angel investment in South Korea totaled 83.4 billion won in 2014, no more than 0.3% of the angel investment made in the U.S. during the same period.

Listing is not easy for venture firms in South Korea, either. “Listing on NASDAQ takes an average of 6.7 years whereas that on KOSDAQ requires 13 years on average,” the KCCI pointed out, adding, “It is almost impossible to find an investor willing to wait for 13 years with more than 80% of corporate businesses in South Korea shutting down within 10 years.”

The attractiveness of South Korean venture firms as investment targets from the viewpoint of foreign investors is not that high as well. In a recent survey by the IESE Business School of the University of Navarra in Spain, South Korean venture firms’ charm as international investment targets was found to be 80% or so of that of their American counterparts.