Seok Jong-hoon, head and assistant minister of Startup & Venture Innovation Office at the Ministry of SMEs and Startups, has been spearheading the government’s drive to foster the venture industry. He sought to create a private-led venture ecosystem through a series of policy initiatives, including the operation plans for the Centers for Creative Economy & Innovation released in February, measures for youth startup promotion disclosed in March and a package for innovative startup promotion released in May. He has also been pushing ahead with various measures to help small and medium enterprises and startups grow into global players. BusinessKorea sat down with him and asked about major results from his efforts to develop the venture ecosystem since taking office early this year. Following are excerpts from an exclusive interview with the assistant minister.
It has been about 10 months since you were appointed to lead the Office of Startup & Venture Innovation of the Ministry of SMEs and Startups. What has been and will be the key of the office’s policy?
We have come up with a wide range of measures to create a startup and venture ecosystem led by the private sector. Those include a private-centered venture ecosystem plan released in January this year, detailed operation plans for the Centers for Creative Economy & Innovation announced in February, measures for youth startup promotion disclosed in March and a package to support innovative startups for job creation released in May.
As a result, this year’s accumulated fresh venture investment reached 2.55 trillion won (US$2.27 billion) in September, up 47.3% from a year ago. From January to August, the number of newly established venture companies increased 6.4% year on year.
The policy tenet for next year will be the same. The private sector will play an increasingly important role in shaping the venture ecosystem and promoting the growth of startups and venture firms, with the government’s role limited to assistance.
Fresh venture investment hit an all-time high of 1.615 trillion won in the first half of this year and the amount of venture investment recovered totaled 1.858 trillion won from January to August, a year-on-year growth of more than 200%. Can it be said that a virtuous circle has taken root in the venture ecosystem?
The government has made a lot of efforts to expand venture investment. For instance, a 10 trillion-won innovation venture fund will be established by 2020. We have also introduced private-proposed funds to induce private venture investment. At the same time, the government has improved the KOSDAQ market and reformed the venture holding company system to facilitate exit from venture investment.
We believe a virtuous circle is taking root in the venture ecosystem. For the development of an ecosystem, exit channels are particularly important. The fact that this year’s recovery of venture investments more than doubled from last year is a very positive sign. We will continue to make efforts so that the virtuous circle takes firm roots, fueling a second venture boom in Korea.
A growing number of startups are created thanks to government support. However, it has been reported that the number of technology-based venture firms not large enough. Why is it so?
Quantitative indices such as the number of newly created venture firms are continuing to improve. However, it has been pointed out that there are not enough startups with high technological capabilities or founded by highly-educated engineers.
The main problem is that the personal cost of business failure is much greater than the reward of success in Korea. As a result, talented young people are not interested in starting a business. Furthermore, a second chance is still hard to come by for a failed entrepreneur. To address this problem, the government has abolished the joint surety system required for taking out a loan at financial institutions, while restoring tax exemption for stock options given to venture entrepreneurs and employees. Also, the government has been striving to create a startup culture in universities and state-funded research institutes. For instance, startup-related indices are reflected in its assessment of colleges and research institutes.
Despite the continued uptick in venture investment, it is hard to find venture companies that have the potential to grow into a unicorn. What are the reasons?
The reasons include Korea’s laws and regulations failing to catch up with new technologies and trends, startups’ tendency to focus on the domestic market, and their lack of global networks. In addition, the amount of venture investment per company is smaller compared with other countries, which means Korean venture companies do not have enough capital for growth. As of 2017, the average investment in venture firms was 1.9 billion won in South Korea and 10.6 billion won in the United States.
However, the National Assembly has recently passed a bill on regulatory sandboxes, allowing us to remove regulatory hurdles for venture companies. We will work with other ministries to ensure that startups can grow fast free from unnecessary regulations. We will set up the “Startup Park” and the Korea Startup Center to promote open innovations among companies. These measures will lay the foundations for the emergence of unicorns in Korea.
According to the Startup Trend Report 2018, Korean venture companies regard deregulation, not a lack of funds, as the most urgent task for startup ecosystem development. What is the ministry’s plan to address the task?
South Korea’s legal system is based on a positive regulatory approach. Laws specify things that people are allowed to do. You are not allowed to do things that are not specified by law. This means a company cannot roll out a new product or service if it is not specified in the law. On the other hand, companies in advanced countries can launch new products and services even if they are not specified in the law.
In this regard, what we need is a flexible regulatory system that allows entrepreneurs to bring their new products and services to market unhindered. Regulating their products and services is necessary only when they are found to have problems
In September this year, the National Assembly passed amendments to laws on industrial convergence, ICT convergence and specialized regional development to facilitate the introduction of regulatory sandboxes. Down the road, we will cooperate with other ministries to ensure that startups can enter new industries without being hindered by regulations.
What is the current status of startups’ advancement into overseas markets and how is the ministry supporting their entry into global markets?
We are currently pushing ahead with various measures to help small and medium enterprises startups turn themselves into global players. We are providing overseas marketing assistance to SMEs, which is tailored to their level of globalization. We are also operating a global acceleration program aimed at globalization of startups in their initial phase. We select startups in cooperation with foreign accelerators and provide each of them with 30 million won for overseas business expansion.
We are planning to establish the Korea Startup Center and provide a place where foreign accelerators and local startups can meet and build networks.
The South Korea-France Startup Summit was held during President Moon Jae-in’s recent visit to Europe. What are its significance and achievement?
We have confirmed the need for more exchanges between South Korean and French startups. France has one of the most developed startup ecosystems in Europe. French officials shared with us France’s effective startup programs like “La French Tech” and “Station F.” We also discussed cooperation in organizing startup support events.
Four MOUs were signed at the startup summit, including that between BPI France and the Small and Medium Business Corporation of South Korea. We have gained a foothold for South Korean startups’ expansion in France and Europe. Twelve Korean startups carried out IR pitching, getting an opportunity to build networks with French startups and participate in incubation programs.
This year’s Startup Festival takes place in Busan from Nov. 8-10. What is it going to be like and what effects do you expect from it?
The annual Startup Festival celebrates its 18th anniversary this year. This year’s event will be the first to be organized outside the capital area. While past editions of the festival had been indoor exhibitions largely for businesspeople, we are planning to make this year’s event an outdoor festival primarily for ordinary people. The three keywords for this year’s edition is “participation of ordinary citizens,” “festival” and “global.” We have invited many foreign experts and entrepreneurs.
The festival will offer about 40 events including startup IR sessions, investment consulting meetings, lectures, forums, product exhibitions and performances. They are going to be very enjoyable and interesting to see and experience.
We hope that the upcoming event offers a space for local and foreign startups to build networks with global leaders, investors, government agencies and private-sector participants. We also hope that the festival inspires more people to take on the challenge of launching a startup. Lastly, we would like to see it spark off a startup boom in Busan and other provinces.