Plug and Play Tech Center is a long-standing Silicon Valley startup accelerator that has helped over 1,200 startups to become successful since 2006. Lately, it has been working closely with Korean companies in Silicon Valley to navigate the many pitfalls in creating successful enterprises. Business Korea was able to sit down with Jupe Tan, vice president of International Operations of Plug and Play International, for an exclusive interview yesterday during his visit to Korea. We asked him about the work that his company has been doing with Korean small and medium-sized businesses and the Korean startup scene as a whole. What follows are excerpts from the interview.
Tell us a little bit about your company for our readers.
We are a startup incubator/accelerator. But the Plug and Play business only started in 2006. Our investment activities in startups actually started much earlier. So we started investing in startups from 1998.
So you started as an angel investor?
Yes. You could consider us super-angels, if you will. The Amidi Group is our parent company. They are an Iranian-American group of companies. They moved out to the States after the Iranian revolution. By now they are second and third-generation Americans. The Amidis were one of the largest industrial families in Iran, so they did like manufacturing, rubber, shoes, plantations, things like that. When they moved out to the US, they actually lost most of their wealth. So they started with different things like commercial real estate, plastics trading, a five-gallon bottle water business, things like that.
And then Saeed Amidi, our founder, started Amidzad, our group’s investment arm. So they started investing in startups from 1998. Our first accidental investment was PayPal. It was kindof like a good hit for us. So, from the late ‘90s, the first Dot Com boom, to the mid-2000s, it was basically Amidzad that was doing ad hoc tech-related startup investments.
In 2006 Plug and Play started. At that point it was more like an infrastructure business, like flexible office space, data center, IT services and things like that. But we quickly became an incubator, and we are like an incubator/accelerator now. Along the way, around 2008, we brought our investment arm into Plug and Play, so today we invest directly from Plug and Play itself.
Our investment portfolio, from start ‘til now, probably has 250+ startups. We are early stage investors, so pre-seed to Series A, as little as US$25,000 per company, or to as high as half a million dollars per company. So we’ve had several good hits - PayPal was one of our portfolio companies, DropBox is one of our portfolio companies - so on the investment side we’ve done pretty okay.
In recent years we have accelerated the pace of our investments both in the US and internationally. I oversee our international business, so part of that involves bringing international startups to Silicon Valley where we work with the company, give them that immersion into the Silicon Valley ecosystem. And the other part of my work is expanding outside of the US. So today we have operations or activities in Singapore, Canada, Spain, Germany, and Russia. And we’re kindof seeing Korea as one of maybe 10-15 locations around the world where we want to establish something. So that is what has kindof brought us to this point.
So how long have you been active in Korea?
I would say we’ve been coming to Korea for the last 2 to 3 years or so. As you probably are aware, President Park is focusing on the Creative Economy and all that, so there has been a big public-sector push into supporting Korean entrepreneurs, tech startups, and all that. So I think we’ve been in the thick of it since last year. Last year was actually the first year we had Korean startups participate in our formal programs. We worked with about 30 Korean startups at Plug and Play. We invested in 2, and we are now investing in the third one. And that has been pretty good for us. At the end of the day we are looking for investment opportunities. So we see a very good startup setup coming out of Korea, and now that we have worked with them in the US, we do want to also explore whether there’s an opportunity for us to establish some kind of presence here. And also to start investing in Korean startups in Korea.
What made you decide to focus on Korea? Was it an invitation from the government?
I would say its both push and pull, if you will. We’ve been somewhat opportunistic in our international expansion. We’ve been established in the US for quite a while. We are doing quite well in California. Outside of the US we have a vision of establishing a Plug and Play presence globally. When we look at the world, we kindof see North America as where we already have a good presence. In Latin America we want to be in key markets like Brazil and Mexico. In the Middle East/North Africa, we want to be in Saudi Arabia, Jordan, Egypt, thereabouts. In Western Europe, we want to be in Germany, Spain, the UK; and in Central Europe maybe Poland and the Czech Republic. And then, coming to Asia, we have already started establishing a Russian presence.
In East Asia its China, Japan, and Korea. We are trying to figure out what’s the best way to enter some of these markets. So we have started doing a few things in these areas. We are using Singapore as a launchpad into the rest of Southeast Asia. And let’s say we have 10 to 15 tier one targets - Korea is one of them. We see good opportunity. I’m from Singapore, so I know that Singapore is a good test market for technology. You have good adoption, you have good education, literacy, etc etc. But Singapore is only 5 million people. When you look at Korea, its 50 million people, dense urban population, and even better technology adoption than Singapore. English is not as good, but in general there is the ability for tech startups to actually become fairly significant in Korea, before they go global. We’ve seen that in the past with NHN and Kakao being very successful, and now you have the next wave of startups coming out. So we’re trying to be part of that wave, to get in and to start looking at opportunities.
In your experience with Korean SMEs, have you found unique qualities that Korean businesses bring to the table?
We’ve actually seen a lot of positive change, as we call it, in the last 2 to 3 years. When we first started looking at Korean tech startups, there’s always been a good emphasis on design and technology. The gaming industry is very strong here. So everything looks really good. But to make a feasible business you need to have a good business plan and a revenue model and all that behind it. So we started seeing good design, good technology, good technical back ends – you have top universities and good engineering talent. Now we are starting to see better business plans come about as well. So I think the strengths have been design and engineering, but now we’re seeing that a lot of these startups are ready to jump to the next phase.
Have you seen any tangible effects of the Park Geun-hye administration’s focus on the Creative Economy? Would you consider yourself to be a tangible effect?
Absolutely, yes. To put it this way, many countries and many cities around the world are trying to take the lead to become the next Silicon Valley, or become creative, or encourage innovation and all that. But at the early stage, you need significant support at all levels to encourage innovation and the entrepreneurial mindset. And the government, fortunately or unfortunately, plays an important part. Because, if you look at where the startup ecosystem is today, you have active, large-scale events that are taking place every year, like the beLAUNCH conference. You have programs that provide seed funding and grants to very early-stage companies. The private sector is not going to do that for fun. So you kind of need that public sector support to support some of these activities. You have web sites today like VentureSquare and beSUCCESS that talk about tech news in Korean startups. In the initial stages these businesses are not very viable. In the US, for example, you look online and you have 10 to 20 web sites about venture businesses. But it takes a while for these businesses to become viable.
So we have definitely seen tangible effects. There have been a lot of programs launched. There have been a lot of outreach for exposure given to these up-and-coming companies. Many of them are going to fail, but that’s the name of the game.
What do you think about Kakao’s upcoming IPO?
They have done phenomenally well. And I think there’s a very unique opportunity in East Asia for Internet businesses. You ask why we are here - if you look at the US, you’ve read about Facebook acquiring Instagram for a billion dollars; Facebook offering Snapchat 3 billion dollars. And Instagram and Snapchat are not profitable businesses. They have tens or hundreds of millions of users - lots of eyeballs. But they’re not profitable.
And Facebook itself is probably not profitable yet.
Facebook makes a lot of money. I don’t know how profitable they are. But yeah, Twitter just IPOed. They make good money, but they’re not profitable. But you come over here and you look at Line and Kakao – their numbers are out of this world. And a lot of it comes down to the way Asians consume these types of products. The purchasing of virtual goods, virtual currency, stickers, playing games through the Line or KakaoTalk platforms... I think when they started it they probably did not imagine that it would be so big. But the numbers are incredible. And if you extend that into the rest of Asia, they have huge competition in China, etc. But it’s still early in the game, so to speak.
Line and KakaoTalk are both chat programs. One of the most popular chat programs on the other side of the world is WhatsApp. If you compare WhatsApp’s revenues to Line and KakoTalk, its not even close. They don’t disclose it, but that’s for a reason. They don’t make that much money. Whereas these guys are raking it in. So there’s a lot of opportunity here.
And the nature of these social games, social media – the nature of these products are that you always have somebody playing social games. Somebody’s always going to be playing the next Flappy Bird, for example. So somebody will always be playing Candy Crush, somebody will always be playing Flappy Bird, there will always be something.
Social media and gaming are very strong in East Asia, so we see a lot of opportunity in that. So hopefully we can get into the ecosystem and get involved, find some startups that we can invest in. We want to build that bridge between Silicon Valley and Seoul, or other regions around the world, and create a big, connected platform for innovation.