454 Venture Firms Turned Over 100 Billion Won Last Year, on Average 18 Years after Founding

The number of venture businesses that recorded sales of 100 billion won (US$97 million) last year is seven times as high as the figure for 2003. Those startup ventures are widely acknowledged to have improved their profitability and created jobs with aggressive investment in research and development (R&D) and their wiliness to penetrate overseas markets. However, the number of new venture firms that turned over 100 billion won in 2013 did not increase much. Therefore, measures to foster venture businesses are urgently needed.

According to an analysis by the Small and Medium Business Administration (SMBA) and the Korea Venture Business Association (KOVA) on July 21, the number of startup ventures that surpassed 100 billion won in sales last year was 454, up 56 companies from a year ago. The number is a 6.7-fold increase from the 2004 figure. Those firms have operated for 21.7 years on average, and it took 16.8 years on average to achieve more than 100 billion won in sales.

The number of venture businesses that posted sales of 100 billion won increased from 68 in 2004 to 454 in 2013, and the figure for new entrants surged to record highs in 2007 with 59 firms, accounting for 39 percent of the total. After that, however, the number dropped each year, and the figure only represented 12 percent of the total last year.

Sales of those venture firms rose by 8.2 percent, far higher than the 0.6 percent of large businesses or 4.6 percent of small and medium-sized enterprises (SMEs). Their operating profit margin was higher than other business types. The rate of their return on sales was 6.9 percent on average, higher than 4.2 percent of SMEs, and 4.6 percent of large companies. The number of employees working at those venture businesses grew 3.1 percent to reach 166,000 people in 2013, exceeding the figure for small and medium-sized manufacturing companies (a 1.4 percent year-on-year increase), or large corporations (a 2.1 percent year-on-year gain).

The SMBA attributed the reason for the fact that start-up enterprises grow very rapidly and create many jobs to technological innovations through their continued investment in R&D and efforts to secure researchers, along with their strategy to enter the global market.

In fact, the proportion of R&D to sales for those venture firms was 2.7 percent on average, more than twice as high as the figure for SMEs (0.7 percent), or large companies (1.2 percent).

There is a big difference in exports as well. 78.2 percent of venture businesses with sales of 100 billion won reported 58.7 billion won (US$57.3 million) in exports, which made up 25.9 percent of the total sales. The ratio is higher than the number for large corporations (17.4 percent) or SMEs (14.0 percent).

Han Jung-hwa, head of the SMBA, explained, “The growth of venture firms that achieved 100 billion won in sales is largely attributable to technological innovation and overseas expansion.” He concluded by saying, “It is necessary for us to strengthen our support for technologically innovative companies to become venture firms in that category and to make full-scale expansion into overseas markets.”