Tech startups spring up
With help of incubators and accelerators, young entrepreneurs thrive in the 'lean startups'
By Kang Ye-won
Mobile application startups grew rapidly last year thanks to the widely available smartphone platform.
Founders of companies such as Kakao Talk and Ticket Monster have opened doors for incubators and accelerators to nurture young entrepreneurs who are now thriving in the lean business environment, challenging the current risk-averse culture.
Incubators and accelerators in the startup world refer to mentors of early-stage startups — they could be angel or venture investors — who give advice, hands-on training and funding. Although these terms are used flexibly, incubators, as the name implies, help startups begin from the ground up whereas accelerators allow them to speed up their growth.
In Silicon Valley, the concept of professional startup incubators and accelerators has been around for years.
Back in 2005, Y Combinator introduced a new funding model, for which it provides a three-month boot camp for early-stage startups, in order to prepare them for a pitch to investors on Demo Day. It became a must-see event in Mountain View, California that draws hundreds of prominent venture firms and entrepreneurs.
Across Europe, too, this type of startup support system is widespread more so than ventures. The London-based accelerator, Seedcamp and Startupbootcamp that runs in multiple countries are among the top players.
In comparison, the incubator and accelerator market is just beginning to bloom here.
A local incubator, Fast Track Asia, was launched this January by people close to Ticket Monster including its co-founder and CEO Daniel Shin and its early investors, Chester Roh, founder of ABLAR Company, and Justin Park from Stonebridge Capital. Dan Francis from Insight Venture Partners, a global venture capital firm, also sits on its board of directors.
Located in Yeoksam, Southeast Seoul, where most local startups are located, Fast Track Asia works somewhere in between an incubator and an accelerator in that the firm selects a team to build a service.
In return for small stakes of the company it funds, the firm offers almost everything from seed funding and financing to marketing to HR and IT support — and even business ideas, too.
In essence, what does the company do? “Operation and execution,” according to Henry Choi, the 28-year-old operations director of Fast Track Asia.
“When we select a startup team, it’s not about the idea, it’s more about whether they can execute, operate, work under stress and stay positive,” Choi said.
The five-month-old firm, which began with three board members at a dinner table early this year, has now grown to 45 employees and is currently aggressively hiring.
When it comes to a business idea, the firm keeps a list of more than hundred items that’s often benchmarked after successful cases from the U.S. and Europe and localized for the Korean and possibly the broader Asian market.
And for an idea to come alive, they strictly apply three criteria — it has to have a proven business model, a highly defined target customer and an adequate potential market.
For example, the firm’s first service called GooDoc, a mobile app that finds users prominent physicians in their neighborhood, targeted a possible $300 million out of the $8 billion health care market in Korea, specifically, smartphone owners in their 20s and 30s, residing in Seou2l. Since its launch on May 14, it has recorded 100,000 downloads with 5,000 registered doctors.
As Fast Track Asia’s first service was launched and tested on the market within a five-month time frame, the so-called lean startup culture is a universal trend thanks to a shift to mobile platforms.
“The startup boom really started last year as the access to mobile ventures including Ticket Monster became widely available,” said Kim Dong-ho, a co-founder of IDINCU, an open survey app provider, in a phone interview.
“And it sent a positive message to the players like incubators and accelerators that there is a return from investing in the early-stage startups,” Kim said.
And interest in Korean startups is spreading beyond local ventures. Just last Thursday, the Japanese mobile gaming company GREE acquired a Korean Web and mobile game start-up, Paprika Lab. The firm’s first app launched in 2007 and its latest game Hero City on Facebook, has more than 1.5 million monthly active users.
Another local incubator K Cube Ventures made three investments in the last two weeks in the 100 million won to 800 million won range (approximately from $85,000 to $685,000).
It was created by Kakao Talk’s founder, Kim Beom-soo, last April.
“Today’s incubators work at a much faster speed than traditional venture capitalists,” said Jimmy Rim, co-founder of K Cube Ventures.
Because they invest in very nascent start-ups with no specific services or portfolios, Rim said they only look for potential in people.
In a typical meeting with a start-up, about three people from the K Cube Ventures will chat with a prospective CEO in an empty room with a white board for about three hours.
“After having a discussion for that long, we can tell whether these guys have really thought about what they’re trying to do, what they’re passionate about, and we decide to go or not to go with them right there,” he said.
“The Internet giants cannot completely make the shift from PCs to mobiles, and if the lean start-ups seize the chance with speed and flexibility, they can even compete with the conglomerates. ... This is an opportunity that comes once in a decade,” Rim said.
“This is an exciting time for startups in Korea that a promising entrepreneur has nothing to lose, even if he fails, the experience will lead him to a better place,” said Rim, with the K Cube Ventures, during a mobile entrepreneurs conference, sponsored by Maeil Business Newspaper & MK and VentureSquare.
Koh Young-ha, a founder of Go Venture and one of the pioneers of Korean startups back in the 1980s, acknowledged the change of mood among the Z Generation or the Internet generation.
“Today’s young people have different DNA, I have respect for the risk-taking entrepreneurs at a time when everyone else is chasing stable jobs,” said Koh, during the conference.
However, he expressed concern about the stigma attached to a “failed” businessmen and women.
“Korea still lacks a social safety net so that once businessmen lose their credit rating, it’s not just themselves but people around them that also get hurt,” Koh said.
Despite the social hindrance, Rim with K Cube Ventures urged taking more risks.
“When someone else comes with a great service, I see people sigh and say, “God, I thought of that idea earlier. I suggest if you’re pondering an idea, now is the time to put it into action,” Rim said.
Kim Yeong-ho, 29, a co-founder and CEO of malang studio, a social alarm service provider, thrust himself into a mobile startup with five other people in April, 2011. The group of 20-somethings met through a government subsidized entrepreneurship program called Global K-Startup.
Since last September with 1 million won seed money provided by the Korea Communications Commission, the team has been testing the app on Android and iPhone and applied the market feedback. So far, the app has marked 900,000 downloads and 150,000 active users on the Android devices.
“What we need the most at this stage is the first round of funding and the non-technical support such as marketing and management,” Kim said, during a phone interview.
Kim and his team applied to Fast Track Asia early this year but didn’t win support, which nearly 600 other startups competed for.
“Now most of us are still in school, but once we graduate from college and if the business goes sour, we do worry about not having a place to go back to,” Kim said.
Besides uncertainty about the future, another challenge is a lack of global experience among the team members, he added. As they aspire to expand the service to other Asian countries, they feel the need to have talent that has a better understanding of those cultures.
Kim with IDINCU agreed that having a mix of talents from diverse backgrounds in terms of geographic region and experience is a plus.
“Diversity in the talent pool is increasing in the industry,” he said. “I see many MBA graduates come to startups for internships or people quit their jobs at conglomerates to become entrepreneurs.”