No. of venture firms plunges

By Kim Tae-gyu

An alarming number of domestic venture start-ups went bankrupt during the latter part of last year, an unprecedented repeat of the high-tech bubble burst in the early 2000s.

The Korea Venture Business Association (KOVA) said Tuesday that venture firms reached an all-time high of 26,996 as of the end of last April but the figure went down by 400 in June, 126 in September and 228 in December.

During the May-December period, the overall number decreased by 848, which starkly contrasts with the abrupt increase of 2,351 during the first four months of last year.

``The number of venture companies jumped by 22.15 percent in 2005, 25.54 percent in 2006, 14.71 percent in 2007, 9.89 percent in 2008, 22.67 percent in 2009 and 30.35 percent in 2010,’’ a KOVA official said.

``In other words, the increase rate has been higher than 20 percent during the past several years excluding 2007 and 2008 when the global financial crisis hit the world market. Something happened in late 2011.’’

Worse, people with better educational backgrounds shunned launching new firms as amply demonstrated by the falling proportion of venture entrepreneurs with degrees from graduate schools.

KOVA picked a total of 2,000 sample venture companies midway through last year and found that only 9.4 percent of their chief executives had Ph.Ds. and 18.2 percent had master’s degrees.

The rates were 13 percent and 18.7 percent in 2009, respectively.

``The proportion of venture start-ups with new technologies was 6.7 percent in 2009 but the figure plunged to 4.2 percent last year,’’ the official said.

``The venture ecosystem is suffering in terms of both quantity and quality. We think that the social atmosphere of seeking only stable cash cows is responsible for the lack of entrepreneurship and the resultant reduction in the venture spirit.’’

KOVA also pointed its fingers at some large-sized conglomerates, which tend to scout high-quality personnel from the ventures.

``We are required to come up with a fresh societal incentive system under which venture entrepreneurs can pursue their dreams without worrying too much about failure,’’ a Seoul professor said.

``Otherwise, the venture start-ups might continue to plummet, which would be very bad news for Korea as we have to depend on new technologies in order to keep our growth momentum.’’

He urged the government to produce a set of policies to prop up the overall venture eco-system.