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03 JUN 2018

Why Startups are coming to Korea for business?

TOPIC : Business in Korea Incorporation Taxation & Accounting Living in Korea

Why Startups Love to do business in Korea?

Before 2015, there had been an all-time low, in terms of coming up of new enterprises, in South Korea’s startup landscape - the last two $1 billion worth unregistered businesses were honored in 2015. However, a limited number of significant startups have been coming up rapidly as the economic environment gains maturity.

Restaurant delivery startup Baedal Minjok, with yearly revenue growth of 80% in 2017, and financial technology startup, Viva Republica, with a turnover of $1 billion in monthly transactions, are already underway to turn into billion-dollar corporations. The technology-based company, Hyperconnect and fresh-food supply startup, Kurly, might want to transform into a public limited company.

Around the same time, a large number of investments in cyberspace startups, as early as 2016, are finally coming up with results, with just a few VR startups stepping into the market. And in spite of the lack of clarity about cryptocurrency rules, blockchain startups are increasing in number.

Start-ups Driving Economic Growth in South Korea

As South Korea’s economy takes deep breaths, one wonders why the focus is more on the country’s rather few flourishing tech start-ups. The Korean Government is determined on building a start-up ecosystem within and around Seoul that can generate employment and drive development. This is because of conglomerates, such as Samsung and Hyundai that have been leaders of their domain since a long time, are losing the competition to Chinese rivals.

Officials have already put in place policies to boost funds for startups. In 2018, an all-time high figure of venture-capital funds, amounting to 3.4tn WON ($3.04bn), was made available for doing business in Korea. However, for the larger part of the tech community, large scale economic reforms and efforts to liberalize would be required for plans to be successful.

According to President of the Korea Startup Forum, if start-ups are able to expand and flourish, they would be in a position to create numerous employment opportunities. This would benefit the youth and simultaneously upgrade the nation’s economic structure.

Start-up has since long been a keyword for South Korean functionaries, who aspire to make Seoul an Asian Silicon Valley. However, they have a history of being dependent on the large conglomerates, known as chaebol. As the manufacturing sector experiences a tough time, policymakers have no choice but to do something about it.

In September 2018, officials launched the first quota of investment exceeding $9bn-plus, in the form of funds to promote start-ups in the areas of artificial intelligence to aircraft.
One month after this strategy, came a proposal of extensive financial market reforms. This was aimed at easing rules to make finances easily accessible for doing business in Korea. In South Korea, just 2 percent of funds churned out by small businesses makes it to the capital markets.

The average investment is only WON1.7bn ($1.5m) — approximately 11% of the sum, on an average comes from US start-ups and less than 8% of what Chinese companies produce, as per the Financial Services Commission.

The government of Korea is keen to have more private players invest in start-ups. It seeks investments from rich start-ups in other start-ups and conglomerates to invest in start-ups by way of mergers and procurements. The control of conglomerates over the country’s economy has been a bone of contention for new companies.

Extremely prosperous and once supported by the government, the chaebols traditionally set up their own associations cut into the competition and cut out start-ups, rather than procuring cutting-edge technologies. The major challenge that faces the inexperienced start-up scene is in the form of numerous legislations. These cause a nuisance to the functioning of small enterprises.

Korea does have strict rules pertaining to ride-sharing, healthcare, and fintech that make it difficult for big multinationals to invest in the domestic market.

Towards the latter part of 2018, a pack of regulations was launched to facilitate start-ups to apply for a two-year waiver from the rules, so that their products could be tested in the market. To boost the growth of startups, the government is consistently dissolving all hurdles and painful regulations.

Doing business in Korea, Korea Company Incorporation, Korea Startup

The Benefits of having a Startup in Korea

Doing business in Korea has its unique advantages, let us take a look at them:

· Ample government support

· In-depth internet and mobile penetrability (specifically 84 and 83 percent) is one of the best worldwide. Korea’s technology infrastructure is futuristic, as compared to other developed markets.

· Korea’s population density: Seoul stands for 50% of the whole nation’s 50M population. This facilitates the masses to absorb and disseminate modern technologies too fast.

· South Korea has the maximum credit card perforation in the world, with an average of 5 credit cards per individual (this beats the average of 2 in the US)

· Korea emerges as the World’s Mobile Commerce Powerhouse: 28% of Korea’s total online sales are in the form of mobile commerce.

· Young entrepreneurs of today, the majority of who have completed their studies outside Korea, are launching startups that are keen on global expansions.

The Korea Advantage

Korean culture

The popularity of South Korean culture is rising by leaps and bounds every year. Korean cosmetics are in great shape, as a result of booming Korean startups such as Memebox. More than 8,000 K-Beauty brands are doing business in Korea.

Korean K-pop has become larger than life and the credit goes to groups like Big Bang, 2NE1, and EXO. Additionally, the Korean IT infrastructure is among the finest in the world. The nation has excellent internet penetration and the majority of the Koreans use smartphones. Koreans get used to new technologies very quickly and early fashion gurus.

Korean Fintech

Fintech is doing big-time in Korea, as the country is on the way to lead cryptocurrency exchange and services. Korea has all it takes to become a world leader in the global financial centers. It won’t be long before Seoul becomes the FinTech hub of Asia. Among the best Fintech startups in Korea is Viva Republica; it is known for developing the Toss a mobile payment tool that endeavors to enter the international market after being successful in Korea.

Korean consumers

Korea has a splendid consumer market. Most of their customers belong to the middle class. Smartphones and credit cards are commonly used by almost every Korean. Their GDP per capita is at its peak, supported by excellent wireless penetration, superbly designed infrastructure, and quick LTE. A blend of these components combines to form a great domestic market to nourish your startup. This is precisely why Korea has the capacity to help companies and startups in Korea that play only in the domestic market. Fifty million Koreans are proficient in new technologies. This was the primary factor that led Korea to be able to sustain an extensively scalable business. Companies such as Naver, Coupang, and Ticket Monster are perfect instances of exclusively Korean market players.

Government Support for Startups in Korea

The Korean government has rolled out several programmes to support foreign entrepreneurs looking to do business in Korea. From 2012 to 2013, the startup landscape in Korea was consistently steady, despite the enthusiasm displayed by foreign entrepreneurs to make the most of foreign startups.

Korea is fast turning into a center of activity for startups. The same holds true for global businesses, especially taking into consideration the schemes rolled out by the government and its supporting agencies. This is the very reason that a few of these supports are now being designed and directed at foreign startups in Korea.

Creative Economy Campaign

Since 2015, there has been a lot of focus on the catchphrase ‘Creative Economy’ (a step by the Korean government to enhance employment generation, breaking new ground and boost economic growth). With the dawn of the 4th Industrial revolution, Korea has been directing the majority of its investments in technological infrastructure and logistics.

Also, the country is building a favorable ecosystem for startups to prosper. From time to time, a rise has been evident in startup events, startup accelerators, angel investors, co-working spaces, venture capitalism and incubator programmes.

More than anything else, there’s been a tremendous surge of funds that have gone into developing startups. Consequently, the Korean government calls for foreign startups to begin their entrepreneurship expeditions in Korea.

Additionally, Seoul has emerged not just as an attractive tourist getaway place, but also, foreign startup entrepreneurs. Due to this, it is imperative to shape programmes that back foreign startups in Korea and simultaneously guide potential entrepreneurs.

The K-Startup Grand Challenge of 2018

The Korean government has made a lot of investments in startups the world over by way of a yearly competitive accelerator program, organized in Seoul. This programme was named as the K-Startup Grand Challenge. This was a wonderful worldwide platform catering to everything it takes for startups to help them enter the robust Asian market. The following points are persuasive enough for you to consider taking up this challenge:

State-of-the-art R&D Labs within Easy Reach

The challenge brings world-class prototyping, testing conveniences and professional guidance within easy reach. The Pangyo Techno Valley is an innovation hub where SMEs and startups can exchange information between themselves and technology research institutes and large, global companies.

And the Winner gets USD 100,000

A grant of USD 100,000 (110,000,000 KRW) goes to the winner, along with USD 40,000 (44,000,000 KRW), USD 20,000 (22,000,000 KRW) and USD 6,000 (6,600,000 KRW) for the first, second and third runners up respectively. These prizes are in Korean currency.

USD 22,727 Grants for 40 Top-of-the-line Startups

All the finest 40 startups selected, are eligible to receive total funding of $22,727 to settle in Korea, subject to how they perform on the 'Demo Day' and based on the evaluation of their settlement.

A Brand-new, Startup Campus with a Perfect Location

The Global Startup Campus is cleverly designed at a distance of 14 minutes from Gangnam – Seoul’s affluent and swanky trade center.

Specialist Mentoring

An opportunity to get mentored by a few of the world’s best technology firms having expertise in offering a global arena to startups and SMBs.

Business Alliances

Through this challenge, you can reach out to Korea’s top tech companies having technologies right from cellular phones and software to semiconductors.

The Programme Takes Care of Your Running Costs

Each of the 80 startups in the programme has been allocated around $11,130, in equal installments, over 3.5 months, to cover their living expenditure.

Prospects for Extra Investment

Startups can reach out to VCs and investors who might be keen on investing in them. The programme’s accelerators may also invest their capital in startups with considerable potential.

The Working

After the regional audition and document screening are successful, 80 teams will be called upon to work at the Pangyo Startup Campus, equipped with a tough system that supports startups, in addition to mentoring, connecting with regional enterprises and even support for the settlement. Startups and entrepreneurs on the way to do business in Korea qualifies for fast track visas.

The top 40 teams of the K-Startup Grand Challenge were provided with funds for extra 6 months to live in Korea and formally initiate their business there.

The two preceding editions of the programmes saw businesspeople and startups get grants of more than $26 million in all. Also, they succeeded in signing 46 contracts, as well as, above 300 partnerships and MOUs.

Towards a Billion Dollar Future

The Seoul Metropolitan Government has made its plans public, to invest more than $1 billion in blockchain and fintech startups by 2022, as per the formal announcement issued in February 2018.

The South Korean capital’s government has decided to use the “Seoul Innovation Growth Fund” for startups that have encountered a variety of problems related to investments in Series A, funding rounds. The fund that was rolled out last year basically targets startups concerned with the blockchain and fintech domain.

The Seoul Metropolitan Government announcement stresses that the average investment for each company in London and Silicon Valley is around $6-7 million, whereas in Korea, it approximates to just $1.1 million.

Conclusion

In just 60 years, South Korea has achieved a mind-blowing success. From an impoverished country at the time of the Korean War, South Korea has come a long way and is now an economic dynamo.

South Korea has been consistently investing in programs to boost the Korean startup ecosystem. The spirit of startups has repeatedly surfaced as the primary force driving employment generation and economic development. South Korea has leveraged its own extraordinary assets to build and make innovative startups a super success.

As far as they continue with their endeavors to bring in increasing numbers of foreign entrepreneurs into Korea, the higher will be the chances of Korean startups to conquer the international market. The world has acknowledged Korea’s potential, backed by the belief that the Korean startup ecosystem will continue to go great guns.

Doing business in Korea and at the same time, the country’s forte of producing global startups can result in nothing less than producing billion-dollar market value companies.

Are you interested in setting up a company in Korea? Contact us now.

You can also download our latest guide on doing business in Korea.

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Korea Company Formation: Your Essential Guide to Expansion

In the age of global connectivity, South Korea stands out as a beacon of technological advancement and economic prosperity, offering promising opportunities for international businesses. Establishing a subsidiary in this market goes beyond mere access to a thriving consumer base—it serves as a gateway to a hub of innovation. However, venturing into this realm requires meticulous strategic planning and a deep understanding of the local business environment. This guide provides a comprehensive overview of the key stages in the process of Korea company formation, ensuring a smooth and compliant entry into one of Asia's most dynamic markets. Navigating the Registration Process Launching a subsidiary in South Korea begins with the pivotal step of registration. This involves selecting the appropriate legal entity, such as a joint-stock company (Chusik Hoesa) or a limited company (Yuhan Hoesa), each carrying distinct legal obligations and implications. Thorough documentation is essential, including drafting articles of incorporation, outlining business objectives, and compiling a list of directors and officers. These documents undergo scrutiny by the Korean court for approval, establishing the subsidiary's legal identity and facilitating subsequent operational processes within the framework of Korea company formation. Choosing the Right Legal Structure The choice of legal structure for your South Korean subsidiary significantly impacts control, liability, and financial flexibility. While larger enterprises may opt for a joint-stock company for scalability and fundraising capabilities, smaller businesses often prefer a limited company for its simpler structure and reduced reporting requirements. Making this decision necessitates expert legal counsel and a clear understanding of long-term business objectives and strategies. The selected legal structure ensures compliance with South Korean regulations and aligns seamlessly with the parent company's global operations within the context of Korea company formation. Navigating Financial Regulations and Banking Practices Compliance with South Korea's financial regulations is vital for the successful establishment of a subsidiary. This involves adherence to foreign exchange controls and understanding capitalization requirements. Establishing a corporate bank account in South Korea is crucial for managing transactions, payroll, and other financial activities. Additionally, transferring initial capital in accordance with South Korean investment regulations demonstrates the parent company's commitment and serves as a crucial investment for the subsidiary's future endeavors. Navigating these financial intricacies demands careful planning and consultation with experts well-versed in the local banking and investment landscape within the framework of Korea company formation. Establishing Real Estate and Infrastructure Presence Establishing a physical presence in South Korea is a complex endeavor that involves strategic decision-making regarding location, infrastructure, and real estate. Factors such as market accessibility, proximity to suppliers and customers, and the local labor market must be carefully considered when selecting a suitable location. Additionally, a comprehensive understanding of South Korean real estate law, including lease agreements and property rights, is essential. The setup phase also involves building robust infrastructure, such as communication systems, office space, and technology networks. This phase is crucial as it not only demonstrates the operational capabilities of the subsidiary but also reflects its commitment to long-term growth within the South Korean market as part of the Korea company formation process. Conclusion Venturing into establishing a subsidiary in South Korea is a strategic endeavor that, if executed effectively, offers significant rewards. Success requires a deep understanding of the Korean market, meticulous planning, and strategic execution at every stage, from legal registration to financial compliance and physical establishment. Despite its challenges, this undertaking can lead to substantial business growth and a strong position in one of the world's most dynamic economies. With thorough preparation and attention to detail, your business can successfully navigate the intricacies of setting up a subsidiary in South Korea, paving the way for a prosperous and impactful presence in the Asian market. Pearson & Partners: Your Expert Companion for Korean Market Expansion. Are you planning to expand your business into the vibrant Korean market? Let Pearson & Partners guide you through the process. We specialize in providing comprehensive visa acquisition and tax accounting services, ensuring a seamless transition. Our team is adept at navigating the complexities of Korean regulations, ensuring a compliant and smooth business setup. Contact us today for expert guidance tailored precisely to meet your unique business objectives and regulatory needs.

How to Become a Successful Seller on Coupang

Coupang is one of South Korea's largest e-commerce companies, often compared to Amazon. It was founded in 2010 by Bom Kim and has grown rapidly, becoming a dominant player in the Korean e-commerce market. Coupang offers a wide range of products including electronics, household goods, groceries, and more, with a focus on fast delivery. They operate their own logistics network, allowing them to offer same-day or next-day delivery for many items, which has been a key factor in their success. Before delving into this article, it might be beneficial to refer to the following piece.How to sell in Coupang Marketplace How to Become a Successful Coupang Seller? To boost conversion rates on Coupang, sellers can employ two strategies: 1) Ensure their product is easily discoverable by customers, and 2) strive to become the top choice for a given item. Your product must appear prominently when customers search for it, ideally on the initial search results page. In cases where multiple sellers offer the same product, yours should be positioned as the preferred choice, featured above competing listings. Coupang favors sellers who consistently receive positive feedback from customers, as a satisfying shopping experience is paramount to buyers. To understand the specific elements that contribute to a positive shopping experience, refer to the checklist provided below. 1. Does your product match what customers are searching for? Ensure that your product aligns with customer demand; selling sought-after items gives you a competitive advantage. Listing your full inventory is advisable to provide bundle delivery and maximize benefits. Additionally, if a product sought by customers isn't listed on Coupang, being the first seller to list it can position you as the top choice. Coupang often notifies sellers via email about brands or products in demand yet unlisted; regularly check your registered email for insights on which products to list. 2. Can customers easily find your products? Emphasizing the importance of search cannot be overstated. Typically, customers search, click, and make purchases. They locate desired products, compare options, and proceed with buying. To ensure your products appear in customer searches, consider the following questions: - Have you utilized effective search terms? - Have you configured both purchase and search options?- Have your categories been precisely specified? With filter search becoming more prevalent, it's crucial to expand search options by including product details like material, quantity, and color. Omitting these details, even if they're not mandatory, diminishes your chances of being found by customers. Remember: providing more information increases your visibility. 3. Is your inventory supply enough? Do you maintain adequate inventory levels? Regardless of a product's popularity, if it's out-of-stock (OOS), customers can't purchase it, and Coupang won't designate it as a top item. Maintaining appropriate stock levels is crucial to retaining your item's top status. Monitor your inventory status by accessing WING > Manage Products > Product Notifications and reviewing the [Out-of-Stock] and [Almost Out-of-Stock] tabs. Ensure you replenish stock for products expected to experience increased sales. 4. Does your ultimate price offer competitiveness? If you believe customers are solely seeking inexpensive products, you're mistaken. It's a common misconception that lowering prices is the only path to securing the top spot for your product. Customers aren't solely focused on low prices; they seek value. While they may opt for the cheapest option when presented with similar products, they prioritize a reliable shopping experience over minor price differences. Coupang designates sellers who offer stability and customer support as item winners, even if their prices are slightly higher. To gauge the price disparity between your product and the item winner, navigate to WING > Product Notification and review the [Non-Item Winner] tab. Remember, the final price encompasses shipping costs. Lowering product prices but inflating shipping fees can deter customers and harm sales, as shoppers are highly sensitive to shipping charges. 5. Do you offer free shipping? Through experimentation conducted on Coupang, we made an intriguing discovery. Transitioning from paid shipping to conditional free shipping resulted in a notable uptick in sales by 32%, with a concurrent increase of 38% in average visitor numbers. (Test duration: 5 weeks spanning June and July 2018; involving 233 Coupang sellers) This suggests a significant portion of customers are inclined to add additional items to their cart to qualify for free shipping. However, to prompt customers to take this action, it's essential to have a diverse array of products available. If there aren't other items to add to the cart for free shipping eligibility, customers may abandon their purchase altogether. This underscores the importance for sellers to offer free shipping and list their full inventory. 6. Have you responded promptly to customer inquiries? As a seller, it's essential to recognize that customers can be quite demanding. This underscores the importance of promptly addressing issues to avoid potential problems like stock shortages or defects. Responding swiftly to customer inquiries is just as vital as ensuring your product detail pages are visually appealing. Typically, customers rely more on product reviews than the details provided on the page when making their purchasing decisions. Therefore, it's crucial to actively manage product reviews. Your dedication will ultimately lead to consistent sales and payoff in the long run. Conclusion In conclusion, becoming a successful seller on Coupang involves a strategic approach that focuses on meeting customer expectations and optimizing various aspects of your selling process. By ensuring that your products are aligned with customer demand, easily discoverable through effective search optimization, and competitively priced while offering value, you can enhance your chances of success on the platform. Additionally, maintaining sufficient inventory levels, offering free shipping options, and providing prompt responses to customer inquiries are essential elements for maximizing sales and maintaining a positive seller reputation. As your company endeavors to sign up as a global seller on Coupang, implementing these strategies will help you navigate the platform effectively and achieve steady sales growth. For further assistance or inquiries, please feel free to contact us.

South Korea eCommerce: Where to Sell

South Korea is renowned for its highly advanced internet business landscape, ranking as one of the world's leaders. In 2019, it stood as the sixth-largest eCommerce market globally, boasting a revenue of $74 billion, surpassing countries like Germany and France. Additionally, the size of the e-commerce market in South Korea is projected to be around USD 2.80 trillion in 2024, with a forecasted growth to USD 6.82 trillion by 2029. This growth is anticipated to occur at a compound annual growth rate (CAGR) of 19.49% between 2024 and 2029. However, tapping into the Korean eCommerce market presents challenges, including limited information on marketplaces and language barriers. This article aims to shed light on the Korean marketplace environment, offering valuable insights for those venturing into this dynamic market. Naver Smart Store Naver Smart Store, an online C2C eCommerce platform owned by the Korean portal giant Naver, focuses on enabling small business owners to participate in the digital economy. One key advantage of establishing an online store on Naver Smart Store is its lower fees compared to the Coupang Rocket partnership. Additionally, Naver has announced that it will waive commission fees for sellers during the first year, aiming to support local small businesses. Since the onset of the Covid-19 pandemic, Naver Smart Store has experienced significant growth in its seller base. The platform has witnessed a remarkable increase in the monthly average number of new smart stores, rising from approximately 15,000 per month in 2018 to about 35,000 per month in April 2020, more than doubling over two years. Coupang Often dubbed the "Korean Amazon," Coupang stands as one of Korea's largest online retailers. Established in 2010 as a daily deals (coupon) venture, it has since burgeoned into a behemoth valued at over $9 billion. Coupang's triumph hinges on its adeptness in catering to the distinct needs and preferences of local consumers, achieved through the development of an end-to-end eCommerce platform renowned for its unparalleled delivery speed. A standout feature of Coupang is its acclaimed "Rocket Delivery" service, offering same-day or next-day deliveries, made feasible by the country's high population density and the expansive infrastructure cultivated by the platform. Remarkably, 70% of all Koreans reside within a 10-minute radius of a Coupang logistics center. Moreover, Coupang has devoted substantial efforts to optimize its mobile interface, ensuring a seamless and enjoyable shopping experience for users accessing the platform via mobile devices. GMarket GMarket, another well-known Korean marketplace, has been under the ownership of eBay since 2009. This eCommerce platform facilitates global trade, allowing users from around the world to engage in buying and selling activities. GMarket made history as the inaugural Korean eCommerce platform to be listed on the NASDAQ in 2006 and was also the pioneer in offering an English website, a feature that garnered significant popularity among expatriates residing in South Korea. The platform offers a wide array of products ranging from electronics to clothing to technology. With its availability in English, Chinese, and Korean languages, GMarket enjoys considerable popularity among the foreign community in Korea. 11 Street 11 Street is an e-commerce platform managed by SK, one of South Korea's largest corporations, with a significant presence in both Korea and Malaysia. It's a popular destination for finding attractive deals, coupons, and sales. With a focus on prompt delivery, most products are shipped within 2-3 business days, emphasizing secure transactions and providing seller training. Their extensive product range covers electronics, fashion, beauty, food, health, and furniture. In 2017, 11Street introduced its cross-border e-commerce platform, extending its services to clients globally. Other Marketplaces in South Korea Interpark Kurly Market Tmon Conclusion Entering the eCommerce market in Korea can be challenging for overseas sellers due to regulations and language barriers. Creating an effective product page is crucial for convincing customers to purchase your product, particularly in competitive categories. Moreover, providing excellent customer service is essential to meet the expectations of Korean internet users, including seamless mobile payment options, responsive customer support, swift delivery, and clear return policies. If you're considering opening an account on Korean marketplaces but require assistance, feel free to reach out to Pearson & Partners Korea for expert guidance and tailored advice for your specific situation.

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