Korean Tech and Startup Intro Jan 2015

1. 
A look into Korea’s tech infrastructure
and Startup Ecosystem
January, 2015
Seoul, The Hottest Startup Hub
In Asia?
Nathan Millard @Nathan_mill

3. It wasn’t
always
like this…

4. Gangnam 1950s

5. Gangnam 2015

6. • 25.6M in Seoul Metropolitan Area (1/2
of population)
• Home of Samsung, LG, Hyundai,
Hallyu
• Hard working (10-12 hours per day)
• Tech-savvy & Engaged
• Homogenous & Impressionable
• Trend setters
• Pop culture, tech, fashion
Understanding Korea

7. • $25,997 per capital GDP as of 2013
• Asia’s third largest e-commerce market
(12%+ annual growth since 2006)
• Increasingly vibrant exit market (M&A
and IPO)
• Engaged consumer base,
eager to spend through tech
Korea’s Economic Landscape

8. • Fastest mobile broadband (excellent for content
consumption)
• High smartphone penetration: 80% as of
September.2014
• High Android-powered smartphone
penetration:90% of smartphone user
• 15 % for web-surfing & 85% for using mobile
apps ( high usage in mobile-app services)
• Kakao games platform boosting Google Play
• Currently, no serious challenge against Kakao
Talk
Korean Mobile Market Overview
IPhone

9. = 85% M/S
3 big Search Engine companies
= 14% M/S
Samsung & LG hold 80% m/s
while Apple 20% in device market
= 15% M/S
92 % m/s for Kakaotalk & 4% for LINE in
messenger service (as of Sep.2014)
Large (Korean) Corporations
Dominate

10. •#3 in the world for downloads
•#3 in the world for revenue
•25%+ online for 8+ hours/day
•$100M USD monthly app revenue
<Whole population engaged>
App Opportunity in Korea

11. • First country to have professional PC gamers
• PC rooms used to dominate free time
(now mobile)
• Highly experienced gaming market place
• Exceptionally high consumer expectations
• Infrastructure supports ‘heavy’ games and apps
• 80%-90% of app revenue from games
<Anipang: First Kakao Game>
Gaming in Korea
<Clash of Clans: #1 ranked in Google & Apple app store>

12. • Highly trend-focused, social, and fickle
• 90% of top games released in previous month
• Local apps / services often triumph over imports
• Large marketing budgets are [now] required for
engagement
• Localization can not be stressed enough
Koreans as App Consumers

13. • World leader in mobile payments
• Extensive NFC enabled devices
• SK Planet’s ‘T Cash’
• Used for 54% of in-app purchases
• Connected devices offer future opportunity
• Samsung aims to be IoT leader
• Korea is a great test market / gateway to Asia
• Bitcoin emerging (Korbit, Coinplug, CoinOne)
Mobile Payments Situation

14. Unit:
$Billions
“10 companies belong to what we call
the “Korean Unicorn Club” (by our
definition, Korean software companies
valued at over $1 billion by public or
private market investors)” – John Nahm,
Strong Ventures (9/11/2014)
US Population: 318 million | S. Korea Population: 50 million (15.7% of US)
US GDP: $16,8 trillion | S. Korea GDP: $1,3 trillion (7.8% of US)
All Rights Reserved
Korean Unicorn

15. Startup Ecosystem
Accelerators
Startup Ecosystem

16. • 130 Angels (around 50 active)
• Seed Investment: KOISRA
• Series A: Capstone, CCVC, Venture Port, Formation 8,
K Cube Ventures, Strong Ventures, Smilegate Investment
• Series B: Altos Ventures, CyberAgent Ventures, Softbank Ventures,
Qualcomm Ventures, IMM Investment, NeoPlux, Stonebridge Capital,
DSC Investment, SL Investment
Startup Ecosystem
Investors & VCs
Startup Ecosystem

17. Startup Ecosystem
Co-Working Spaces
Startup Ecosystem

18. • $5B USD pledged for building “creative
economy”
• Legitimizing entrepreneurship
• Innovation centers in major cities
• TIPS program (1:5 & 1:7 matching)
Startup Ecosystem
Government
Startup Ecosystem

19. • Hanllyu (K-pop, Dramas, Movies)
• On mobile and Global
• Gaming: Devsisters, Smilegate, NCSoft, Nexon,
WeMadeEntertainment
• Online content distribution: Viki, DramaFever
Startup Ecosystem
Content Heritage
Startup Ecosystem

20. • IT infra that supports IT development
• Quality engineers, with strong work ethic
• Greater understanding of risk
• Entrepreneurs with global vision and bigger, better quality ideas
• Mentor networks and Angel investors
• Government support (money, PR, education, economic diversity)
• Exchange of students & ideas (Korea – West)
• Economic conditions that can support entrepreneurship
Startup Ecosystem
Reasons for Growth
Startup Ecosystem

21. Startup Ecosystem
Startups
Entrepreneurship in Korea has never been this hot. Korean founders are passionate, talented
and building companies that are having a real impact in the region, and across the world.
While there is much still to achieve, the future looks very bright.
• Highest number of startups per capita in the world
• China has highest number of startups of any country
• USA has ‘the best’ startups
• Mostly consumer facing mobile services
• 80% of the country own smartphone & Per capita, 280$ annual mobile spend in
Korea vs. 105$ in U.S
• Fastest broadband service: 25 Mbps in Korea vs. 4.5Mbps global average
• Gaming, E-commerce, social-powered platforms, Contents
Startup Ecosystem

22. Hottest StartupsHottest Startups

23. • Not enough M&A (around 98% of exit in Korea is through IPO. Figure is similar in
rest of Asia, except China where is around 50%-50%)
• Large Asian corporations don’t acquire enough startups in Asia.
(except China)
• Japanese companies are most active, but mostly high value, rather than volume.
Examples are Viki and Viber. (only a small number of startups / VCs benefit)
• US companies don’t know how to engage with Asian M&A opportunities. Also US
companies are also more focused on technology, rather than users / sales. (Asian
startups are more service than tech driven)
• In Asia, M&A is generally focused around users / revenue.
• There is general disconnect between what US companies are looking for and
what Asian companies can provide.
ProblemsProblems with M&A in Asia

24. M&A & IPO
3
Why is there NOT a healthy M&A culture in
-Why is M&A so weak in Korea?
•Samsung & LG – want to do things internally,
because they think it’s cheaper / easier / quicker
(they were wrong). Samsung is now doing M&A,
but mostly overseas.
•Lack insight to see the future (unlike like
Softbank)
•Struggle to deal with post-merger integration
(doesn’t work due to company culture)
M&A and IPO
<More inbound, cautious of outbound deal>
• Inbound merger in H1 2014 reached 11.1bn, x12times from H1 2013. But
51% drop in outbound deal(1.4bn) compared to H1 2013 (2.9bn).
• Inbound mergers were mostly big corporate mergers.
• Korean companies are getting cautious in acquisition with new companies.
• Survey among 317 CEOs (Korean/Chinese/Japanese) on willingness
on M&A plans shows: only 5% of korean CEOs willing new M&A
while 34% of jananese strongly willing to new M&A , and 53 % of
them seeking for outbound M&A.

25. • Maturing platform situation
(dominated by 1 – 2 players)
• Kakao–Daum merger could create super-company?
• Global competition (hardware, software, services)
• Opportunities in IoT & smart home
• Korean tech startups & SMEs more determined globally
• Korean consumers will lead global mobile trends
• Closer relationship with China
Today’s TrendsToday’s Trend

26. 
nathan@g3partners.asia
@Nathan_mill
+82 (0)10 8723 7702
Keep in Touch
Thank You!!