When I started working with startups in Korea back in 2012 there was practically no startup ecosystem. There were startups, often founded by engineers who couldn’t secure jobs in Samsung. But entrepreneurship was still ‘underground’.

It wasn’t socially acceptable to work at a startup. There were precious few startup success cases. The investment ecosystem was massively skewed in favor of investors. There was one accelerator. Government support for startups was practically nonexistent.

Fast forward to 2017 and Korea can stake a legitimate claim to be one of Asia’s most promising startup hubs. The country is producing around a unicorn a year. Top developers are leaving Samsung (and other large MNCs) to found their own companies. International VCs are making big bets on Korean startups. At last count over 30 accelerators punctuate Seoul’s dense metropolis. And the government is actively supporting startups to the tune USD $2.5Bn to USD $3Bn per year.

Beyond extensive support for local startups, programs like K-Startup Grand Challenge are now presenting global startups with an opportunity to engage with the massive opportunities for growth in Asia, through Korea’s rapidly maturing startup ecosystem (more on that in a moment).

Startup Campus, Pangyo

How did this transformation happen?

Korea’s relatively newfound first world status has meant an influx of new ideas, often originating from the west coast of the USA (yep, Silicon Valley). Many Korean parents can afford to send their children to US universities, and are. Many returns with tech or business degrees and in some cases experience at Silicon Valley tech companies. Korea also now presents genuine career opportunities for the Korean diaspora. I’ve seen an influx of Korean Americans that are impacting the startup ecosystem, bringing with them international experience and a global perspective.

Success cases are critical to fuel development of a startup ecosystem and Korea’s has reached a tipping point. Kakao, Korea’s dominant messaging and social platform, went public 7 years after launching. E-commerce startups Coupang and TMon reached billion dollar valuations in similar time frames. Yello Mobile, a ‘startup holding company’ skyrocketed to a multi-billion valuation in around three years. There are other examples.

Successful startups, and especially big exits, mean a release of capital and an increase in Angel investment activity. Perhaps even more important, they increase the number and quality of mentors who can guide the next generation of entrepreneurs towards success.

The brick and mortar infrastructure to support startups has also mushroomed.

Co-working spaces, including two giant WeWorks and Asia’s first Google Campus, exist in almost every corner of Seoul. These are fertile breeding grounds for ideas and places that can boost founder morale. Founding teams often first meet at co-working spaces and at the regular events they host. Well funded facilities for hardware startups in Seoul also make it easier, quicker and cheaper for startups to prototype.

Startup capital is no longer as difficult or risky as it was to attain. The local investment ecosystem has matured. Foreign VCs like Softbank Ventures, 500 Startups and Altos Ventures have dedicated funds for Korea and growing portfolios. The public purse has been opened wide for innovators, providing matching funding, grants and other support.

Want to get involved?

While opportunities exist, there’s still challenges. Founders considering Korea need to approach the market with an open mind and realistic expectations. Korean consumers are open to foreign brands, but they have high expectations. Language barriers exist, so localisation is critical. Successfully engaging with Korea’s top companies can be exhausting and time-consuming.

Help is at hand.

K-Startup Grand Challenge, now in its second year, is a program financed by the Korean government and operated by five of Korea’s top accelerators. This year it will invite 50 startups to Korea for four months of fully supported acceleration. That means return flights, living stipends, free office space, support getting visas and registering a Korean legal entity and connections to Korea’s top conglomerates like Samsung, LG, Hyundai and Lotte. A grant pool of USD $800K+ is also up for grabs in a demo day at the end of the program that wraps up in December.

There are other reasons why Korea makes sense as a stepping stone in Asia.

Given Korea’s world-leading IT infrastructure, the result of heavy investment up to 20 years ago, it serves as a great platform upon which to develop new technology. Now a top 15 global economy, the nation boasts among the world’s fastest mobile internet speeds and 88% of Koreans own a smartphone. It’s also safe and stable, exemplified recently by the peaceful impeachment of its president. The nation’s capital, bulging with around 26 million inhabitants, presents a viable test market in Asia where trends catch on with lightening speed. Those trends often make their way to other Asian markets thanks to Seoul’s status as an Asian trendsetter.

On account of Korea’s manufacturing heritage tech talent is abundant and 64% of Koreans hold a university degree. This presents startups with a fertile recruiting ground, at a heavy discount compared to other established startup hotspots. Bloomberg has also ranked Korea No. 1 for the last three years in its annual innovation index.

Strategically located in the centre of North Asia, Korea also provides ready access to over 2 billion potential customers just a short flight away.

I spoke with Ben Park, Co-Founder of Fingertips Lab and last year’s K-Startup Grand Challenge winner, to find out why he pursued expansion in Korea, from San Francisco, and what he gained from the experience.

“Our primary goal was to find a manufacturer that could meet our demands for precision and quality. We were exploring opportunities in Korea and China and when we heard of the K-startup Grand Challenge, we decided to run for it. We had no idea the range of opportunities we’d find, but believed that with the legitimacy of government support we’d be able to more effectively build local connections. We weren’t wrong. The program provided us with free working space and facilities, startup mentors, networking opportunities with investors and partners, as well as return flights. So we could really focus on achieving our business goals while we were there.”

Fingertips Lab developed a dial to improve safety using mobile apps while driving. After a successful Kickstarter campaign, they came to Korea to find a manufacturing partner.

Jazz Tan, an entrepreneur from Malaysia and Founder of YouthsToday, also participated last year and gained rapid market access thanks to support during the program. “Since we joined the program, I’m happy to say we’ve been signing new customers and partnerships much faster than expected,” she said in an article on TechinAsia. Her efforts networking with foreign founders in Seoul also paid dividends. “There are a number of established foreign companies in Seoul and, more often than not, the founders/CEOs are happy to provide some advice or introduce you to a potential client or lead.”

By the end of the program YouthsToday, which connects corporate marketers with millennials, had made confident strides into the Korean market. “we are in over 20 Korean universities and helping connect four corporate clients with thousands of students in Korea. Our future plans involve engaging with up to 200 universities and academies here in the country.”

Fingertips Lab also made significant headway. “During the challenge, we were able to meet Korea’s biggest auto manufacturer, Hyundai Motors. Given the nature of Korean conglomerates, this could have taken years to achieve on our own. We also won US$100,000 first place prize at the demo day. That gave us even more exposure to collaboration with other local companies.”

Fingertips Lab won the grand prize, a share of over USD $800k on offer to startups at the final demo day.

These successes were not unique. All told, startups in the program secured over US$5.5 million in local and international investments. They signed 30 contracts and 120 MOUs. Most established a local entity in Korea and hired local staff by the end of the program.

40 startups from 20 countries were selected to participate in K-startup Grand Challenge 2016.

Ready to take your next steps in Asia?

Tech startups that are less than five years old and have an MVP (minimum viable product), can apply online for this year’s K-Startup Grand Challenge. Applications close by June 7. The program kicks off in the fall.

For more insights about Korea or K-Startup Grand Challenge contact nathan@g3partners.asia