A Korea Israel Love Affair

Is Korea on its way to become a Start-Up Nation?

Seoul, Korea – It’s unclear whether Israelis discovered Korea or Koreans discovered the Israeli start up genome. Either way, it can be considered a passionate affair.

Bloomberg Global Innovation Index 2015 ranked South Korea as the top innovative country in total categories, before Israel (second place), Finland, Sweden and Japan. Korea also leads the list in terms of patents and reached fourth place in the number of start-ups, according to the index that is measured by the size of the country and population figure.

The significant and impressive boost in the number of startups was initiated by the daughter of the former president, the new president elected in 2013, Park Geun-Hye . The first lady, the head of the Conservative Party, whose background is in chemical engineering, called for technological innovation and has been inspired by the Israeli model presented in the book, “Start-Up Nation”. In her inaugural speech in 2013, she announced the adoption of a “creative economy” and established the new Ministry of ICTFP ( Science, ICT and Future Planning). The message was clear: Korea has to be a leader among start-up nations and focus on national effort by harnessing enormous budgets.

Alongside the Israelis, Americans discovered Korea thanks to the Koreans who continued higher education in the US and were exposed to global market benefits. These energetic young Koreans decided to import the system of venture capital funds and the innovative spirit native to Israel, with their desire to penetrate the US market. Of course, these efforts have the ultimate goal of making it big.

Another catalyst for this growth credits gaming software developers of mobile phones. They move the start-up and companies engaged in social networks. Young entrepreneurs feel that in the technological race, Korea missed big time. Long before Mark Zuckerberg arrived with Facebook, and the Israelis made an impressive exit with Waze, Korean platforms were already successful locally, but remained active only in the domestic market.

According to a Bloomberg report, the expectations didn’t remain theoretical. To compete in the race aggressively, tough regulations of the central government were softened, and “Free Zone Regulations” in addition to major Internet sites, were implemented to raise innovative ideas. Although there are still barriers resulting from organizational issues and traditional culture, conservative Koreans have already shown in the past that they are able to mobilize a focused agenda. They have proven already that they are disciplined, madly hard-working , and local patriots.

Adaptation of the Israeli Hutzpah

The “Korean Silicon Valley” near the capital Seoul, specifically in Pangyo (Gyeonggi province), about an hour metro ride from the center of Seoul, is the place for hundreds of large companies as well as tech hubs for startups. The annual earnings of the companies in Pangyo, as of 2015, came to $ 60 million, compared with $ 212 million in technological centers located in the capital Seoul.

There, a particular giant building houses hundreds of startups. The inauguration was only about 4 months ago and was held in the presence of the President of Korea. Standing alongside were Yigal Erlich, founder of “Yozma fund- Israel” as well as various ministers and government officials. This building is also home to Yozma Campus, which includes workshops, presentations, mentors, investors, and platforms for encouraging cooperation between private entities, government and venture capital funds. However, Yozma is a private entity among the Korea government entities located within the tech park.

Wonjae Lee, the CEO of Yozma Korea, proudly hands me over the popular book by Dr. Jong-Yoon Luc , “Hutzpah”, about the daring and risk culture of Israeli startups. Wonjae knows what he’s talking about. Until the age of 12, he lived in Seoul with his parents. From there, he moved with his mother to Israel, as she was pursuing her doctoral studies at the Hebrew University.

Yozma has become a prestigious brand name as well as a role model. Wonjae is convinced that the South Korean President, excited about the Israeli model of initiative spirit, adopted it and even announced the fund name on many formal occasions. This admiration led to the President designating Yigal Erlich, founder of Yozma, to consult on the Yozma Fund being set up in Korea.

Why did the Korean startups failed in the past?

“The main problem lies in the lack of vision of the global market. For example, prominent Korean entrepreneurs were ahead 4-8 years in terms of developing familiar applications. For instance, years before Skype, there was Dial pad, before Facebook there was already in 2000 Cyworld, and before the Israeli successful application, Waze, there was ” Kim Giza “(” Kim driver “), which was sold to Daum cocoa for only $ 65 million, compared with $ 1 billion paid by Google for Waze.”

Without a doubt, the language is also one of the serious barriers .So far, the start-up companies focused on the domestic market because it was easier to deal with the language barrier.

Wonjae stresses the cultural differences between Koreans and Israelis which have an impact on the nature of the start up scene: “Here Korean mothers push their child to be very competitive, to go to the best elementary and high schools, which include intensive enrichment programs in the afternoon, some lasting until 10 PM! And of course, the main goal is to try to get into the best university. From there, parents expect their child to find a stable job at Samsung Electronics or another leading company to stay there all his/her life. The main thing is not to take risks. When I got to school in Israel, I was struck by the openness and direct access to teachers and parents”.

How do you choose in which companies to invest in?

“The main criterion is measured by the potential for success in the global marketplace. At the initial stage of the recommendation, we have development teams. We orchestrate consultation sessions with venture capital firms abroad. The test is how successful would this company be outside of Korea. We locate investors mainly in the fields of virtual reality, biomed, and health.”

Will Korea override the Israeli startup superpower?

Wonjae sounds more cautious this time after winning the Korean newspaper headlines declaring the possibility of bypassing Israel’s superpower startup title.

“There is enormous potential in light of the immense investments that come from the government (Office of the Chief Scientist). However, the Korean advantage is partly due to its proximity to and our understanding of the Chinese, Indonesia, Malaysia, Japan and the Arab world market. The big breakthrough would be if the professors in academia stopped being afraid of taking risks.”

Will China win the race?

“You can’t deny the dynamism and takeover of Chinese international markets. I actually expect cooperation with China. The Chinese dominance is driving the Koreans in the race for innovation. You aren’t able to compete with the production prices”, admits Wonjae and mentions the fact that Yozma has a Chinese partner.

Our success will be measured, among other things, by whether the companies we support and advise them go into the underwriting of stock exchanges in Hong Kong and NASDAQ.

In our model, we are committed to investing in companies selected by us and our consultants. At the start, in addition to a business plan, we teach them to make presentations and pitch in English for investors. We’re downplaying the language barrier, one of the factors that prevented Korea from penetrating the global market. ”

Israeli mentors?

“Yes, of course. We have signed agreements for knowledge transfer with the Weizmann Institute of Science and they have committed to be mentors. Besides the biomedical field, there is also cooperation in the fields of cyberspace, online technology solutions, and entertainment.”

Wonjae is not the only Korean with an Israeli insight. There is also David Sehyeon Beck, the Director of International Affairs, Cooperation & PR at Gyeonggi, the Center for Creative Economy and Innovation – GCCE. David is one of the directors on behalf of the local governments technological park. He was in a Kibbutz in the Negev in 1998 for two years and was impressed back then by the level of innovation in the Negev. “I adapted from Israel many things. Mostly, the investment in human capital, a deep sense of unity in the community, and emphasis on science. I think also that another factor is related to a wide variety of ethnic groups in Israel, contributing to the creativity in Israel. In Israel, people speak many languages ​​and aren’t obsessed with their own native language, and have varied perceptions. I have also noticed the fact that you can express your opinion freely regardless of your age and the recipient’s status. ”

David emphasizes that none of the partners take equity investment in start-up companies.” Our center supports 600-700 startups. This is still not enough. China has hundreds of new startups everyday, therefore our need for innovation is so critical. We are still not a Start-Up Nation.

Suitable for an entrepreneurship ecosystem

David, as well as Wonjae, would like Koreans to adopt some Israeli ‘hutzpah’. “Korean professors do not like the students asking questions. They gave me lower grades compared to American professors. There are still many who dream of tenure in Samsung Electronics. The search for economic security is rooted in Korean culture.”

All experts in the start-up scene in Korea underscore necessary conditions for the success of innovation in Korea – by bypassing regulations and corrupt bureaucracy. It is certainly not obvious in the Korean corporate culture. The significant change is reflected also by the possibility to contact local government and private sector partners when faced with too strict rules. According to David, corporate culture is undergoing a positive change for the benefit of start-ups and is, among other things, a result of the Chinese threat.

According to David, 2016 represents a breakthrough following the entry of foreign investors to Korea, and this will likely see an increase. He sounds optimistic about the future. “Today, there is even a flow of Japanese investors. They do not look down on us. The flow is now reversed, from Japan to Korea.”

“In the middle between China and Japan”

The Economic attaché at the Israeli Embassy in Korea, Shi Feiler, doesn’t agree with the notion that Koreans tend to think uncreatively. “I actually think they are very creative and do think outside the box. It is true that the system is not ready to absorb setbacks. However, they are aware of a distinct disadvantage that could interfere with the flourishing startups. We shouldn’t forget that a poor country with no natural resources, had a significant economic boom since gaining independence.

Feiler says that the new process of creative economy, within three years, is a step in the right direction. All ministries participated in the process as a well-oiled machine, and the amount of investment in this process is enormous. ”True, there are already some successes that demonstrate that they are in the right direction. Even giant companies like Samsung Electronics and other leading companies invest a lot of money in research and development. According to Feiler, actually, not only the big companies do. He said that even medium-sized companies are the backbone of serious economic life in Korea, and have mobilized a new agenda of economic creativity.” Korea is somewhere in the middle, between China Japan. It is pushing and branding itself as an economic power quality. ”

Accelerators – the Korean way

Besides Campus Yozma, Attorney Eyal Victor Mamo, an Israeli KOISRA representative, is among the organizations that bring an Israeli innovative model to Korea. The company locates Korean startups in their preliminary stage, mainly in Cyber, FinTech, Robotics, Medical and Artificial Intelligence. He said that one of the problems that Korea is dealing with in the high tech scene, is the lack of boldness on the part of VCs and companies to invest in revolutionary Korean startups, but rather services and less technology.

The Israeli model is highly sought after. More than 18 innovation centers that are scattered throughout Korea have adopted the method of accelerators. “However, the Israel model isn’t suitable enough for the Korean cultural ecosystem because it is relatively young. The young ones do not have enough networking and they encounter difficulties in language and perception. Therefore, our accelerators last about a year alongside mentors” explains, Eyal.

“The 5 concessions generation”

Camp is a technology incubator that is located in the affluent Gangnam area in Seoul. Naya Jang, the Director of Foreign Relations at D.Camp, fittingly describes the cultural revolutionary scene: “There is a gradual change in perception of its young people. In Korea we call this generation ‘The 5 concessions generation’. This means: giving up dating girls/boys, wedding, children, a social life and owning an apartment. The race is all about getting a good, challenging and meaningful job. In recent years, young people tend to be more individualistic, free-minded and are striving to realize their dreams. Parents are slowly give up and adapting to these new realities.”

The D.Camp Incubator opened only about 4 years ago as an NGO and was able to recruit leading companies, in cooperation with a public fund, governmental agencies and venture capital funds. They were able to raise about $ 470 million.

You can find the “Start-Up Nation” book on D. Camp CEO, Kwanghyon Kim’s desk. He doesn’t hide his admiration for the Israeli model of entrepreneurship and among the other activities in the Tech hub, he emphasizes the need for academic activity to lure the brightest students: “Unfortunately, many of the initiatives are still concentrated in the services which are easier to apply and receive investments”. Mentioning the threat of China, the CEO agrees that the Koreans should compete only on quality but at the same time, try to cooperate with them. “I see China as a huge market for our entrepreneurs, not only to use them as a transfer focal point to market out.” The energetic CEO expects the Korean start up scene to grow rapidly in the next five years, a process that will bring a huge change to the Korean economy.

Yehudit Haspel Ben-Dak was a guest of the Korean Embassy in Israel and of the Korean Ministry of Foreign Affairs