The Korean startup ecosystem is currently seeking new breakthroughs through global expansion and utilization of AI technology amidst an overall depressed atmosphere. According to the VC data, the number of investments in Korean startups and small and medium-sized enterprises (excluding post-IPO investments) in the first half of 2024 was 497, a 32% decrease compared to the same period last year.
Current status of Korean startup ecosystem “Opportunities and Challenges”
Google, together with the Ministry of SMEs and Startups and the Korea Institute of Startups and Entrepreneurship Promotion, conducts a window program every year to help Korean app and game startups, and this year marks its 6th anniversary. As a result of a recent survey of 100 startup representatives who participated in the window program, 42.7% evaluated the current status of the startup ecosystem negatively (8.7% very negative, 34% negative). This figure exceeds the respondents with average (33%) or positive (positive 21.4%, very positive 2.9%) perceptions.
According to the survey results, the pessimistic outlook on the startup ecosystem was mainly due to the contraction of the investment market (75.8%) and the economic recession (70.5%). In addition, problems such as lack of government support policies (32.6%), difficulties in securing talent (26.3%), and regulatory and legal restrictions (14.7%) are all impeding the growth of startups.
Nevertheless, there were also factors that positively evaluated the domestic startup ecosystem. Positive factors cited by respondents included various support programs (70.4%) and opportunities to enter overseas markets (56.3%), while expansion of the ecosystem network (22.5%) and increase in exit cases (7%) were also well-received. .
New breakthrough “Global market and AI”
In a situation where difficulties are increasing, domestic startups are looking at overseas markets as a breakthrough. It was found that many startups have already entered overseas markets (37.9%) or are preparing to enter them (52.4%) and plan to continue their growth. The target markets were North America (73.7%), Southeast Asia (66.7%), and Japan (62.6%). Meanwhile, when entering overseas markets, respondents responded that they are experiencing difficulties in securing business networks and partnerships (62.6%), understanding local market information (59.8%), and securing overseas funding (42.4%).
Another opportunity factor is AI. It was found that 47.6% of startups are already using AI technology in app or game development, and 41.7% plan to introduce it in the near future. However, many responded that they were facing difficulties due to a lack of AI experts (58.2%), technical complexity (46.9%), and high initial investment costs (41.8%).
Role of global companies and partners
The company explained that these survey results suggest that various support programs play a key role in the startup ecosystem. In particular, in a situation where there is an absolute lack of information about overseas markets, it shows the importance of cooperation with global companies with global service operation experience and human networks.
Representatively, the window program is a startup growth support program in which Google Play joins hands with the Ministry of SMEs and Startups and the Korea Institute of Startup and Entrepreneurship Development to support domestic app and game developers in upgrading their content and entering target markets. So far, 560 developers have participated in the 6th window program this year, and the number of investments attracted within the agreement period from the 1st to the 5th period is KRW 147.6 billion. In keeping with the purpose of the program, an increasing number of developers are actively entering overseas markets. In order to provide practical help in entering overseas markets, the global training program ‘Immersion Trip’ has been added starting in 2023, the 5th year of the program.
Expansion of hiring amid recession… The key is to secure AI talent
Domestic startups are also the entities that revitalize the job market. As a result of the survey, domestic startups are actively recruiting talent despite the economic recession and shrinking investment market. As a result of the survey, 85.4% of startups responded that they have plans to hire within the next year. Demand for developers (83.7%) and marketing personnel (50%) was particularly high. This suggests that many startups are adopting a strategy to accelerate growth by upgrading technology and services, the company said.
In addition, while the importance of related technologies is increasing, with 89.3% of startups already using AI technology or planning to introduce it, the shortage of AI experts (58.2%) is emerging as the most urgent problem. Accordingly, startups are showing their will to increase competitiveness by securing technical talent. However, about three-quarters (74.8%) of startups are looking for talent through online recruitment platforms, and 63.1% are recruiting by utilizing the founder’s personal network, so channels for attracting talent appear to be limited. Public/private efforts to connect startups and talent can be of practical help.
In fact, Aru, Action Power, JJ&Company, and Ravel Up participated in the ‘2024 SeSAC Job Festival’, which provides information on future jobs, including AI-related employment information, for young people in Seoul, co-hosted by Google and the Seoul Metropolitan Government last July. Startups such as these have been recruiting developers and AI-related personnel.
Many startups still have difficulty establishing personnel and compensation systems. 71.8% of respondents affirmed that the company has a human resources management-related framework (39.8% slightly agree, 25.2% agree, 6.8% strongly agree), but 28.2% responded that they do not agree (12.6% strongly disagree, 12.6% do not agree). It reached 15.5%).
In addition, only 11.7% of respondents said they ‘strongly agree’ that the performance of executives and employees and the compensation system are interconnected, while 23.3% responded that they ‘disagree’. This shows that there are startups whose systems for attracting and retaining talent are still in their early stages. However, regarding compensation systems frequently used in startups, such as stock compensation, 21.4% responded ‘agree’ and 15.5% responded ‘very much’, suggesting that compensation is an important element in the personnel system.
Jeong Hye-in, CEO of I-Truck, the 6th member of the Canggu Program, participated in the ‘Changgu Program Southeast Asia Immersion Trip 2024’ and said, “The external environment surrounding startups is difficult, but we are looking for opportunities to enter overseas markets by advancing AI technology. Consulting related to consumer characteristics and market situations. “Practical support programs that can help with local networking and securing talent are more effective than ever,” he said.
Google Play Marketing Korea Manager Jeong Yeon-wook, who accompanied the ‘Changgu Program Southeast Asia Immersion Trip 2024’, said, “The successful globalization and recruitment of startups is a key driver of domestic economic growth. The Canggu Program is a program that promotes the creativity and potential of Korean startups to the world. “We will continue to expand customized support so that we can use our services to their full potential and help strengthen our global network.”
editor@itworld.co.kr
Source: www.itworld.co.kr
