As government and local authorities continue to launch various startup programs, the number of South Korean startups benefiting from these initiatives has been on the rise. Last year, the number of venture businesses registered with the Korea Venture Business Association reached 40,081, a 14% increase from the previous year. However, only one domestic unicorn startup (a privately held startup valued at over $1 billion), the game company Shift Up, emerged last year, and none have appeared so far this year. Although the scale of South Korean startups has grown, their fundamental strength appears to be waning.
Experts suggest this is due to the South Korean startup ecosystem being predominantly oriented toward easily initiated B2C sectors such as gaming and shopping malls, rather than fostering differentiated, deep-tech startups. Payton Kim, CEO of MIRAE Holdings (a technical holding company established by KAIST, UNIST, GIST, and DGIST), stated, “As new industries like AI and autonomous driving emerge, the global startup industry is also being restructured around companies with relevant technologies. In B2C, one company must fail for another to thrive, but B2B deep-tech can create new markets and jobs. It’s time to develop a B2B-centered startup ecosystem in South Korea.”
According to global market research firm CB Insights, 12 out of the 15 South Korean unicorns are B2C companies, such as Kurly, Zigbang, Bucketplace, and Shift Up. In contrast, about 78% (416 out of 533) of the world’s unicorns last year were B2B companies. Globally, B2B startups have been growing steadily for some time, whereas South Korea remains focused on B2C. Yang Sang-hwan, head of Naver D2SF (Naver’s startup nurturing organization), explained, “South Korea’s small B2B market has driven startups toward B2C, which connects to immediate profits.”
The overemphasis on the less sustainable B2C sector in South Korea’s startup market is also dampening investment in domestic startups. Total investment in South Korean startups peaked at 15.9 trillion won in 2021 but declined to 10.9 trillion won last year. According to Startup Alliance Korea, investments exceeding 100 billion won dropped from 19 cases in 2021 and 23 in 2022 to just eight last year. An industry insider noted, “Recent surveys indicate that 7 out of 10 startups have not received investment from venture capital or other sources recently.”
