When it comes to representative Korean companies, many people think of large conglomerates such as Samsung Electronics and Hyundai Motor. It’s true that they have elevated Korea’s global status: Samsung Electronics is an IT leader vying with Apple, while Hyundai Motor is a front-runner in Korea, the world’s fifth-largest automobile market.
However, in order to better understand the dynamics and growth potential of the Korean economy, one should first know about its venture companies.
The term “venture company” began being used here in 1997 when the act on special measures for the promotion of venture business took effect. Now it is widely used to describe a company that creates high-value products based on adventurous and innovative entrepreneurship. Considering that the meaning is not much different in the United States or in Japan, both Samsung and Hyundai can be said to have started as venture companies.
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Kim Dong-sun |
Korea’s history of venture companies dates back to 1997 when the global financial crisis hit the nation hard. Many people who regarded the crisis as a business opportunity began to establish companies, especially in the burgeoning IT sector largely affected by the global boom at the time.
And their remarkable growth has played an important role in reviving the sluggish economy during the years of the 1997-98 Asian currency crisis and 2008 financial turmoil.
The number of venture companies saw 13-fold growth from 2,042 in 1998 to 26,503 as of August this year. There are 315 companies with more than 100 billion won ($84 million) in annual sales.
The employment rate at venture companies is also 13-fold and 5-fold higher than those of large conglomerates and small and medium-sized companies, respectively. In other words, venture firms that make up just 0.6 percent of the total companies in Korea are responsible for 3.8 percent of the nation’s employment, offering a good solution to the issue of “growth without employment.”
Such a contribution is expected to become more apparent as business start-up has been active since last year thanks to the progress in IT development such as smartphones and social network services and the government’s strengthened support.
If former venture companies such as Samsung and Hyundai led the “miracle on the Han” over the past 50 years, the “second miracle” will depend on young companies established after the 1990s based on creativity and innovation.
Festival to create venture ecosystem
Venture-Startup Festival 2011 was held for two days on Oct. 5-6 at SETEC in Seoul. It was a meaningful opportunity for venture and start-up companies and future entrepreneurs to meet and share ideas.
During the event, we also vowed to create a “Venture Ecosystem” that is essential for the Korean economy to grow into an advanced economy based on creativity and innovation.
It is encouraging that successful venture entrepreneurs recently became active in supporting young and potential business founders through education, consultation and sometimes investment programs.
The government also plans to step up efforts to create a “Venture Ecosystem” by offering tax benefits to the “angel investors,” funding the business start-ups of youths and supporting “born-to-global” ventures.
One of the factors that enabled Korea to become one of the world’s top 10 economies within such a short period is that it has been a model nation for entrepreneurship as described by American management consultant Peter Drucker.
We can say that our economic development over the past 50 years is the history of challenge and passion ― the very sprit of venture companies.
I hope that the Venture-Startup Festival 2011 has stimulated the “entrepreneurship DNA” within us and encouraged more venture companies to be born and further grow.
By Kim Dong-sun, Administrator of Small and Medium Business Administration
