Foreign start-ups edge in on Korean tech turf

This is the second article in a series on foreigners working in Korea’s technology start-up ecosystem. ― Ed.

Tech industry pundits in Korea used to joke that this is where overseas companies would come to die. In a country once dominated by local titans like Nate and Cyworld, foreign rivals like Yahoo and Myspace struggled to connect with local Web users and eventually backed out.

But the situation has flipped in the past three to five years, they say, as social media and content sharing behemoths like Facebook, Twitter and YouTube have kicked down the door to the local market in the globalizing mobile era. With Koreans warming up to Dropbox, Evernote and mobile games like Supercell’s “Clash of Clans,” a handful of smaller foreign tech companies are quickly eyeing the fresh opening.

Raffaele Giovine, CEO of Italist, a Silicon Valley-based online retailer of Italian boutique fashion, says Korea is currently the hottest market for his industry, being more dynamic than Japan and more sophisticated than China.

“Nowadays, in Milan, Korea is perceived like Japan was in the ’80s. It is a source of new customers, great new products and new trends,” he said, likening Samsung’s popularity in Italy to Sony’s back then. “It is a great country not yet fully discovered by Italians; thus, it still remains a bit exotic and more fascinating.”

Likewise, the gaming, e-commerce, social media, education-tech and ad-tech industries are all trending, and foreign entrepreneurs are not only expanding to Korea, but also setting up shop here.

“The number of start-ups in similar industries, the number of investors and amount of funds they can get ― those for them are very appealing,” said Jeffrey Lim, head of Campus Seoul, Google’s new tech start-up incubation center that opened earlier this month in the Gangnam tech cluster.

The Seoul campus’ launch is testament to the increase in foreign presence here, as its 3,000-plus members represent at least 28 nationalities, according to Lim.

“(In) a broader view, Seoul is a great hub to expand their market to other Asian countries.”

The foreign tech entrepreneur presence was almost nonexistent two years ago, and its quickly sprouting growth will not abate soon, market observers say.

But the inroads are still murky, and entrepreneurs with no experience in Korea often find themselves with mismatched expectations.

Danish entrepreneur Mads Roos, CEO of Seoul-based MotoKey, which makes a remote ignition app for motorcycles, said Koreans are not as tech-savvy as he expected them to be.

“It’s been challenging because I came with some preconceived ideas about the Korean market,” he said.

“I thought that Korean society or Korean people would be early adopters of technology, kind of the same structure as in Europe regarding behavior and market trends. What I’ve learned is that … a huge chunk of them are followers.”

As Koreans are traditionally conformist, he suggested, only cultural trendsetters like celebrities tend to be early adopters, followed by a mass of bandwagoners.

The major key for Argentina-based Wideo, a video-making platform developer, is localization. Its CEO Agu De Marco vows Wideo will adapt its product to the market, and not expect vice versa.

“If we just think about targeting the market, it’s about translating the website and I think it’s a big mistake. I think it’s about involvement with the culture and people there,” he said, citing PayPal’s struggle to gain ground in Brazil.

Wideo plans to not only adapt its user interface, but also to integrate with Korea’s highly localized distribution and sharing channels, where the Naver and Daum Kakao portals dominate. “We know what we’ve seen until now about the Korean market, and I think there’s a huge opportunity we can learn from the users in Korea,” he added.

Globalizing workplace

Adaptability is just as key when doing business, said Carlo Jacobs, a managing partner at Apora Ventures in Seoul.

Korean entrepreneurs, especially global-bound start-ups, are increasingly willing to seek help across nationalities, but they are not always culturally prepared to do so, he noted.

“Koreans are very open to global ideas and approaches,” he said. “However again, understanding culturally what is entailed in taking a different approach can be a huge challenge and causes many workplace conflicts.”

Differing mentalities like individualism versus collectivism, knowing when to speak up, expecting to be treated as equals and other language and culture issues could be sources of conflict, and foreigners should expect to adapt to avoid the pitfalls, Jacobs said.

“Koreans value their processes and culture of respect,” he added. “Those who do learn to understand the cultural nuances perform very well in Korea, as Koreans tend to greatly honor and respect foreigners who are able to adapt to their culture, sometimes even more than if you were Korean.”

Jacobs and other industry experts see an influx of Koreans who studied abroad and “gyopo” ethnic Koreans, who understand both local and overseas cultures, joining local start-ups to help bridge that gap.

At the same time, foreign entrepreneurs see small start-ups tearing down the traditional top-down hierarchy, and casting off Korean speech honorifics by communicating in English is also helping to flatten the power structure and create more room for feedback, they say.

“At first I was butting heads, but then I felt like (my colleagues) learned to appreciate it, the fact that we speak up,” said Megan Bowen, founder of Gomi, a marketing firm for global-bound Korean start-ups.

Playing the “foreigner card” can even give them an advantage in business deals or landing meetings, some entrepreneurs note. While Koreans largely still see working with foreigners as a novelty, Bowen said it makes some eager to collaborate to elevate their company’s status.

“It gives them more credibility. It’s a cultural thing. If you can do business and interact with foreigners, then that means that your business is doing better or well,” she said, adding that photo opportunities are not uncommon.

Choosing the right market

Korea is not for everyone, industry experts say, as fine-tuning to the language and culture might be too big an investment for small companies targeting greater Asia.

“Korea is an excellent test bed, but if you want to be successful in Korea first, then it’s going to be hard to leave, because the Korean market is very unique in what local users want,” said Paul Kang, Korean-American business strategist for Seoul-based MyDrives, a photo indexing app developer.

The localization trap is also true for Korean companies, he noted. Even local tech giants like Kakao and Naver haven’t been able to translate their success overseas, and it’s part of why MyDrives aimed globally from the get-go, Kang added.

Others point out that with a high concentration of Korean websites optimized for Naver and Internet Explorer users, Google-geared international companies might struggle to integrate their services. On the other hand, those who aim to help Korean businesses burst the Naver bubble to go global have a niche, Korean and foreign entrepreneurs say.

Still, those who choose to start here often must decide whether to focus on meeting global or Korean tastes. While Korea is seen as a good place to test the waters, Singapore is more widely considered an international jump-off for greater Asia.

Lim of Campus Seoul, however, sees the trend beginning to loosen.

“If (foreign start-ups) come to Korea, I think it’s partly true that they are more focused on Korean business, but also I feel that it’s changing a little bit,” Lim said. “Before, Korea was a silent market. They said that Korean people had different tastes than other countries. That was true, but I think that’s kind of changing, and Korean people are more open to foreign services.”

The Korean tech hub is ideal for companies that want to refine their technology with a sturdy base of over 40 million smartphone users in the world’s third-largest Android app market, Lim added.

Stressing that his twofold mission was to promote globalization and diversity in the local start-up scene, Lim expressed optimism that the Korean tech hub was becoming more foreigner-friendly.

“It might still be difficult, but I think it’s getting easier,” he said. “I’ve seen foreigners among start-up cofounders and among venture capitals in Korea. In every sector I’m starting to see one or a few foreigners. So I think that’s a good sign that we’re changing.”


By Elaine Ramirez, Stephanie McDonald
(elaine@heraldcorp.com)(smcdonald@heraldcorp.com)