Is The Next Bill Gates Living In Seoul?
Sitting in his company's cramped office above a smoky barbecue joint in downtown Seoul, Yoon Suk Min hardly looks like a millionaire. Yet in May, he struck it rich. The 30-year-old founder of Web International Co., a maker of Internet communications software, saw his company go public on KOSDAQ, the Korean over-the-counter exchange, at $28 a share. By the end of the month, Web shares were trading at $50, and Yoon, who maxed out on his credit card to finance his startup in 1994, was worth $11 million. Like any Silicon Valley hotshot, he's angling to list Web on the NASDAQ market in the U.S. in the next few years. Says Yoon: "I have seen things I thought impossible become realities."
INSPIRED. Entrepreneurs and startups in Korea? It's hard to believe. South Korea remains the land of Samsung, Hyundai, LG, Daewoo, and other chaebol, whose tentacles spread throughout the economy. Yet more and more thirtysomethings are striking out on their own, inspired by Microsoft Corp.'s William H. Gates III and Masayoshi Son, Japan's software and publishing wizard. The number of Korean startups backed by venture capital rose to 1,500 in 1996 from 1,000 two years ago. Plenty may fail. But if enough survive, they could provide Korea with innovation and jobs.
The economy needs a boost. The chaebol that traditionally fueled growth are suffering from high labor costs, new competition from foreign rivals at home, and massive debts. Thirteen of the top 30 are operating in the red. "The chaebol mass-production system no longer works for Korea," says Kim Jin Hyung, the official in charge of small-business promotion at the Trade, Industry & Energy Ministry.
The slowdown at the chaebol is also turning off younger engineers who want a chance to make it big. "Those companies offer few prospects to people with their own dreams and hopes," says You Soo Keun, vice-president of Dooin Electronics Co., a producer of multimedia hardware and software. You, 36, and other former LG Electronics engineers formed Dooin in 1990, and sales recently hit $46 million. You recently gave out stock options to Dooin's 160 employees, something never tried by the chaebol.
If Dooin goes public on KOSDAQ, its workers could get rich. The one-year-old KOSDAQ lists 63 companies and overall the exchange is up 29%. Shares in software company Hangul & Computer Co. have popped from $22 to $54 in a little more than a year. Turbo-Tek, a maker of factory automation equipment, went public at $34 a share on Apr. 22. Latest price: $40.
Other hot stock launches are likely as Korea's venture-capital industry invests in more startups to finance, fix, and float. There are four semi-government venture-capital firms: Korea Technology Finance, Korea Development Investment Finance, Korea Technology Banking, and Korea Technology Advancement. Together they invested roughly $2.2 billion in new businesses in 1996. In addition, 53 private venture-capital firms invested $500 million in startups in 1996. The government is also easing curbs on bank financing. About 80% of all bank loans still go to chaebol, forcing many smaller companies to turn to loan sharks, who exact interest rates of 20%.
Policymakers hope that throwing a little seed corn at entrepreneurs will create more work. Startups generated 23,500 new jobs between 1995 and 1996. Not huge, but a nice contrast to the chaebol, which are trimming staff through buyouts and looking forward to 1999, when layoffs become legal. "This is a breakthrough when job opportunities for young people and middle-aged managers are dwindling," says Park Won, investment director at Korea Technology Finance Corp. More important will be the breakthrough in psychology if the entrepreneurial spirit really takes hold in South Korea.