Korean conglomerates turn to startups to tackle new ventures and ESG

South Korean conglomerates have been reaching out to D.CAMP, the country's largest non-profit foundation for startups, to get in touch with domestic startups that can help foster new ventures and boost environmental, social and governance (ESG) efforts.

In October, SK Ecoplant Co., the construction arm under SK Group, will be co-hosting D.CAMP's demo day, D.Day, to search for startups that may have synergy with the company's new business. The country's three major mobile carriers SK Telecom Co., KT Corp. and LG Uplus Corp. are also set to attend the demo day in pursuit of fresh business opportunities.

The collaboration between conglomerates and Korean startups has become an emerging trend as of late with some large business groups placing startups entirely in charge of new operations.

STARTUPS EMERGE AS ATTRACTIVE PARTNERS FOR BIG COMPANIES

Recently, global automaker Hyundai Motor Group joined forces with domestic startup 42dot to foster its autonomous driving business.

The automaker newly created a Transportation-as-a-Service (TaaS) division to oversee the mobility businesses of Hyundai Motor Co. and Kia Corp. and appointed Song Chang-hyun, the current chief executive of 42dot, as the president and division head of the TaaS unit.

This came as a surprise given that it is extremely rare for a Korean conglomerate to appoint an outsider to spearhead a division deemed as the group's future growth driver.

Last year, Samsung Engineering Co. teamed up with a construction safety management startup GSIL Co. to build a smart safety platform. GSIL was in charge of planning and developing the service while Samsung Engineering handled the development costs.

Also, Korea's No. 1 mobile platform Kakao Corp. acquired the US-based mobile fiction startup Radish Fiction and digital comics platform Tapas Media to firm up its storytelling content businesses.

Korea's portal giant Naver Corp. is also an active participant when it comes to collaborating with domestic startups. The company has assigned key roles to startups to help boost its core e-commerce business alongside onboarding many logistics startups to its online fulfillment data platform, Naver Fulfillment Alliance.

"Among the startups that Naver has invested in, some 71% of them have current collaborations with the company," said Yang Sang-hwan, the head of Naver's startup accelerator D2 Startup Factory (D2SF).

RESOLVING ESG CONCERNS VIA STARTUPS

Korean startups are also noted for their abilities to address environmental, social and governance (ESG) standards which have become key agenda for large companies.

Korea's major beer maker Oriental Brewery Co. has partnered with food upcycling startup REHarvest Co. to transform byproducts made during the beer brewing process into energy bars and cereals.

Leading chemical maker LG Chem Ltd. has collaborated with eco-friendly packaging startup Innerbottle Co. to establish a platform that recycles plastic containers of beauty products. 

"There's a rising demand for ESG related businesses, but we don't have the internal resources to handle it so we search for relevant startups," said an industry official.

CORPORATE VENTURE CAPITALS ON THE RISE

As Korean conglomerates and startups increasingly work together, large companies are setting up corporate venture capitals (CVC) to invest in promising startups.

Shinsegae Group's CVC fund Signite Partners has invested in fashion and beauty startups including Ably Co. and mobile carrier KT's CVC unit KT Investment has invested in fintech startups including Bank Saland and Korea Credit Data. So far, KT has invested around 876 billion won in startups.

Also, fashion conglomerate E-Land Group and energy-focused GS Group have both established CVC arms to ramp up their investments into startups that could help boost their new businesses.

Write to Joo-wan Kim, Jung-hwan Hwang and Han-gyeol Seon at kjwan@hankyung.com
Danbee Lee edited this article.