Korea needs sustainable ecosystem for startup accelerators

South Korea needs to create a “sustainable ecosystem” to nurture influential startup accelerators like US tech startup accelerator Y Combinator Management LLC to lay the foundation for the birth of unicorns, said the new president of the Korea Accelerator Association (KAA).

“Large-scale accelerators such as Techstars and Y Combinator are the strong backbone of the US startup ecosystem,” Jeon Hwaseong, the newly appointed president of the KAA, said in an interview with The Korea Economic Daily on Sunday.

“Korean accelerators are urged to play more active and important roles.”

Jeon is the founder and CEO of Korean accelerator CNTTECH Co., which has invested in some 380 startups, including local startups Cookat and The Swing, and completed more than 4,000 startup incubation programs since its inception in 2003. He will begin his presidential term at the KAA on Feb. 19.

“It is important to have venture capitalists investing in already established startups but the time has come to provide the foundation for accelerators that invest in and educate” startups, said Jeon.

Accelerators educate, advise and invest in very early-stage startups, such as those in the pre-seed and seed stages, before the stages they are ready to receive VC investments. They differ from angel investors and VCs in that they tend to be more fixed-term, short-term, cohort-based and mentorship-driven.

California-based Y Combinator is known as the best place for early-stage startups with an impressive track record of helping Arbnb Inc., Twitch and Dropbox grow into unicorns, each with a valuation of $1 billion or more.

THE KOREAN ACCELERATOR INDUSTRY IS CALM

About 450 accelerators are officially registered in Korea but only 80 to 90 of them are active at discovering and investing in growth-driven startups.

That is why the country needs to establish a “sustainable ecosystem” where Korean accelerators can actively lead projects to nurture the country’s next unicorn, Jeon explained.

To take on that mission, the KAA plans to open a startup center near the capital Seoul, where startups can set up shop and receive mentorship and financial support.

Jeon thinks that because the Korean accelerator ecosystem is still in its early stages of development, promising local startups can’t get enough support to turn their ideas into real business.

“We need to pave the way for the launch of more private sector-driven funds of funds,” he said, adding that combined with public funds of funds, the private funds will help startups survive a severe funding winter.

Under his leadership, Jeon hopes the KAA can go global so it can lead Korean accelerators to actively mentor foreign startups or give Korean startups easier access to offshore investment.

“I envision discovering an overseas startup and mentoring it in Korea to nurture it so it's large enough to go public on the Kosdaq market,” said Jeon.  

The KAA is preparing to list a special-purpose acquisition company (SPAC) for the country’s first initial public offering of an accelerator.

Despite multiple attempts, no Korean accelerator has yet succeeded in going public.

Write to Eun-Yi Ko at koko@hankyung.com
Sookyung Seo edited this article.