Half of Korean start-ups founded business outside of Korea

Around half of the Korean start-ups running a business outside of Korea have founded their business locally, according to a report of The Korea Trade-Investment Promotion Agency that analyzed 259 Korean start-ups operating in 29 countries. The ratio of start-ups founding businesses overseas without a parent company in Korea continues to grow rapidly. New businesses with creative ideas and new businesses are turning to other countries rather than choosing the open their business in Korea.

Even start-ups that are founded in Korea wish to take their business elsewhere. According to a survey commissioned by The Korea International Trade Association(KITA), one out of four Korean start-ups replied that they are considering transferring their operations due to “domestic regulations” that hinder innovation and growth. ThorDrive, a start-up that performed urban autonomous driving for the first time in Korea, took its business to the U.S. in 2017. Little has changed since.

Previous governments have sought deregulation, but the environment remains hostile to start-ups. Despite competent medical resources and info technology, telecare is still illegal. Accommodation and ride-sharing are prevalent overseas, but in Korea, there are still many regulations to restrict new businesses. Platform-based start-ups are struggling against opposition from interest groups in the medical care, tax, and real estate industries. Over the last five years, there were 2.7 regulation-related bills submitted per day.

No wonder half of the world’s 100 top unicorn businesses would find it difficult to run their business in Korea. The Asan Nanum Foundation, a non-profit foundation dedicated to promoting youth entrepreneurship, found that 12 overseas unicorn companies would not have carried out their business at all in Korea due to regulation, while 43 might have, with restrictions. In Korea, overly stringent approval standards and red-tape hinder technology verification and commercialization. Four of the start-up CEOs that your reporter met with said that they would have opted to build their business elsewhere.

Start-ups are candidates poised to become potential global businesses. In an age where technology competition between the U.S. and China grows more intense than ever, start-ups backed by innovative technology can become a platform to create future growth for Korea. We should implement ‘negative regulation’ in which everything is permitted with few exceptions and deregulate to encourage start-ups to come out of regulatory sandboxes and continue their businesses. Delayed regulatory reform would only take away innovative technology and entrepreneurship in Korea.