Start-up Rises out of Necessity, not by Entrepreneurship

In terms of age of the founders, the percentage of the firms headed by those in their 20s and younger declined 5.6 percent from a year ago while those established by middle-aged entrepreneurs in their 40s and 50s increased 9.6 percent and 13.5 percent. (image:kobizmedia)

SEOUL, Korea, April 30, 2014 (Korea Bizwire) – First-quarter figures for new start-ups signal that the economy may be finally in full recovery pace. Given there are many “micro” businesses whose capital is below 10 million won headed by middle-aged entrepreneurs, however, it is too early to tell.

According to the Small and Medium Business Administration on April 29, the number of newly established firms during the first quarter of this year was in excess of 20,000, a record-high level. During the month of March, the number rose to 7,195, a monthly high and up 13.2 percent from the same month a year ago.

The quarterly figure of 20,761 is up 9.4 percent from a year before and 7.9 percent from the previous quarter. This is the first time that the new start-up number surpassed the 20,000 level after the administration began collecting data in 2003.

By industrial sector, manufacturing increased 14.9 percent from a year ago while construction and services rose 13.7 percent and 6.2 percent, respectively.

(graphic:Kobizmedia/Korea Bizwire)

But the percentage of new companies with paid-in capital less than 10 million won was 35.4 percent. The ratio has steadily increased from 25.8 percent in the first quarter of 2011 to 29.9 percent and 33.7 percent in the same quarter in 2012 and 2013.

In terms of age of the founders, the percentage of the firms headed by those in their 20s and younger declined 5.6 percent from a year ago while those established by middle-aged entrepreneurs in their 40s and 50s increased 9.6 percent and 13.5 percent, respectively. 

The figures imply that business start-ups are led mainly by those who are laid off and forced to open new commercial establishments out of necessity; not motivated by entrepreneurship.

Kim Se-jong, vice president of the Korea Small Business Institute said, “The fact that the number of new start-ups is increasing is positive by itself. Recently spin-offs of affiliates of large corporations have partially contributed to this trend.

There were so many spin-offs during the 1997 Asian financial crisis. But when it comes to middle-aged businesspeople who have to open their own business due to corporate downsizing measures, however, the story is totally different.”

Written by Sean Chung (schung10@koreabizwire.com)

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