SEOUL, Jul. 13 (Korea Bizwire) — More than half of the successful international startups would have failed in South Korea due to the country’s onerous regulations that many industry experts have said hinder new business opportunities, a new report claims.
During ‘Startup Korea!’, a policy conference held by the Asan Nanum Foundation and Google’s Campus Seoul at the headquarters of the Korea Chamber of Commerce & Industry on Thursday, McKinsey Korea partner Kim Su-ho cited the report, which claim that only 43 business models could have survived the country’s strict regulations, while 44 companies would have had to go through changes in order to bypass regulations under current law.
The report showed the average amount of investment South Korean startup companies attract is far below that of other countries including the U.S. and China, meaning over seven in ten successful startups would have not been able to take off in the South Korean market, where only $116 billion in investments were made during the past year, due to the lack of initial capital.
“In reality, innovative venture capital firms can’t thrive because of strict regulations. It is bringing down business morale in the South Korean industry,” Kim said.
According to a global entrepreneurship monitoring survey conducted this year, South Korea ranked 49th among 65 countries, listing not a single startup company among the global top 100.
In the meantime, the U.S. took the lead having listed 56 startups, while China followed closely with its 24 venture capital firms.
Due to the country’s restrictive business environment, however, many of the companies that made the world’s top 100 would have run afoul of either regulations or business laws.
For instance, Ant Financial, a sister company of Alipay (a payment service used on Alibaba), could have been in breach of accounting law, while Airbnb would have been disqualified as a startup as it fails to meet the requirements imposed on lodging businesses. Ride-hailing app Uber would also have found itself in conflict with the Passenger Transport Service Act.
The report urged reforms to government policy on venture capital to bring about a more open regulatory framework, while pushing for market deregulation and corporate venture capital to boost investment.
Though South Korea has the fifth largest venture capital investment market as a proportion of GDP, the heavy reliance on government funds – around 40 percent – points to a lack of private investment, Kim said.
Hyunsu Yim (firstname.lastname@example.org)