[Takryucheongron] Enhancing the Global Competitiveness of Domestic Startups

Choi Sung-jin, CEO of Korea Startup Forum

Woowa Brothers, the operator of the 'Baedal Minjok' service, is making headlines. At the end of last year, they announced a merger and acquisition (M&A) deal worth nearly 5 trillion won with Delivery Hero, the parent company of another food ordering service, 'Yogiyo.' Reactions range from cynical remarks that 'Baedal Minjok' has become the 'German Minjok' to concerns that the monopoly could harm users' interests or increase costs for restaurants, and even opinions that the Fair Trade Commission should not approve the merger. It is unfortunate that the significance of this event and the positive value of startups seem to be overshadowed.

First, even from a narrow perspective, this has elevated the value of Korean startups to a new level. There are over 400 'unicorn' startups worldwide with a corporate value exceeding 1.2 trillion won, and about 10 in Korea. Although the number is not small, ranking around 5th or 6th globally, Korean startups have not been widely recognized on the global stage, leading to the term 'Korea discount' to describe their undervaluation. This deal objectively acknowledges a corporate value of about 5 trillion won. Interest in and evaluation of our startups will inevitably increase going forward.

Moreover, the contract between the two companies does not simply represent a sale but signifies a challenge toward a bigger goal in the global market. The management of Woowa Brothers, including CEO Kim Bong-jin, will not leave the company but will oversee the entire Asian market, including Korea, with CEO Kim becoming a major shareholder in the merged entity and participating in global management. This will serve as an experiment for the globalization of domestic startups and an opportunity to enhance global competitiveness. The innovations created by startups focus on digital transformation and are inevitably exposed to global competition. The 'food tech' sector, including food delivery, has global leaders and is converging with mobility services like Uber and Grab. As our talents accumulate experience in the Asian market and globally, the global competitiveness of domestic startups will naturally improve.

Above all, the greatest significance lies in the positive impact on the entire startup ecosystem, not just the achievements of one company. Our startup ecosystem continues to grow overall but has many weaknesses, such as a lack of many successful exit role models, small investment capital, and some detachment from the global ecosystem. This case, where a startup founded with no capital has been recognized with a corporate value of 5 trillion won in about ten years and is challenging the global stage, can provide hope not only to startup founders but also to the younger generation. Domestic venture capital (VC) firms that have experienced successful investment returns this time will also expand their investment scale, leading to a virtuous cycle of new investment funds flowing in.

Due to the characteristics of the digital economy, which has no entry barriers, having a high market share does not easily harm user interests or increase transaction costs. On the contrary, it is common to act to block competitors' entry. CEO Kim Bong-jin has expressed regret that they could not list on the domestic market and had to pursue global challenges through M&A. However, within the startup industry, the consensus is that 'Baedal Minjok' would not have been valued at over 3 trillion won through a domestic stock exchange listing. It is hoped that the significance of the 'Baedal Minjok' case will be justly evaluated as a positive step forward for our startup ecosystem.

Choi Sung-jin, CEO of Korea Startup Forum