[COVID-19 Transformation] Frozen Startups "There Is Opportunity"... Need to Select Customized Education and Support Carefully

Fierce Startup Market... High Closure Rates Due to Overheating of Similar Businesses
Focus on Untact Life... 4th Industrial Revolution and Delivery Food Service Industry Promising

Capture of the Korea Startup Strategy Institute website.

[Asia Economy Reporters Seon-ae Lee, Min-young Cha, Seung-jin Lee] The startup environment is expected to change in the post-COVID-19 era. Although the startup market, which had already shown limitations due to fierce competition before the novel coronavirus infection (COVID-19), is at risk of rapidly cooling down, experts believe there are still opportunities even in the frozen market. However, there is a growing call for the need to distinguish between suitable and unsuitable candidates for tailored education and support for startups.

Kyunghee Lee, Director of Korea Startup Strategy Institute.

◆Fierce Competition...Need to Strengthen Individual Capabilities= Competition in the domestic startup market is intense. While overseas regulations make starting a business difficult, South Korea has relatively loose regulations on startups, leading to a highly competitive environment with many jumping in. Lee Kyung-hee, Director of the Korea Startup Strategy Institute (CEO of BujaBiz), diagnosed, "In South Korea, when someone opens a store next door, 'me too' and 'copycat' businesses proliferate, resulting in a row of similar stores. This is a characteristic that leads to a particularly high proportion of self-employed businesses among OECD countries."

As self-employed businesses close one after another due to COVID-19, the startup market inevitably cools sharply. Therefore, warnings have been raised that indiscriminate entry into the market could be more harmful than before. There are also calls for appropriate regulations accordingly.

Lee said, "Small-scale businesses generally have high closure rates regardless of domestic or international context, but the problem in South Korea is the overheating of similar businesses rather than idea-based businesses," adding, "Cases where franchises are recruited at low prices aiming for mergers and acquisitions are also problematic. While freedom to start a business should not be restricted, appropriate regulations to prevent overheating are necessary."

She also advised that individual entrepreneurs entering startups must strengthen their own capabilities. Lee emphasized, "In South Korea, there are almost no places to receive counseling before starting a business, and few think they need to pay for consulting. Because of this, many make mistakes in the process of selecting business types. It is essential for individual entrepreneurs entering startups to enhance their personal capabilities."

Experts also advise that proper startup education is necessary. Although information and communication technology (IT) education has increased as the future society approaches, it often does not meet the needs of the recipients. Especially, tailored education is needed for startup hopefuls aged 60 and above, such as the baby boomer generation (born 1955?1963) approaching retirement.

Yoon-jae Lee, Chairman of the Small and Medium Business Hope Foundation (Professor of Economics at Soongsil University), said, "After COVID-19, society is moving toward a contactless society, which presents new startup opportunities," and emphasized, "The attendance rate for mobile practical training conducted by the foundation exceeds 90% each session, showing the eagerness of those hoping to start businesses. Institutional support is needed to satisfy their thirst for education."

There were also calls to distinguish between suitable and unsuitable candidates for startup support. Currently, the government and local governments are doubling funds and competing to expand startup spaces and increase financial support. Eun-hee Lee, Professor of Consumer and Child Studies at Inha University, pointed out, "There are various social support systems for startups, but the standards are low, which sometimes leads to misguided startups," and added, "It is necessary to create a virtuous cycle by strictly selecting support recipients with stricter standards to increase the possibility of government fund recovery and increase successful startup cases."

◆Opportunities Triggered by COVID-19...Focus on the 4th Industrial Revolution= To find promising startup items, attention should be paid to the 4th Industrial Revolution. Discussions on VR performance businesses, mobile and contactless service enhancements, which had been talked about before COVID-19, have begun in earnest. New entrepreneurs should find business items in new occupations based on these points. Lee said, "COVID-19 has acted as a catalyst for the 4th Industrial Revolution, so business items should be sought in this field," adding, "Existing businesses will find marketing business models suited to contactless life very important, and deep consideration is needed on how to manage customer systems." For example, how to make consumers using contactless services feel the same level of humanity as face-to-face services. Furthermore, he added, "Since most people still think of chicken restaurants when it comes to startups, it is necessary for the government to help absorb startup demand in various ways."

In the dining market, competitive food franchises are expected to be the answer. Im Geum-ok, CEO of bhc, said, "Among delivery foods, chicken is the most preferred menu by consumers. Despite being a red ocean, the national interest in chicken and various menu developments by companies have given the dining industry high competitiveness," emphasizing, "If prospective entrepreneurs do not have the skills and experience to develop competitive tastes and menus, franchises can increase the chances of success." Im added, "Through consulting on menu development, ingredient purchasing, promotion, marketing, and store operation, the entire startup process can be made easy and safe, and above all, the benefits of high brand awareness are significant."

She continued, "Due to COVID-19, contactless services are spreading across all industries, and non-face-to-face consumption culture will become the new normal reflected throughout society," adding, "The dining industry will also follow this direction, with increasing consumer demand for delivery orders and growing interest in health, making related industries notable startup items."