[Regulatory Republic] Startup Ecosystem Receives 'Positive' Evaluation... Excessive Regulation is a 'Hindrance'

<2> Startup Regulation Survey
57% Positive on Venture and Startup Growth
Government Support Policy Scores Average 61 Points
Investment and Workforce Support, Regulation Easing Needed
Only 21% Satisfied with Government's Regulatory Reform Efforts

The global startup festival 'ComeUp 2021' was held last November at Dongdaemun Design Plaza (DDP) in Seoul. Photo by Mun Ho-nam munonam@

Startup workers cited excessive government regulations as one of the factors hindering the development of the innovation ecosystem. Only 2 out of 10 respondents expressed satisfaction with the regulatory reforms promoted by the government. There were also calls to focus support on startups less than seven years old to sustain the 'Second Venture Boom.'

Asia Economy conducted a survey over two days, December 28-29 last year, using the mobile survey platform Open Survey. The survey targeted 300 startup employees to assess the domestic startup market and the government's regulatory reform achievements.

The results showed that 57% of respondents believed the overall growth trend of the domestic venture and startup ecosystem improved positively last year, accounting for the majority. Only 9.3% responded that it changed negatively. As of the third quarter of last year, venture investment reached a record high of 5.2593 trillion KRW, an 81.8% increase compared to the same period the previous year, making the 'Second Venture Boom' tangible.

Startup workers gave an average score of 61 points to the government's venture and startup support policies last year. The areas where government support is most needed for venture and startup growth were identified as 'support for revitalizing the investment market (30%)', 'support for securing excellent talent (21.7%)', 'flexible policy operation such as deregulation (20.3%)', and 'creating an environment for coexistence with existing interest groups (15.3%)'. This showed the necessity of government deregulation following essential investment and talent for business management.

The biggest reason startups face difficulties in the ecosystem was cited as a lack of support for venture capital (VC) and accelerators (startup planners) (19.8%). This indicates that despite the recent activation of the investment market, securing business funding remains challenging.

Next, factors hindering the development of the startup ecosystem were 'insufficient entrepreneurial capabilities (18.3%)', 'excessive regulations or inadequate legal systems (15.7%)', and 'conflicts of interest with traditional businesses/interest groups (13.3%)'. Notably, startup workers with 10 to less than 15 years of experience perceived difficulties due to excessive regulations or inadequate legal systems (26.3%) as the biggest obstacle.

Only 20.7% of respondents expressed satisfaction with the recent regulatory reforms promoted by the government. Regarding this, when asked how much they knew about the government’s regulatory reform initiatives or announcements over the past two years, the 'Passage of the Tada Ban Law (Amendment to the Passenger Transport Service Act)' had the highest recognition rate at 66%. The Tada Ban Law, passed by the National Assembly in March 2020, declared illegal the business model providing rental cars along with drivers. Following this, Tada suspended its 'Tada Basic' service, which had clashed with the existing taxi industry, and the passage of the Tada Ban Law became a representative case revealing the rigidity of the mobility market.

On the other hand, awareness of deregulation efforts to help startups grow and enter new industries was relatively low. Despite some opposition, only 18.3% of startup workers knew about the government's ongoing bill to introduce multiple voting rights (Amendment to the Special Measures for the Promotion of Venture Businesses), meaning only about 2 out of 10 were aware. Similarly, only 2 to 3 out of 10 recognized relatively recent issues such as the Fair Trade Commission’s decision of no charges on false or exaggerated advertising by LawTalk (28.0%) and the relaxation of qualification requirements for TIPS program operating institutions (23.7%).

To sustain the venture boom, 38.7% of respondents said support for early-stage startups less than 3 years old was most needed. However, support for mid-stage startups aged 3 to less than 7 years also accounted for a similar proportion at 37.7%, indicating a need for support for startups in growth and leap stages.

Regarding this, Kim Yong-moon, head of the Korea Institute of Startup & Entrepreneurship Development, emphasized in an interview with Asia Economy, "For startups in their 3 to 7 years, rather than general policy support, it is necessary to expand sales channels to secure funds and create an environment where they can attract investment with such references tailored to the leap stage characteristics." He added, "Cooperation with large corporations plays an important role, and global startups can also contribute to forming references in overseas markets."

Meanwhile, this survey was conducted via a mobile application (app), with a sampling error of ±5.66 percentage points at a 95% confidence level. Detailed survey results can be found on the Open Survey results page.