[Square] For a Well-Prepared Light Startup

Jang Jaewon, Head of Startup Venture Research Office at Korea Institute of Startup & Entrepreneurship Development

Jae-won Kang, Head of Startup Venture Research Office, Korea Institute of Startup & Entrepreneurship Development

During the author's school days, every year at Chuseok, the university student council operated large-scale return buses. These buses were cheaper than express buses and provided lunch boxes, making them popular among students from rural areas who were not financially well-off. But was there no way for the student council to offer return buses completely free of charge? For example, they could have sought companies targeting university students as their main customers to sponsor the bus costs in exchange for allowing those companies to conduct their desired activities on the bus.

This actually happened in an entrepreneurship course at Western University in London, Ontario, Canada. In an assignment where teams of five started a business with $25, one team made a contract with the energy drink company Red Bull to receive $1,000 per bus heading to Toronto for Thanksgiving in exchange for recruiting students. Students were thrilled with the free buses during peak season, and Red Bull was able to freely conduct tasting promotions and surveys during the long journey in the confined space of the bus.

What comes to mind when you hear the word "startup"? Some may think of positive images such as self-realization and definite financial rewards, while others may recall negative images like bad credit and ruin. Jeong Moon-sul, former chairman of Mirae Industry and a pioneer of venture companies, reflected, "I truly felt the weight of life while running a venture." On the other hand, YouTuber Daedoseogwan, a role model for young people dreaming of being solo creators, advises starting casually as a hobby because when you put everything on the line, anxiety prevents ideas from coming out. So, what kind of startup is desirable?

First, a well-prepared startup. According to the Business Birth and Death Administrative Statistics, the three-year survival rate of startups was 45%, and the five-year survival rate was 32%. Despite such low survival rates, only 19% of founders reported having startup education experience in the Startup Company Survey. The Small Business Survey showed that 36% of startups had a preparation period of less than six months, and 14% less than three months. For solo startups, it took an average of 27 months to reach the break-even point.

Second, a light startup that allows for recovery. Among founders, the proportion of re-entrepreneurs was 26%, and only 4% had started three or more times. The average startup cost for small business owners was 90 million KRW, of which 69 million KRW was self-funded. Investing most of one’s assets in a first startup with objectively low survival chances is very risky. It is better to think of it as gaining experience and try with low costs.

Third, a collaborative startup. The vast majority of founders start alone. However, management encompasses various fields such as human resources, labor, accounting, finance, marketing, and production management. A founder cannot and should not handle all tasks alone. Non-core tasks should be boldly outsourced. Meanwhile, a partnership between young people with brilliant business ideas and middle-aged individuals with practical experience can create great synergy.

Fourth, a value-driven startup. The earlier-mentioned Western University entrepreneurship course anecdote shows how prospective entrepreneurs discover and commercialize the values of consumers and advertisers. Nowadays, concept consumption that values experience and meaning is increasing. The recent management buzzword ESG (Environmental, Social, and Governance) also reflects this trend.

Finally, the government should proactively implement job and welfare policies for involuntary potential entrepreneurs. A significant number of founders started businesses due to employment difficulties, uncertain job prospects, or lack of alternatives. It is important to prevent these involuntary entrepreneurs from entering the fiercely competitive self-employment sector, which threatens the survival of existing businesses, thereby breaking the vicious cycle in advance.