Invested 3 Trillion This Year Alone... 33% of Young CEOs Report '0 Won' in Sales

Youth Startup Companies Hit Record High Last Year
33% of Government-Supported Firms Report Zero Revenue
Experts Say "Quality Improvement, Not Just Quantitative Growth, Is Important"

(Seoul=Yonhap News) Kwon Chil-seung, Minister of SMEs and Startups (fifth from the left), visited the Northern Gyeonggi Youth Startup Academy in Paju, Gyeonggi Province on October 26 last year, and is taking a commemorative photo after a meeting with the academy's new students.

[Asia Economy Intern Reporter Seohee Lee] Young entrepreneurs who transformed with government support are facing the risk of business closure. Although the government pours the largest-ever budget annually to foster 'young CEOs,' one-third of them are effectively surviving by taking on debt. Experts advise that the government needs to focus not only on the quantitative expansion of young entrepreneurs but also on qualitative improvement.

The number of young entrepreneurs steadily increased even during the COVID-19 pandemic. According to the Ministry of SMEs and Startups in February last year, the number of startups in 2020 was 1.48 million, a 15.5% increase from the previous year (1.28 million). In particular, the number of entrepreneurs under 30 rose sharply by 19.1%, from 146,000 in 2019 to 174,000 in 2020, showing the steepest growth among all age groups. The number of youth startup companies also continued to rise, reaching a record high of 511,000 last year.

The youth startup 'boom' began in earnest about 10 years ago. In 2011, the government launched the 'Youth Startup Academy' to foster new growth engines and reduce youth unemployment. The Youth Startup Academy is a program that provides free education and support for the entire process from startup planning to commercialization for young entrepreneurs. Approximately 4,800 young entrepreneurs have graduated from this program as of this year. Additionally, the budget for government startup support projects such as startup packages and youth-specialized startup support reached about 3.6668 trillion KRW this year, marking the largest scale ever.

(Paju=Yonhap News) Kwon Chil-seung, Minister of SMEs and Startups, is visiting the Gyeonggi Northern Youth Startup Academy on Jungang-ro, Paju-si, Gyeonggi-do, listening to a product explanation from a youth startup representative.

However, the reality for young entrepreneurs appears to be challenging. Many 'young CEOs' born through government support are barely managing to pay interest or are facing business closures.

According to the 'Youth Startup Academy Status' received by Asia Economy from Representative Kim Jeongjae's office, as of October last year, among 4,793 companies graduated from the 1st cohort (2011) to the 10th cohort (2020), 1,594 companies reported 'zero sales' for one year. This means about 33% of the total are effectively operating by incurring debt. Even if they have not declared bankruptcy, many companies are likely to have suspended operations or are barely surviving.

Experts point out that government startup support projects have expanded excessively in quantity but lack consideration for qualitative improvement. Kim Jongjin, Senior Research Fellow at the Korea Labor and Society Institute, said, "Among youth policies by the central and local governments, startup policies occupy too large a proportion," adding, "Despite pouring enormous budgets, two-thirds of youth startup companies fail within three years. This is because the expansion has been only quantitative without concern for qualitative improvement."

Kim further advised that creating an 'ecosystem' is as important as increasing the number of supported companies. He said, "Even if only 3 to 4 companies are supported, helping these companies make qualitative leaps is meaningful," and added, "The number of supported startups should be reduced to about two-thirds of the current level, and the remaining budget should be invested in improving their business environment, such as organically connecting youth startup companies with nearby commercial districts."