[Insight & Opinion] Regional Startups Must Thrive to Prevent Local Extinction

[Asia Economy] Recently, Busan City launched a task force to establish a Startup Agency, becoming the first local government to do so. They plan to consolidate startup support functions scattered across various institutions and implement policies to make Busan a startup hub in Asia. This is a meaningful move for startups and the regional economy.

However, the reality is not easy. According to a survey conducted earlier this month by the Korea Startup Forum Southeast Region Council targeting Busan startup representatives, only 44% of founders said they would continue their business in Busan, which is less than half. More Busan startups are considering leaving Busan. Only 13.7% responded that Busan is a good environment for startups, while 44.2% said it is not. Regarding the recent investment environment, 46.3% responded “very serious” and 41.1% “serious.”

Some in the local community consider these survey results a “shock,” but the reality is a natural outcome. The polarization between the Seoul metropolitan area and regional startup ecosystems is worsening. About 90% of startups that received investments exceeding 1 billion KRW are located in the metropolitan area. The same goes for venture capital. Among 24 “unicorn” startups valued at over 1.3 trillion KRW, all but one are in the metropolitan area. Nearly 90% of “pre-unicorn” and “baby unicorn” startups selected by the government for nurturing and support are also concentrated in the metropolitan area, which was pointed out during a national audit. However, since these are companies above a certain scale, it is difficult to find candidates in the regions.

On the other hand, according to government statistics on technology-based startups, about 40% of startups are founded outside the metropolitan area. This means regional startups are leaving their areas in search of better environments as they grow. A common concern among many startup founders met in the regions is that it is very difficult to receive good investments locally, and it is even harder to solve issues like follow-up investments for growth and talent recruitment. Ultimately, unless the issues of “investment” and “talent” are resolved, the concentration of startups that have “not yet left the region” in the metropolitan area will continue.

Why is revitalizing regional startup ecosystems important? From a regional perspective, it is natural to want to prevent “regional extinction” caused by youth leaving and to reduce the gap with the metropolitan area. On the other hand, from a startup ecosystem perspective, it might seem natural and more efficient to concentrate in Seoul. However, diversity is the driving force of innovation in startup ecosystems. The steady emergence of talent from regions and the process of solving various problems discovered locally can invigorate our startup ecosystem. If ecosystems with unique regional charms are activated and strong networks with Seoul and the metropolitan area are formed, the global competitiveness of Korea’s startup ecosystem will increase. “Regional revitalization” is better for the startup ecosystem than “regional hollowing out.”

It is difficult to artificially activate regional startup ecosystems, but it is also hard to wait for natural activation alone. Therefore, a cooperative system led by the private sector and actively supported by the public sector must be created. Among these, the role of startup founders is the most important. As seen in global cases, Busan’s founders themselves are raising awareness of the reality through such surveys and continuing to make proposals and activities for the Busan startup ecosystem. This is one reason why Busan is showing slightly faster policy changes than other regions and is pushing for the establishment of a Startup Agency. We hope that more diverse startup ecosystems will grow in more regions.