[Insight & Opinion] The 'Hot Winter' of Startups Breaking Through the Investment Deep Freeze

[Asia Economy] Globally, startup investment has entered a deep freeze this year. Domestic investment also dropped by more than half compared to the previous month, amounting to around 380 billion KRW as of September. Considering that the monthly average in the first half of the year was about 1 trillion KRW, this represents a sharp decline. It can truly be called an ‘investment deep freeze.’

Amid this, the country’s largest and a global startup event, ‘ComeUp2022,’ was held earlier this month. The three-day event belied the term ‘deep freeze.’ Over 250 global startup ecosystem stakeholders from 19 countries participated in large numbers, and the number of visitors attending both onsite and online reached approximately 57,000, making it a huge success. Contrary to expectations that it would reflect the startup ecosystem’s slump, the atmosphere on site was rather heated.

Of course, the ‘investment deep freeze’ caused by the triple crisis and global economic contraction was a topic of much discussion. However, rather than pessimism, serious discussions focused on how to survive and overcome the situation. Startup founders, domestic and international investment firm leaders, Minister Lee Young of the Ministry of SMEs and Startups, and Park Jae-wook, chairman of the Korea Startup Forum, the organizing body, presented various diagnoses and solutions regarding the current situation.

The quality of participating startups also improved significantly. The IR pitching competition among 70 teams in the early-stage (Rookie League) and growth-stage (Rocket League) received high praise from investors and participants. Unicorn startups, large corporations, and big tech companies that could collaborate with these startups also expanded their participation, resulting in the highest-ever record of ‘business matching’ between startups, investors, and large corporations. Global participation also increased, reflecting growing interest in the Korean startup ecosystem. Countries such as the United States, the United Kingdom, Germany, Italy, and Saudi Arabia showed great interest in supporting Korean startups’ entry into their markets and in market exchanges. Their unanimous opinion was that although the Korean startup ecosystem is not widely known globally, it demonstrates a very high level of capability and achievement worldwide, and most expressed a desire to participate in next year’s event as well.

The conclusion drawn from ‘ComeUp2022’ is that although difficult conditions will persist for some time, the startup ecosystem will inevitably continue to grow. Since 2010, venture investment in Korea’s startup ecosystem has increased more than sevenfold, and the government’s fund-of-funds contributions have increased ninefold. Choi Hyuk-jae, CEO of Spoon Radio, founded in 2010, advised, “According to various statistics, over 95% of startups disappear within three years. Even successful companies face 99 failures. It is better to accept reality and approach it with the mindset that ‘the more failures you experience, the higher the chance of success.’ All founders grow and succeed only after going through failures.” The current crisis is, in a way, everyday life for startups, and the startup ecosystem has steadily grown amid it.

Grimland, CEO of the global investment firm Antler, who gave a keynote titled ‘Where is the End of the Long Winter?,’ emphasized that now is actually a good time to start a business. A globalized world, new technologies, low startup costs, rapid innovation, and many unresolved problems present opportunities for startups. Compared to last year, startups receiving appropriate valuations is actually beneficial as it helps distinguish the wheat from the chaff.

Historically, the 2001 dot-com bubble burst and the 2008 global financial crisis?both recession periods?were the times when Google, Amazon, Airbnb, and Uber emerged. The more startups endure this winter passionately, the sooner spring will come.

Choi Sung-jin, CEO of Korea Startup Forum