It’s now easier to slap together a startup in Seoul than San Francisco, says Jimmy Rim, a youthful venture capitalist who founded K Cube Ventures. He said he sees 30 to 40 new business plans a week.
Among the new entrepreneurs is Hyungseok Dino Ha, the 30-year-old who co-founded Memebox (pronounced mee-mee-box) with partner Doin Kim.
Born in South Korea and educated in the United States, Mr. Ha ditched a job with Tom Ford, the fashion name, for the thrill of startup culture. The company sends out boxes with an array of beauty products – moisturizers, fragrances and yes, cocoons – to subscribers and is slowly developing its own brand of beauty goods. In two years, Memebox has grown to 260,000 South Korean users, and another 10,000 American and Canadian ones, each sampling and buying goods from 450 partners, including Estée Lauder and L’Oréal.
It has 80 per cent of the online beauty market in South Korea, and nearly 80 people on staff, most of them women. Mr. Ha is currently in Palo Alta, Calif., as the first South Korean company at Y Combinator, the prestigious startup accelerator. The workload – only four hours off on Saturdays – is as enormous as the ambition, which is to grow by 10 per cent a week. Last December, Ms. Park, the South Korean president, sent him a rice cake with best wishes for 2014. It hit home that “she really cares about innovation and I should really try to help and do what I can,” he said. “I’m on a mission that the Korea brand – or Korea itself – has to really stand out in the world.”
Growth miracle at risk
South Korea has 0.03 hectares of arable land per person, placing it in the company of Greenland and Kuwait (Canada has 42 times that). Its energy supplies are minuscule, pumping just 1,000 barrels of oil a day in 2011; it used 2.2 million.
The lack of natural resources has long made innovation a do-or-die question for the country, but perhaps at no time more than now.
In the 1960s, the average Seoul worker made as much as someone in sub-Saharan Africa; today, the city’s wealthy Gangnam district sports a Ferrari dealership. South Korea has succeeded by doing just about everything Western thinkers tend to oppose, not least using a dictatorship to establish a series of monopolies in car manufacturing, chemicals, steel, shipbuilding and electronics. For decades, that model worked.
“If you look at the Korean industrial topology, you will find that in all of these five areas, we have the top firms in the world,” said Wonjoon Kim, an associate professor at the Korea Advanced Institute of Science and Technology, who studies the economics of innovation.
But the growth miracle is at risk of becoming history. Those industries face increasingly difficult prospects. Recent years have seen slowing GDP growth and growing levels of indebtedness. The International Monetary Fund projects growth of about 3.7 per cent this year, though some forecasts are lower. South Korea’s risk-averse banks are among the least profitable in their peer group, and the country suffers from a deep conservative streak sometimes mixed with toxic gender imbalances.
Ten conglomerates account for more than 75 per cent of the country’s GDP. Young people face such strong expectations from parents to work for those stable giants that some risk being booted from home if they strike out on their own.
“These are probably the most fiscally conservative people on Earth. Behind the Estonians maybe, but that’s about it,” says Isabelle Mateos y Lago, the IMF’s mission chief for Korea.
Something has to give, Ms. Park said in February. The old model has “reached its limit,” the President said in a major speech unveiling a plan to boost research and development spending to fully 5 per cent of GDP, and pour more than $4-billion into sparking new startups. “Unless we change the fundamentals of the economy and break from the trap of slow growth, there will be no future for us,” she said.