South Korea needs to create a “sustainable ecosystem” to nurture influential startup accelerators like US technology startup accelerator Y Combinator Management LLC to lay the foundation for the birth of unicorns, said the new president of the Korea Accelerator Association (KAA).
“Large-scale accelerators such as Techstars and Y Combinator are the strong backbone of the US startup ecosystem,” Jeon Hwaseong, the newly appointed president of the KAA, said during an interview with The Korea Economic Daily on Sunday.
“Korean accelerators are urged to play more active and important roles.”
Jeon is the founder and chief executive officer of Korean accelerator CNTTECH Co., which has invested in about 380 startups, including local startups Cookat and The Swing, and completed more than 4,000 startup incubation programs since its inception in 2003. He will officially begin his presidential term at the KAA on Feb. 19.
“It is important to have venture capitalists investing in already established startups but the time has come to provide the ground for accelerators that invest and educate” startups, said Jeon.
Accelerators educate, advise and invest in very early-stage startups, such as those in pre-seed and seed stages before the stages readying to receive VC investments. They are different from angel investors and VCs because they tend to be more fixed-term, short-term, cohort-based and mentorship-driven.
Mountain View, CA-based Y Combinator is known to be the best place for early-stage startups with an excellent track record of helping Arbnb Inc., Twitch and Dropbox grow into unicorns with a valuation of $1 billion or more.
THE KOREAN ACCELERATOR INDUSTRY IS CALM
In Korea, about 450 accelerators are officially registered but of them, only 80 to 90 are active in discovering and investing growth-driven startups.
This is the reason that the country needs to establish a “sustainable ecosystem” where Korean accelerators can actively lead projects to nurture the country’s next unicorn, Jeon explained.
For that mission, the KAA plans to open a startup center with a floor area of 990 square meters in metropolitan areas near the capital Seoul, in which startups can reside to receive mentorship and financial support.
Jeon thinks that because the Korean accelerator ecosystem itself is still in the early stages of development, local promising startups can’t get enough support to turn their ideas into real business.
“We need to pave the way for the launch of more private sector-driven funds of funds,” said the KAA president, adding that combined with public funds of funds, the private funds will help startups live through a severe funding winter.
Under his leadership, Jeon hopes the KAA can go global so it can lead Korean accelerators to actively mentor foreign startups or let Korean startups have easier access to offshore investment.
“I envision discovering an overseas startup and mentoring it in Korea to nurture it big enough to go public in the Kosdaq market,” said Jeon.
The KAA is readying to list a special-purpose acquisition company (SPAC) for the country’s first initial public offering of an accelerator.
None of Korean accelerators has succeeded in going public yet despite multiple attempts.
Write to Eun-Yi Ko at [email protected]
Sookyung Seo edited this article.