When New Economy Billionaire Overtook the Old Conglomerates
South Korea is the latest prove of self-made billionaire boom
It is easier to be millionaire nowadays. Stock market and VC money made us easier to have so much money we can never imagine. Being a startup founder is such a promising career, so do being an executive in tech company. In some cases, they are overtaking decade-old conglomerates. The latest prove is what happen in South Korea.
A new elite of uber-rich entrepreneurs is shooting up the wealth rankings in South Korea, overtaking the families behind the country’s sprawling conglomerates known as “chaebol.”
Take Brian Kim as the example. Brian Kim is the founder of mobile-messaging app Kakao Corp., one the most prominent South Korea’s tech entrepreneur. With a fortune of $13.2 billion, he recently replacing Samsung group heir Jay Y. Lee as the nation’s richest person. But he is not the only one, other self-made billionaires abound.
There’s Chang Byung-gyu who completed a listing of game developer Krafton Inc. just this week, and Bom Kim, a South Korea-born U.S. national who took e-commerce giant Coupang Inc. public in the U.S. earlier this year. Another one is Seo Jung-jin, the founder of biotech firm Celltrion Inc. His firm make him worth about $10 billion.
The changing of the guard is a sign that South Korea’s $1.6 trillion economy is entering a new era of growth. The country is becoming less reliant on the family-controlled corporations that wield immense power in all aspects of life. Some experts say the new wealthy are more aware of rising inequality and are more willing to give back to society. Others question whether they’ll be any different from those who built their old empires using cozy links to politicians and bureaucrats.
Anyway, it is a positive shift for South Korea. The new rich is mostly self-made, not inheriting bunch of wealth from family. With this kind of background, they offer a silver lining for younger folks by showing how fortunes can be made independently.
In South Korea, the chaebol have served as pillars of the Asian “miracle economy” for decades, especially after the ashes of the Korean war. After the mess of the war, the country’s political leaders have relied on conglomerates including Hyundai, Samsung, LG and Hanjin to rebuild the nation, giving them outsized influence. Over the years, some of them shot into the spotlight for scandals and cases of corruption that made international headlines and spark backlash from the public. As a result, President Moon Jae-in has vowed to overhaul chaebol business practices and his government kicked off reforms last year to improve corporate governance and transparency.
That image of South Korea is slowly giving way to one full of booming startups. With the pandemic spurring demand in sectors such as e-commerce, entertainment and biotechnology, an investor frenzy is fueling billions of dollars in fundraising, initial public offerings and acquisitions. Venture capital investment in the country reached 3.07 trillion won ($2.7 billion) in the first half of this year. That is the most on record for the six-month period.
How This Newly Rich Differs from the Conservative Chaebol
If there is one thing that differ South Korean’s newly rich and chaebol is charity thing.
Some of the newly minted wealthy are getting into philanthropy. Kakao’s Brian Kim and Kim Bong-jin, the founder of food-delivery app Woowa Brothers Corp., have pledged to give away their personal fortunes. That’s in contrast to families behind chaebol, who usually aren’t known to make large personal donations. They’re more likely to give to charity via companies they control.
Many chaebol have faced criticism for using questionable means to transfer wealth to their scions and retain control in disguise of charity. That will change as more newly wealthy take more country-wide publication.
South Korea Startup Landscape
South Korea is now the 4th largest in all of Asia. They have one of the best wireless infrastructures, yet Korea is still globally not recognized as a startup tech hub. This is because South Korea is only 1 of 3 countries (Russia & China) in the world where Google is not the primary search engine. Therefore the world does not have access to information related to South Korea since most of the content is on Naver, a search engine that is not used outside of Korea. However, despite this, South Korea continues to be one of the fastest-growing developed countries in the world.
Speaking of startup ecosystem in South Korea, it did not exist just 20 years ago. The Korean government was trying to grow and find new ways to create jobs in the economy. They started to realize that entrepreneurship was the key to job creation. It was the main factor in a strong and innovative economy.
When you look at the Korean startup scene today, the community is strong and growing. Over 500 million dollars a year has gone to funding late-stage startups for a few years now. There is a lot of potential in Blockchain, Fintech, Biotech, IoT, and Korean entertainment, which are key growth areas for South Korea.
Startup Funding in Korea
When talking about startup, funding is important to keep the company running. In South Korea, it really started to take off in 2014. Startup funding went from $71 million in funding in 2013 to $949 million in 2014. Then went to an all-time high of $1.8 billion in 2015. These days it has settled down to around $500-$600 million per year.
From 2017–2019 many Korean Blockchain startups have found success raising funds through an ICO. Currently, in 2020 the ICO scene is pretty much nonexistent. However many Korean investors are still interested in Blockchain technologies and alternative fundraising methods could rise in 2020 through IEOs or STOs. All this shows that Korea has a large and diverse range of investors, Korea-based funds, corporate VCs, Angels, and crowdfunding systems.
For now, South Korea is getting better and better in building startup ecosystem. Pandemic, capital availability and adoption of digital tools are fueling the growth of startups.
Some experts even argue that there has never been a better time for startups to grow and raise funds like today since there are some prominent VC and accelerators that ready to give money to startups.
Softbank Ventures
Softbank Ventures Asia which was formerly known as Softbank Ventures Korea specializes in IT startup investments. They recently opened a brand in Singapore in early 2019. Now have offices and investment managers in Singapore, Shanghai, Seoul, Beijing, San Francisco, and Tel Aviv. They are famous for their $1 billion investment in Coupang. They have a $500 million fund and will focus on early-stage startups.
Korea Investment Partners
Korea Investment Partners, the leading venture capital firm in Korea. They made headlines in late 2018 for investing in TEMCO a blockchain-based supply chain platform. This was their first-ever investment in blockchain. KIP (Korea Investment Partners) manages over 40 funds with assets under management totaling $2 billion. Since 2010, KIP has liquidated 12 funds with an average internal rate of return of 18% and no net loss on any fund. KIP backs on average 120 companies every year.
MBK Partners
MBK Partners, the largest and most successful independent private equity firm. They have gotten bad press due to the labor issues of one of their holding companies Homeplus which is a discount store chain in Korea. MBK bought Homeplus in late 2015 for $6.2 billion. Due to online retailers as well as Costco, Homeplus has been losing a lot of value. They are known for their annual special situations fund which was at $850 million in 2018. Since being founded in 2005, MBK Partners has over $16 billion under management and has invested $12.9 billion in 38 companies. They have five offices located in Seoul, Beijing, Hong Kong, Shanghai, and Tokyo with over 60 investment professionals.
Hashed
Hashed is a blockchain accelerator and investment fund, based in Seoul as well as San Francisco. They invest in blockchain startups as well as help with community building and acceleration. They are Korea’s largest Blockchain fund. Hashed was founded in 2017 and became famous for raising 150,000 Ether through an ICO for ICON Foundation. What started out as a $600K digital assets fund pooled together by partner investments is now worth $250 million. They are currently the largest holder of ICON and EOS in Korea.
And many more. It’s just about to name a few.
