Seoul may be known as the home of corporate giants like Samsung and Hyundai, but over the last several years the Asian metropolis has been striving to add dynamism to its economy by cultivating a vibrant, local startup ecosystem. These efforts have resulted in the city being ranked as one of the world’s top 20 ecosystems this year.
With a highly educated population of nearly 10 million, Seoul ranks third in the world for knowledge and presents startups with a wealth of talent to draw from. In addition to a deep pool of skills and expertise, government bodies as well as local investors provide potential founders excellent opportunities to secure the funding necessary to grow their companies.
Seoul has made some of the more impressive investments in its startup ecosystem worldwide. The Seoul Metropolitan Government (SMG) has committed to spending $1.6 billion to develop its ecosystem over the next three years along with the national government and private investors, for instance. The $1.6 billion includes the $1 billion Seoul Future Innovation Fund, which SMG contributes about 15% of the total fund formed. General Partners forming funds are attracting money from both the national government and private investors. This activity is reflected in the fact Seoul scored 9 out of 10 on our investor activity index this year.
In addition to funding, Seoul has a thriving network of organizations that provide startups with mentoring, office space, and other support. The Seoul Startup Hub is the city’s biggest business incubator nurturing startup talent. The Korea Startup Forum, started by Woowa Brothers founder Bongjin Kim, and the Asan Nanum Foundation, created in honor of Hyundai Group’s founder Asan Ju-yung Chung, acts as an trade association that works closely with the national government for legislative reform. Seoul is famous for its generous supply of public working spaces for early-stage startups and SMG’s Techspace1000 project provides an additional 1,000 early-stage startups with office space.
South Korea is also the fifth highest investor in R&D spending globally at around $73 billion. The government’s Technology Incubation Program (TIPS) offers R&D grants of $800,000 per startup to support R&D. Local biotech startups in particular have reaped the rewards of this investment and the sector is a particular strength of the Seoul ecosystem. The number of new startups in the sector doubled between 2015 and 2018, while D&D Pharmatech raised a $137.1 million round in 2019 to fight Alzheimer's, Parkinson's, and other diseases.
The availability of both support and capital is reflected in the rising number of unicorns growing out of the Seoul ecosystem. As of today, ten Seoul-based startups have billion dollar valuations, including Viva Republica, the Fintech success story founded by SG Lee, Bluehole, a fantasy game developer, and Woowa Brothers, a food delivery app that was acquired by Delivery Hero for $4 billion in late 2019.
Like other ecosystems, Seoul is facing a major challenge to these gains with COVID-19, but the government has taken strong steps to support startups during the crisis. Its three-pronged response focuses on the labor force, growth and funding. Policies include the allocation of $42 million to help startups retain up to 10,000 technical employees during the initial five months of the crisis, $8.3 million to support the growth of promising startups working in biotech and on remote collaboration tools, and an additional $96 million in funding for other startups from early-stage to Series B and beyond.
And while the pandemic has slowed investment activity globally, deals are continuing to get done in Seoul. Market Kurly, a fast-growing grocery delivery startup founded by Sophie Kim, just raised $164.3 million in Series E funding from a group of global investors in May, for instance.
“While conglomerates and multinational companies dominated the global economy in the past, the post-corona era should be a ‘startup Renaissance.’ For the last eight years, steady investment has upgraded Seoul’s startup ecosystem to a global level, and it is unfortunate that the pandemic hit just when the world started to pay attention to Seoul’s startup ecosystem. Undaunted by the pandemic, however, we will further strengthen and expand support to turn this crisis into an opportunity. No effort will be spared to cultivate globally competitive unicorns while striving to advance Seoul into one of the top five startup cities in the world,” commented Seoul mayor Wonsoon Park.
With the quick rise of its startup ecosystem from modest player to top global performer, as well the city’s resilience in the face of a global crisis, Seoul should serve as an example to other cities looking to grow their ecosystems with a robust, data-driven program of investment and support for local startups.