Public and private sectors boost entrepreneurial support to tackle nation’s unemployment problem
Published Oct. 3, 2012, on The Korea Herald
In an effort to tackle youth unemployment and boost young people’s enthusiasm for starting their own businesses in a conglomerate-dominated economy, the public and private sectors alike are boosting their entrepreneurship programs for ambitious new university graduates.
Chung Ju-yung Entrepreneurship Competition
The latest of these programs is the Asan Nanum Foundation’s Chung Ju-yung Entrepreneurship Competition, which awarded its first six winning teams in August for their ambitious industrial ideas.
Created by the Asan Nanum Foundation, which is funded by a 500 billion won ($448 million) donation from the family and affiliated businesses of the late Hyundai founder Chung Ju-yung, the program aims to “find the second Chung Ju-yung” by supporting youth entrepreneurship and instilling a business spirit in young people.
After rigorous one-on-one interviewing during a three-day, two-night camping trip, teams are judged on not only their innovation, but also feasibility and social impact. The winning business ideas ranged from first-place winner Exsen’s sensors measuring nitrogen oxide in real time to an eco-friendly recycling method for used cables and an indoor tent to block outdoor wind in energy-poor households.
Winners receive 50 million won, 20 million won or 10 million won, and get onto the foundation’s priority list for its 100 billion won Chung Ju-yung Investment Fund for further capital. But the real prize is in the assistance the program provides in start-ups’ biggest challenges: mentoring, networking and finding investors.
A delegation from California-based Plug & Play Tech Center, which specializes in fostering technology startups, came to advise winners on how to venture into Silicon Valley.
“The winning groups are continuously meeting with the Asan Foundation and participating venture capitalists in order to invite investments,” said Lee Hee-seok, general manager of the Asan Foundation’s start-up team. He noted that winners might get additional opportunities to go overseas.
“There were many winners who said it was useful that the program helped solve problems that start-up companies face,” Lee said. “We hope to send a message that the program provides a shortcut to success for startup entrepreneurs.”
Seoul’s Youth 1000 CEO Project
Seoul City pours 19 billion won a year into its Youth 1000 CEO Project to motivate young people aged 20-39 to start their own businesses. Established in 2009, the program has selected 1,000 winners yearly, giving an extra advantage to women, the disabled, previous contest winners, or those who had recently failed to set up a business and are trying again.
Winners get grants of up to 1 million won per month and free office space. In the program’s first three years, 3,451 jobs were created in 1,551 businesses, officials said. The program has been proven to be widely popular: In its fourth run from March to May this year, the program stepped up its support and decided to award 1,200 winners instead of 1,000.
“The profit ratio per investment is pretty good. The (new businesses’) average profit is around 300 billion won, and there have also been two or three people who earned 10 billion won each,” said Kim Jae-hyung, a program official.
“The program has been two or three times more successful than we initially expected. There have been several cases that were role-model worthy, and seeing them guide others behind them has been inspiring.”
“I tried many things and thought of a lot of things in college, but they usually ended up as concepts and never materialized. I wanted to have more real-life experiences as opposed to entering contests and building credentials for a job. I set up businesses twice before, but getting enough capital was always a problem,” said Park Su-wang, who won the competition in 2009 for his smartphone application “OneCampus,” which provides day-to-day information now to more than 1 million college students at over 200 universities, such as cafeteria menus, scholarship information and even empty seats in the library.
With some help from the program’s mentoring, advertising and patent assistance, along with the monthly stipend and office space, Park’s 40-person business Social Network also runs a magazine called Campus 10 and party/snack business called Campus Attack, where corporations sponsor them to give away snacks at 15 colleges in Seoul.
“I think (the 1,000 CEO program) is successful, especially for start-up companies, since the project provides a lot for them,” said Park, who launched Social Network in March 2010. “I have been running my business for three years, and I feel that without the project I would not have been able to.”
Assistance is limited to beginners, though, and doesn’t help much once companies become more vetted, according Han Dong-heon, who won the competition in 2010 for his business Micimpact, which prepares and directs performances and lectures.
“They provide helpful assistance for start-up companies, but don’t have much for second- and third-stage companies who are developing,” said Han, who launched Micimpact in January 2010 and now manages a 50-strong team. “One million won a month is not very substantial for a sufficiently developed company.
“I would like to see more support for grown companies, such as supporting and providing investors or finding a means of exporting the business item overseas.”
Student Excellence in Entrepreneurship Competition
Last month, the government-affiliated Korea Credit Guarantee Fund, or KODIT, awarded six teams in its fourth University Student Excellence in Entrepreneurship Competition, geared towards promoting especially unique and innovative business and product ideas.
First-, second- and third-place winners get 5 million won, 3 million won and 1 million won, respectively, as well as credit consulting and start-up training, management consulting and credit guarantees for those qualified.
About 60-70 percent of KODIT’s applicants, who are university students with bright ideas but tight budgets, propose tech-based or online ideas requiring little start-up capital such as specialized online shopping malls, online platform development, social networking-based programs, or smartphone applications.
Second-place winners Motivap, who took the 3 million won prize, developed an app called “Today’s Mission” for companies to send users on physical real-time missions to specified locations. Through the location-based game, a company can increase its marketing presence and promote its services or social responsibility, and the mission players have fun both online and offline and use the “jewel” points to get tangible rewards such as cash or mobile coupons.
After establishing the company in July, five-member Motivap is gearing up to launch an iOS beta application in October.
“We think that opportunity comes to those who challenge, and we plan to find a greater opportunity by starting our own company,” said Motivap COO Roh Hye-kang, who is due to soon receive his bachelor’s degree from Seoul National University Business School.
But for KODIT’s first-place winners, winning a competition doesn’t make them feel ready to start a company. The five-person team BOB won 5 million won for their patent-pending invention of a pen-shaped glue gun that is safe, cordless and easy to use. Instead of launching a business, they intend to sell the idea to an existing small or medium-sized business.
“I personally think I need more experience before setting up my own business,” said Ko Dong-woo, team leader. “I think selling an idea to a company is also an experience. I plan to start up a business after I’ve gained enough experience and have solid basic skills.”
The competition’s success in boosting youth start-ups has mixed results. Though the competition has been steadily gaining popularity, with 110 teams applying this year from 50 teams in 2010, fewer than half of the winners actually go on to start their own businesses. Of the 18 teams awarded in the competition’s first three years, eight started their own businesses; this year, three of the six winning teams have established their proposed ventures. The rest, KODIT says, for the most part have gone back to school or signed on to work at bigger firms.
“Even if they win, it takes time to start their business as well as get customer recognition, so some people may give up or apply to other companies. It’s a natural process. If they feel that their items do not have potential, they would naturally move on,” said Lee In-su, the competition program director. “The purpose of the program is to bring awareness and promote creative ideas, even if others eventually move on to other jobs. So in that, I think we fulfill our intended purpose.”
Starting this year, KODIT plans to offer free training programs even for the non-winning applicants in order to further encourage their enthusiasm for starting their own businesses. “We can provide free education and guide them to receive credit guarantees ― though not provide them ― and provide free consulting if they have received credit guarantees elsewhere,” said Lee In-su, the program director.
KODIT’s boosted initiatives are part of the government’s efforts to tackle growing youth unemployment due to various factors such as the local impact of the global economic slowdown and structural job mismatching between employers and job-seekers, with 6.4 percent of new graduates unemployed and many more young people in long-term unemployment, which is not counted in unemployment statistics.
Almost 30,000 young Koreans say they want to launch their own companies, according to a survey cited by The Economist.
“In the past, most youth were able to get a job after college graduation, but now many graduates are jobless. We think more programs like these, that inspire and promote entrepreneurship, are needed in order to not waste their talents and help them become a driving force for the Korean economy,” Lee of KODIT said.
Despite the government’s aggressive push to create a business-friendly environment ― Korea placed eighth on the World Bank’s “ease of doing business” global ranking in 2011, the country’s patent numbers are higher than the G20 average, and Korea has the second-highest loan value-to-GDP ratio and one of the highest research and development spending-to-GDP in the G20 ― Korea’s new business density, which is the number of newly registered businesses per capita, has consistently lagged far behind both G20 and mature market averages, according to World Bank data. According to the latest available data, 1.72 new business per 1,000 people were registered in Korea in 2008, compared to an average 5 per 1,000 people in the OECD countries.
Lee of KODIT suggests that more education and entrepreneurial training should be available for those interested in starting up a business.
“The most important factor aside from the business item or funds is the entrepreneur themselves, and how revolutionary or creative or risk-taking they are. Not only are lessons important, but I feel an entrepreneur community where people can share their experiences is necessary. It’s my personal desire that entrepreneurship training courses are provided on a governmental level for anyone who wishes to start their own business.”
By Elaine Ramirez and Sang Youn-joo