[THE INVESTOR] In the early 2000s, Samsung and local venture capitalists had little recognition outside Korea. But nearly two decades later, the two have embarked on vastly different paths: while Samsung built a reputation as one of the world’s most influential tech firm, Korean VCs have failed to gain global prominence.
The main reason for the sector’s sluggish, and even insignificant growth, is due to an ineffective money chain, according to Park Hee-duk, co-founder and CEO of SEMA Translink Capital.
SEMA Translink Investment CEO Park Hee-duk
“Korea’s history of VCs is relatively short at under 20 years, but this is not the only reason,” Park said in a recent interview with The Investor. “It’s because money has not been smart. Limited partners need to get smarter to keep up-to-date with global competition. Remember, startups are only as great as their investors.”
Korean limited partners -- mostly pension funds, mutual aid associations and policy banks -- have so far been much more focused on policy demands, rather than following the nature of money, that is, aim for higher returns.
“Korea’s government-led model has hit a wall,” Park said. “From about five years ago, government officials have been asking why there are no global VCs and startups in Korea. I would reply that the answer lies in the difference of the investment ecosystem between Silicon Valley and Korea.”
In Silicon Valley, the money chain of limited partners, general partners and startups work together effectively and relentlessly. But in Korea, startups lose steam after Series A or B investments. This is an issue of chicken or the egg, because the lack of Series A and B investments is naturally why there are so few Series C or D, and the lack of these latter phase investments is why early phase investments don’t pan out too well.
When Park first visited Silicon Valley more than a decade ago, there were many who were familiar with Korean companies and possessed similarly competitive technologies. But since then, those in the US have gone global, while their Korean counterparts either disappeared or went bankrupt.
“I was wondering why, and these questions were why I relocated so much,” he said.
In the late 1990s Park started working at KTB Network, then one of the most powerful venture capital firms, and led investment teams for conglomerates like KT and CJ, helping them expand overseas.
In 2015, he founded Sema Translink Investment -- a joint venture of SEMA and Translink, a Palo Alto-based VC -- to adopt Silicon Valley type of investments. SEMA, Korea Scientists and Engineers Mutual-Aid Association, operate 5 trillion won in assets as of December.
“SEMA was interested in investing in companies in Silicon Valley and I wanted to do things differently and help Korean companies go global,” Park said.
He stressed that regulations -- which are deemed as the biggest factor stunting the growth of Korean startups -- are not the whole part of the problem, and changing or improving the ecosystem itself is the ultimate task.
“Take China for example. Both in Korea and China, it was government-led initiatives to push VCs and startups and China might have tighter regulations. But Chinese firms have become more globalized than Korean and Japanese VCs because they adopted Silicon Valley governance.”
He admits that it will take more than a single VC to change the entire ecosystem. “Still, I always think about how I can contribute, and I want to do my part in creating the flow of smart money in Korea.”
By Park Ga-young (email@example.com)