Cross-Innovation Opportunities for SMEs between Latin America & South Korea
This October, I was invited by InterAmerican Development Bank to participate as judge in a pitch day in South Korea. This event took place during the Korea-LAC Business Summit 2019 and was co-organized by IDB LAB with the purpose to develop cooperative business models among South Korea (Korea) and Latin America and Caribbean (LAC) technology startups. See the following video.
During my one-week visit, I had also the opportunity to get to know the South Korean Ecosystem and explore innovation-based synergy between Korea and LAC. Let me share some thoughts from my Latin American perspective.
South Korea is a global innovation leader. It has been ranked 1st on the Bloomberg Global Innovation Index 2019 for six years in a row. This can be explained taking to account the great amount of R&D spending, value-added manufacturing and high-tech density.
While China is getting the lion’s share of attention these days, South Korea is also boosting its business globally, based on innovation.
The country has a relatively small population of 53 million people. Thus, global expansion is necessary for many young companies who are trying to scale. Startup founders from South Korea take part in business competitions all over the world including Latin America.
South Korea was deeply affected by the 1997 Asian financial crisis. However, it rebounded and created an amazing economic miracle during the following two decades: its GDP per capita has doubled, and technology innovation has gained global renown, together with cosmetics and skin care products, home appliances, mobile phones, food, clothing and automobiles, all of which have driven exports more than fivefold during the period.
South Korea NDA. based on Network + Data + Artificial Intelligence
South Korea has a deep conception about the Fourth Industrial Revolution. It is considered as a revolution of intelligence based on the hyper connectivity triggered by digital technologies such as artificial intelligence and big data.
It refers to the innovative changes not only in the industries but also across the, society and the whole life. In particular, converged with the fundamental technologies of each field, digital technologies including NETWORK (IoT, 5G), big DATA (Cloud), and AI software (machine learning, algorithm) are leading the Fourth Industrial Revolution.
The Korean government has selected eight areas to promote its investment during the next years: Smart Factory, Smart Farm, Smart City, Future Vehicle, Drone, Energy New Business, Hydrogen Economy, Bio-Health
About South Korean Ecosystem
There are almost 500 accelerators, venture capital funds and government organizations supporting startups in South Korea. Since 2015, the South Korean government has provided u$s 4B to startups, the biggest government backing of startups per capita in the world.
South Korea is particularly attractive for startups because of its high-speed internet, the fast rollout of the 5G network and the high uptake of technology.
I would like to remark the following 6 key players:
Born2Global is a major Korean government agency under the Ministry of Science and ICT(MSIT) contributing to the national startup ecosystem and beyond. Each year, Born2Global selects over 100 startups with high potential for entering the global market. Born2Global provides services such as professional consulting in law, patents, accounting, marketing, investment and business development. Additionally, Born2Global gives training services to startups by hosting conferences, seminars and meetings.
PTV is the South Korea’s Silicon Valley, which is a miniature of innovation and technology (innotech) development in the entire country. PTV is an advanced and innovative cluster (R&D Complex) focused on IT, BT, CT, NT and fusion technologies, developed to reinforce Korean competitiveness The success of PTV is founded on the aggregate efforts of the country over the past 20 years. Firstly, Korean people have been working very hard for it. Secondly, Koreans start to learn computer coding from kindergarten, enabling the education system to provide ample talent for the technology industry. Thirdly, they are very patriotic and proud of their country. They support their home culture, arts and products wholeheartedly.
D.Camp Website: (only Korean)
D.Camp is a private accelerator founded by 20 Banks contributing a total of u$s 450 billion. It aims to link the three key elements of the startup ecosystem – Investment, Space and Network – to carry out various support activities for startup ecosystems. D Camp provides support with customized growth financing by growth stage and has invested in more than one thousand start-ups, getting 83 IPOs
Notice that in Korea IPO exit strategy for startups is possible through KOSPI, KOSDAQ or KONEX.
- KOSPI market is the main board and many of the larger domestic and international companies such as Samsung Electronics, LG Electronics, Hyundai Motor, POSCO and KIA Motors are listed on KOSPI.
- KOSDAQ market opened in 1996 to support venture and medium-sized companies’ smooth financing. ∙ IPO requirement for the KOSDAQ market is less rigorous than the requirements for the KOSPI market,
- KONEX was created in 2013 to support small and middle-sized start-ups to raise capital. ∙ IPO requirement for the KONEX market is less rigorous than the requirements for the KOSDAQ market, enabling small and middle-sized or start-up companies with high potential to be listed.
Korea’s global startup acceleration program funded by Korean government and operated jointly by the Ministry of SMEs and Startups (MSS), and the National IT industry Promotion Agency (NIPA).
TIPS program, an innovative program based on private-public partnership led by Korea Institute of Startup & Entrepreneurship Development (KISED), plays an important role in vitalizing investments in early stage startups in Korea, making the connection between private investments and government’s R&D.
DMC is a new IT and digital media collaboration complex in the Sangam area of Seoul City, with the goal of creating the world’s first M&E industrial cluster. In the DMC Hi-Tech Industry Center, there are tenants’ companies in the fields of computer games, mobile technology, animation, character design, broadcasting, advertising, film, music, edutainment, and other digital content companies.
Cross-Innovation Opportunities for SMEs between LAC & Korea
Most countries in LAC have had difficulties consolidating their development models over the past couple of decades. Consequently, there has been little change in the innovation, production, and export structures. This is partly because the region has invested little in science, technology and education, which would have contributed to raising productivity levels and fostering structural change towards activities with higher value added and knowledge content.
Currently, LAC spends little on R&D in relation to its gross domestic product (GDP) of which the majority is funded by the public sector. In contrast, Korea has the second highest R&D expenditure (as a percentage of its GDP) in the world after Israel.
In this context, LAC – specially Argentina – could significantly benefit from increased cross-innovation initiatives with Korea.
SME internationalization strategies represent an area of mutual interest. SMEs account for the largest share of employment in both LAC and Korea. However, SMEs in LAC register much lower productivity levels than large firms compared to those in Korea. The productivity of SMEs can be improved through cross-innovation businesses. The participation in innovation export-related activities contributes to investment, knowledge transfer and the development of labor skills.
From my VC and entrepreneurial perspective:
- There is a great opportunity to explore cross-innovation synergy between LAC and Korea in the following sectors: Gaming/Entertainment, Fintech/Blockchain, Cybersecurity, Biotech/Healthcare, Logistics, AI & IOT.
- Korea has a great opportunity to export innovation to LAC based on sectors: Microelectronics, Semiconductors, Industrial & Automobile Software, High Performance Materials and Cosmetics.
- LAC has a great opportunity to export innovation to Korea based on: Ag-tech, Ecommerce/Adtech, Financial & Social Inclusion, Space and & Mining (Lithium-related).
During the mentioned Pitch 18 startups exposed their technology and capability. The winner was Satellogic, a vertically integrated geospatial analytics solution provider. Satellogic was highly rated in that the technology can be applied to various fields such as Forestry, Agriculture, and Energy by analyzing geo-information collected from satellites based on AI. Besides, four other companies were selected as the best startups representing respective countries. The awarded companies were: GSIL (Korea: Smart construction safety control system), Untech (Argentina: Topical medication for chronic wounds including ulcers), Mareigua (Columbia: a platform provider replacing underbanked services), Nocnoc (Uruguay: Cross border e-commerce logistics platform).
Among organizers and key players were Luis Alberto Moreno, the president of the Inter-American Development Bank(IDB), Wonki Min, The 2nd Vice Minister of Ministry of Science and ICT, and Dongil Kim, the division head of Ministry of Economy and Finance to support the startups’ intercontinental entry.
I would like to re-express Luis Alberto Moreno words during the initiation of this event “The power vitalizing the economy and creating new jobs initiates from the opportunities to enter counter markets among innovative tech-startups. Since LatAm is the geographically important strategic base, it would be a good opportunity for both Korea-LAC companies to build a cooperative relationship”
Additional aspects & Closing Remarks
- As the most connected country in the world, South Korea has an great Internet penetration, a virtual supermarket, GPS machines in all taxis, digital countdowns at all bus stops.
- South Koreans became one of the world’s leading users of credit cards.
- Creams use volcanic clay, fermented soybeans and snail guts. South Korea’s obsession with beauty feeds the huge cosmetic industry.
- Koreans and Latin American people are very similar emotionally. We both are very passionate, resilient and open-minded. I am seeing an enormous opportunity to work together.