Seoul is home to a burgeoning corps of young entrepreneurs, a shocking number of them born or educated in America. Why aren't they starting companies here?
The act was, by almost any standard, a laudable one, coming as it did in the middle of the worst recession in decades and given that Shin had been enjoying the kind of upper-middle-class life that, once tasted, can be difficult to give up. Born in South Korea, Shin moved to suburban Washington, D.C., with his parents when he was 9. He went to a magnet high school and got into the University of Pennsylvania's Wharton School, where he studied finance and marketing. By 2008, he was comfortably ensconced in the New Jersey offices of McKinsey & Company, where recession-era cutbacks meant that all-expenses-paid Caribbean bacchanals had given way to comparatively ascetic (but still all expenses paid) ski trips. He had an apartment in Manhattan. He was comfortable. His parents were proud.
And yet somehow, this life, in all its dull glory, did not feel like his own. Shin was an entrepreneur at heart, having started two companies while still in college. The first, a website for students looking for housing, failed miserably. The second, an Internet advertising company called Invite Media, which he co-founded with several classmates during his senior year, was more promising. It won a business-plan competition in early 2007 and raised $1 million in venture capital the next year.
Shin's buddies would eventually sell Invite Media to Google for $81 million, but Shin had left the company long before that happened. His parents, who had come all the way from Korea precisely so their son could grow up to work at a place like McKinsey, were not about to see Daniel throw the opportunity away for a money-losing start-up no one had ever heard of. "That was the only reason I was at McKinsey," says Shin. "It didn't feel like a career to me. I'd always wanted to start a business."
By late 2009, Shin was through with consulting, but he didn't have the guts to strike out on his own just yet. He applied for, and was offered, a job in the New York City office of Apax Partners, a European private equity firm. He accepted the offer on the condition that he could delay his start date until the following August, so he could complete the two-year stint he had promised McKinsey. It was a lie; he walked out on McKinsey in November. "It was my chance to get something off the ground without my parents telling me I couldn't do it," says Shin. "I had about six months."
Shin got to work. He and two college buddies holed up in a house with whiteboards, laptops, and an endless supply of McDonald's for a series of all-day brainstorming sessions. Their goal: to come up with a business that would grow fast and require no start-up capital. They started with 20 ideas and, over the course of two months, whittled them down to one: a Groupon-style coupon company that would offer deals on restaurants, events, and merchandise. Shin liked the business model because it had a built-in financing strategy: Cash came in several months before the company would have to pay it out, giving him a supply of free debt. He picked a name—Ticket Monster—collected several thousand e-mail addresses, and launched the site in May.
A month later, Apax called Shin to rescind its offer of employment. The firm had done a background check and discovered that Daniel Shin was not a second-year McKinsey associate but the CEO of a fast-growing company that was doing $1 million a month in revenue. By the end of the summer, Ticket Monster had doubled in size, growing to 60 employees. By the end of the year, the company had doubled in size again.
When I met Shin last August, just 20 months after he quit McKinsey, he had 700 employees and roughly $25 million a month in revenue. "We've always been afraid that we wouldn't grow fast enough," said Shin, a baby-faced 26-year-old with a booming voice and a hulking frame. A year ago, he was one of only two salespeople at the company; today, he is sitting in a brand-new corner office acting like the CEO. "We didn't believe in spending money in the early days," Shin said. "We had this whole macho idea about starting up." A week after he said this, Shin sold his company to the social-commerce site LivingSocial for a price that was reported to be $380 million.
An immigrant starts a business, creates hundreds of jobs, and becomes wealthy beyond his wildest dreams—all in a matter of months. It's the kind of only-in-America story that makes us shake our heads in wonder, even pride. At a time of 9 percent unemployment, it's also the sort of story we Americans desperately need to hear more of.
But Daniel Shin isn't that kind of immigrant. He went in the opposite direction. Ticket Monster is based in Seoul, South Korea. Shin arrived there in January 2010 with a vague plan to start a company; the brainstorming sessions that produced Ticket Monster took place in his grandmother's house in Seoul. Now he is the closest thing there is to a Korean Mark Zuckerberg, despite the fact that upon his arrival, he barely spoke Korean.
Last December, Shin was summoned to South Korea's version of the White House—the Blue House—for a meeting with the country's president, a former Hyundai executive named Lee Myung-bak. In attendance were the CEOs of many of the country's largest companies—LG, Samsung, SK, and half a dozen others. "It was the conglomerates and me," says Shin. "They were saying, 'We have X billion in revenue, and we're in X number of countries.' I'm like, 'We didn't exist a few months ago.'" Shin laughs—a sheepish, nervous laugh—as he tells me this story and shakes his head. It's been a crazy year and a half. "I think it was the first time the president had learned an entrepreneur's name," he says. A few weeks later, President Lee gave a radio address in which he sang Shin's praises and urged the youth of South Korea to follow his example. (In Korean, family names come before given names. Throughout the rest of this story, I've used the Western convention, as do most Korean business people.)
At the end of last summer, I traveled to Seoul, an ultra-modern city of 25 million, because I wanted to know how a twentysomething kid with limited money and limited language skills could become this country's great economic hope. I wanted to know what in the world was going on in Seoul—and also, what in the world was going on inside the head of Daniel Shin of Wharton and McKinsey and McLean, Virginia. Why would a guy who could have just as easily written his own ticket in the U.S. decide to do so on the other side of the world?
The first thing I learned was that Shin was not alone—he wasn't even the only young, ambitious American in the coupon business. His chief competitor, Coupang, was founded by a 33-year-old Korean American serial entrepreneur named Bom Kim, who last year dropped out of Harvard Business School and relocated to Seoul to start his company. After a little more than a year in business, Coupang has 650 employees and $30 million from U.S. investors. Kim hopes to take the company public on the Nasdaq by 2013. "There's an opportunity here," says Kim. "I want this to be a company like PayPal or eBay."
Kim was one of more than a dozen American entrepreneurs I met in Seoul. They were the founders of media start-ups, video-game start-ups, financial-services start-ups, manufacturing start-ups, education start-ups, and even a start-up dedicated to producing more start-ups. "It's a big trend here," says Henry Chung, managing director of DFJ Athena, a venture capital firm with offices in Seoul and Silicon Valley. "There's a growing number of students studying overseas and coming back."
The country to which they are returning is an entirely different place from the one they (or their parents) left years ago. In 1961, the southern half of the Korean peninsula—formally known as the Republic of Korea—was one of the poorest places on earth. South Korea has no mineral resources to speak of, and it ranks 117th in the world in terms of arable land per capita, behind Saudi Arabia and Somalia. Fifty years ago, the average South Korean lived about as well as the average Bangladeshi. Today, South Koreans live about as well as Europeans. The country boasts the world's 12th-largest economy by purchasing power, an unemployment rate of just 3.2 percent, and one of the world's lowest rates of public debt. South Korea's per-capita GDP growth over the past half a century—23,000 percent—beats that of China, India, and every other country in the world. "A lot of Koreans still say that the market is too small," says Shin. "But it's not. It's huge."
South Korea is smaller in area than Iceland but has 166 times its population, meaning that 80 percent of its 49 million citizens live in urban areas. In the capital, retail shops and businesses reach high into the air and far below the earth in miles of underground shopping malls. Many of Seoul's bars and nightclubs stay open until sunup, but just walking the city's narrow, hilly streets—jostled by hawkers and flanked by the neon signs that advertise barbecue joints and karaoke rooms and the ubiquitous "love motels"—can be intoxicating all by itself. An hour's drive west, in Incheon, 50- and 60-story apartment buildings abut rice paddies and vegetable gardens.
The sense of claustrophobic density is magnified by the country's embrace of communications technologies. In the 1990s, the South Korean government invested heavily in the installation of fiber-optic cables, with the result that by 2000, Koreans were four times as likely as Americans to have high-speed Internet access. Koreans still enjoy the fastest Internet in the world while paying some of the lowest prices. The easiest way to feel like an outsider in this country is to board one of Seoul's subway cars, which are equipped with high-speed cellular Internet, Wi-Fi, and digital TV service, and look anywhere but at the screen in your hand.
Have you ever heard the term Pali pali?" asks Brian Park, the 32-year-old CEO of X-Mon Games, which makes games for mobile devices. The phrase—often said quickly and at considerable volume—can be heard all over Seoul; it translates roughly to "Hurry, hurry." Park, who founded his company in early 2011 with $40,000 in seed capital from Ticket Monster's Shin and another $40,000 from the South Korean government, invokes the phrase in trying to explain the three beds I had noticed in his company's conference room.
"It's normal," he says, gesturing at the makeshift bunkhouse. "Our crazy culture." By that, he doesn't mean the culture of the seven-person company. He means the culture of the entire country of South Korea, where the average worker spent 42 hours a week on the job in 2010, the highest in the Organization for Economic Cooperation and Development. (The average American worked 34 hours; the average German, 26.) I saw similar sleeping arrangements at most of the start-ups I visited, and even at some larger companies. The CEO of a 40-person tech company told me he lived in his office for more than a year, sleeping on a small foldup futon next to his desk. He had recently rented an apartment because his investors had become concerned about his health.
In their personal lives, South Koreans are relentless self-improvers, spending more on private education—English lessons and cram schools for college entrance exams—than do the citizens of any other developed country. Another obsession: cosmetic surgery, which is more common in South Korea than anywhere else in the world.
And yet despite this outward show of dynamism, South Korea remains in its soul a deeply conservative place. Shin told me about meeting, in Ticket Monster's early days, with an executive from a large Korean conglomerate about a marketing deal. The executive refused to talk business. He wanted to know why a young man with a wealthy family and an Ivy League diploma was messing around with start-ups. "He said that if his kid did what I'm doing, he'd disown him," Shin recalled. If this sounds like hyperbole, it's not: Jiho Kang, who is chief technology officer of a start-up in California and CEO of another one in Seoul, says that when he started a company after high school, his father, a college professor, kicked him out of the house. "My dad is seriously conservative, seriously Korean," Kang says.
That older Koreans view risk taking with suspicion isn't surprising, given the country's history. The Asian financial crisis of 1997 nearly destroyed the South Korean economic miracle. (In a remarkable show of national resilience, South Koreans turned in hundreds of pounds of gold—wedding bands, good-luck charms, heirlooms—to help their government pay down its debt.) These days, Seoul, which is just 30 miles from the North Korean border, remains on alert for a nuclear or chemical attack. One afternoon when I was in Seoul, the city stood still for 15 minutes as sirens blasted and police cleared the roadways. These drills, which are held several times a year, can be even more involved. Last December, a dozen South Korean fighter jets buzzed the city streets to simulate a North Korean air raid.
Amid all this instability, the Chaebol, Korea's family-owned conglomerates, have been a redoubt of stability, providing the best jobs, training new generations of leaders, and turning the country into the export powerhouse it is today. The Chaebol grew thanks to government policies, instituted in the 1960s, that gave them monopoly status in every major industry. Their power was greatly diminished in the wake of the 1997 financial crisis, but the Chaebol still dominate the economy. The 2010 sales of South Korea's largest Chaebol, the Samsung Group, were nearly $200 billion, or about one-fifth of the country's GDP.
To many South Koreans, being an entrepreneur—that is to say, going against the system that made the country rich—is seen as rebellious or even deviant. "Let's say you're working at Samsung and one day you say, 'This isn't for me' and start a company," says Won-ki Lim, a reporter for the Korea Economic Daily. "I don't know how Americans think about that, but in Korea, a lot of people will think you of you as a traitor." Business loans generally require personal guarantees, and bankruptcy usually disqualifies former entrepreneurs from good jobs. "People who fail leave this country," Lim says. "Or they leave their industry and start something different. They open a bakery or a coffee shop."
The penalty for failure is even more onerous for female entrepreneurs. When Ji Young Park founded her first company, in 1998, her bank not only required her to personally guarantee the company's loans—a typical request for a male founder—it also demanded guarantees from her husband, her parents, and her husband's parents. Park persevered—her current business, Com2uS, is a $25 million developer of cell-phone games—but her case is extremely rare. According to the Global Entrepreneurship Monitor, South Korea has fewer female entrepreneurs, on a per-capita basis, than Saudi Arabia, Iran, or Pakistan. "Most of the companies women are creating are really small, and the survival rates are really low," says Hyunsuk Lee, a professor at Seoul National University of Science and Technology.
Entrepreneurs in South Korea often struggle to raise capital. Though Korean venture capitalists invest several billion dollars a year—about half of which comes from government coffers—most of the money goes to well-established, profitable companies rather than true start-ups. It's not that Korean VCs hate small companies; it's just hard to make money selling them. "The Chaebol don't buy companies," says Chester Roh, a serial entrepreneur and angel investor who has taken one company public and sold one to Google. "They don't need to. They just call you up and say, 'We'll give you a good job.'"
As an American, Daniel Shin wasn't subject to these constraints. His largest institutional investor was Insight Venture Partners in New York City, where his college roommate worked as an associate. "American Koreans have a big competitive advantage," says Ji Young Park. "They can raise much larger investments from outside of Korea, and they can take business models from the U.S. It is much harder for a genuine Korean." This has a cultural component as well: "Korean Americans aren't predisposed to the Korean mindset," says Richard Min, co-founder and CEO of Seoul Space. "They're open to risk."
Min, a 38-year-old Korean American, is a former college swimmer who looks as if he could still do a couple of laps. He dresses well and talks fast, with just a hint of an accent from his native New England. He launched Seoul Space last year with two other Americans as a redoubt of Silicon Valley–style entrepreneurship in Seoul. The company offers discounted office space to start-ups, mentors them, and then introduces them to investors, in exchange for small equity stakes. "We're trying to get an ecosystem going here," Min says, leading me through a sea of mismatched office furniture at which 20 or so young people are pecking away at keyboards.
Min moved to South Korea in 2001 because he was curious about his roots and because he saw an opportunity in his dual identity. His first Korean company, Zingu, was the country's first pay-per-click advertising company. When the dot-com bust hit Seoul, he turned Zingu into a consulting firm to help large Korean companies market themselves outside the country. Two years ago, when the Korean launch of Apple's iPhone gave local software developers an easy route to international consumers, he decided that the next big opportunity was in start-ups. "You have a new generation feeling like they have a pathway that's not working for Samsung," says Min, who is winding down his ad agency in order to focus on Seoul Space. "We're at the forefront of a major shift."
I had assumed that everyone working in Seoul Space was Korean, but when Min started introducing me, I realized that half of these guys were American—there was Victor from Hawaii, Peter from Chicago, Mike from Virginia. Others were Korean nationals but with a decidedly American way of looking at the world. "I was a pure engineer—one of those nerds," says Richard Choi, who came to the United States in 2002, as a freshman biomedical engineering student at Johns Hopkins. "I had no interest in business whatsoever."
Choi assumed he would end up in the laboratory of some large company, but when he and several classmates designed a gadget that made it easier for medical technicians to take blood, he found himself in a business-plan competition. His team won first place—a whopping $5,000 prize—and he was hooked. Choi thought about starting a company after graduation, but he had a problem: His student visa had expired. He didn't have the $1 million in cash necessary to qualify for an investor visa, so he figured his only option would be to get a job and hope that his employer would sponsor his application for permanent residence. He went on a dozen interviews at American medical-device companies, but none were interested, and he finally enrolled in a master's program at Cornell to stay for another year. When it was over, he gave up on the States, returned to Korea, and took a job at the pharmaceutical division of SK, one of the country's largest conglomerates.
Choi worked at SK for three years, but he never got the entrepreneurial bug out of his system. Out of boredom, he started an event marketing company called Nodus, and then he met Min at a party. Min introduced him to the person with whom he would eventually (with one other person) co-found his current company, Spoqa, which makes a smartphone app designed to replace the loyalty cards issued by retail businesses. "It's funny how a small event can change your life," Choi says.
Over the past two years, the South Korean government has launched a series of policies designed to help people like Choi. The Small and Medium Business Administration—South Korea's version of the SBA—has created hundreds of incubators throughout the country, offering entrepreneurs free office space, thousands of dollars in grants, and guaranteed loans. There are government-sponsored missions to the United States and regular seminars for aspiring entrepreneurs. "Our economy can no longer rely only on the conglomerates," says Jangwoo Lee, a member of the Presidential Council for Future and Vision and a professor at Kyungpook National University in Seoul. "This is the 21st century. We need another instrument for economic growth."
That instrument, Lee told me, will be people like Shin. "He's part of a new trend in Korea," says Lee. "He made his success with his ideas and imagination, without a lot of technology and investment." Lee tells me that although South Korea has been very good at commercializing university research, it has been very bad at nurturing the kinds of disruptive companies that are so common in the U.S. "We need to get our young guys dreaming," he says.
That, says Min, is the idea of Seoul Space. "We're focusing on helping people understand how things work in Silicon Valley," he says. I got a taste of this on a Saturday morning at Seoul Space, as I watched half a dozen new entrepreneurs—some Korean and some American—present their ideas to an audience of 100 in the room and, via Skype, to several thousand viewers around the world as part of a Web TV show called This Week in Startups. The language of the day was, of course, English, and Min, who had spent hours coaching the six entrepreneurs on their pitches, leaned against a wall just off camera, watching nervously as his students performed.
Among the presenters was the incubator's biggest star, Jaehong Kim, a slight 26-year-old who wore an untucked white dress shirt and black trousers that stopped 8 inches above a pair of two-tone dress shoes. Kim is a co-founder of AdbyMe, an online advertising company that allows companies in South Korea and Japan to pay the users of social media to hawk their products. In his first four months, Kim turned a profit while taking in an impressive $250,000 in revenue.
AdbyMe graduated from Seoul Space earlier this year, moving its 10 employees into a small apartment across town. When I stop by on a Monday, Kim tells me to take off my shoes, walks me past the inevitable bedroom—"I sleep two nights a week here," he says with a grin—and then introduces me to a group of guys he calls Ringo, Big I, and AI. "His name isn't really AI," Kim explains. "We call each other by code names."
At most South Korean companies—even many start-ups—employees are addressed by their job title rather than their first name, but Kim is trying something new. At the suggestion of one of his co-founders, an engineer who lived in New Orleans as a child, Kim ordered employees to scrap the titular system and pick new names. If they want to get his attention, they refer to him not by the traditional Korean greeting—"Mr. CEO"—but by his nickname, Josh. "The vision is that an intern can tell me something isn't right," he says. I had assumed that Kim had been educated in the U.S., but it turned out he wasn't straight out of Wharton. He lived for two years in Kansas City, Kansas, but his most recent job had been as a first lieutenant in the Korean Army.
In September, Kim raised $500,000 from investors in South Korea. His goal is to raise enough to qualify for an American investor visa.
He isn't the only entrepreneur who talks about coming to the United States. "I know for sure that I want one more stint in the States," says Shin. He is curious to find out if he can replicate his success in America's larger, more competitive market; and even though he now speaks passable Korean, he has never stopped thinking of himself as an American. "I don't know when, and it's too early to think about ideas, but I know I'll probably end up going back and forth," he says. "I think it's possible to do stuff in both places."