Regardless of the relatively negative economic outlook caused by the pandemic, South Korea has continued to push the innovation pedal. And results are now visible. According to the “Tech Scaleup South Korea 2022 Report”, produced by advisory firm Mind the Bridge with the support of Korean National IT Industry Promotion Agency (NIPA) and presented today in Seoul as part of the MTB Scaleup Summit, this country in just less than three years has become one the he world’s main innovation clusters.
“Last year we reported about the unique momentum of the South Korean innovation scene. As of June 2022, South Korea is continuing on a thriving growth trajectory, setting the stage for becoming a dominant innovation hub at global scale with a yearly average growth of about 40% in the main figures – commented Marco Marinucci and Alberto Onetti, respectively CEO&founder and Chairman at Mind the Bridge – South Korea is now significatively ahead of countries like Germany and France.”
The country increased its scaleup population by 35% since 2020, reaching a total of 1,214 units (2.4 scaleups every 100K inhabitants), and doubled their total amount of funding raised, now reaching a total of $48.2B (roughly 2% of the country’s GDP). These figures combined clearly outperform all the most advanced and emerging global scaleup economies, including France (3.0 and 1.23%), Germany (1.69 and 1.14%), the UAE (2.54 and 0.77%), as well as the European average (1.76 and 0.98%). Only the US, the UK, Israel, and the world’s epicenter of innovation – Silicon Valley – outperform today South Korea.
Furthermore, the country now hosts 53 “scalers” (scaleups that raised more than $100M since inception) and 7 “super scalers” (scaleups that raised more than $1B since inception) compared to the 26 and 3, respectively, recorded last year.
“The outstanding growth pace of the South Korean scaleup economy is rooted in its capability of reaping the benefits of specialization on a few strategic industry verticals.
Data confirms that over the years the country became a haven for digital media technologies. And, yes, a new trend is thriving in South Korea as a direct evolution of the country’s strong foundation in digital technologies: the “metaverse” – added Marco Marinucci and Alberto Onetti.
The ecosystem: players and backers
200 scaleups are today playing in the Digital Media and Gaming field, collectively accounting for $11.4B raised. Other strong verticals are Business and Productivity Software (111 scaleups, $1.4B raised), E-Commerce, Retail & Shopping (94, $11.1B) – an expansion mostly driven by the large deals mentioned above, Fintech (88, $6.9B), and Healthtech (88, $1.1B).
The average South Korean tech scaleup is 7 years old. It took only 3 years since inception to cross the $1M threshold in funding (8 and 4.5 years, respectively, in Europe). As per the other countries, scaleups tend to aggregate around one main hub per country, typically the capital city. Seoul hosts 948 scaleups (78% of total), which attracted more than 70% of the total funding made available to Korean scaleups.
As of 2022, the South Korean scaleup economy remains largely VC-driven, as roughly two thirds of the total capital raised by Korean scaleups comes from venture capital both public and private. Domestic investors dominate the Korean VC investment landscape, by deploying 46% of the total capital. Japanese, US and Chinese investors follow (22%, 15% and 7%, respectively). The government contributed to rounds amounting a total of $3.5B in investments (11% of total VC funding), while corporate-led rounds accounted for 54% ($17.3B+). Over the last 10 years Korean corporates instituted new CVC funds for on average over $1B every year.
58 international companies from over 10 countries have an innovation outpost in South Korea. The US, Germany and France are the most active countries.
“This is a clear indication that the main corporates have put South Korea on their map of key innovation ecosystems”, ended Marco Marinucci and Alberto Onetti.
In South Korea, the “Metaverse” is a visible and expanding trend. As of June 2022, the Report tracked 109 scaleups (9% of total) that have built – or are in the process of building –
technologies related to the “metaverse”. On top, the study estimates the presence of about 200-300 additional “metaverse” startups below the $1M funding threshold. Among them about 50 are post seed and then “ready to scale”. Their scaleup density ratio is 3-4 times higher than the Silicon Valley and the UK (3% of total), Europe and Israel (2%) ones.
The centrality of the Metaverse in South Korea is confirmed by the amount of funding raised by local scaleups, equal to $10.6B (i.e. the 22% of total funding made available to Korean scaleups), deployed with the precise goal of supporting them in building their metaverse platforms after the foundation (i.e. not “born metaverse”).
With the highest smart device penetration rate in the world (about 98%), yet the metaverse appears to be much more than “just entertainment”. Several other industry verticals are likely to be disrupted by metaverse-related technologies: gaming, immersive tech, digital media, fashiontech, fintech, business & productivity, edtech, web platforms, construction, advertising, sport and industry 4.0.