Average Startup Capital 290 Million Won... "Difficulty Securing Funds"

Source: Ministry of SMEs and Startups

[Asia Economy Reporter Kim Daeseop] The biggest difficulty felt by entrepreneurs when starting a business was securing funds. The average capital required for starting a business was found to be approximately 290 million KRW.

According to the "2019 Startup Company Survey" released by the Ministry of SMEs and Startups on the 29th, the number of startup companies was 1,722,000 in 2015, 1,734,000 in 2016, and 1,748,000 in 2017. It was found that the number of startups increased steadily each year from 2015 to 2017.

This survey improved statistical accuracy by changing the population from the "National Business Survey" to the "Statistical Business Register," which utilizes administrative data such as national tax and four major social insurances. However, since the survey population was changed, the time series comparison with past startup company survey results is not possible. Accordingly, the status of startups for the previous three years (2015-2017) was separately tracked and analyzed based on the changed population (Statistical Business Register).

By industry, technology-based industries accounted for 440,000 companies, representing 25.2% of all startups. Total sales generated by startups were 660.9 trillion KRW in 2015, 679.1 trillion KRW in 2016, and 705.5 trillion KRW in 2017. Sales per company steadily increased from 380 million KRW in 2015 to 400 million KRW in 2017.

The total employment in startups increased by 128,000 people in 2016 compared to the previous year (2015), but decreased by 47,000 people in 2017 compared to 2016, showing slight annual fluctuations.

Looking at the status by growth stage (business age), early-stage companies within three years of establishment accounted for 60.4% of all startups. The average number of employees per company was 1.3, and sales were 290 million KRW. Companies between three and seven years old accounted for 31.6% of startups, with an average of 2.2 employees and sales of 560 million KRW per company.

The most common difficulties experienced when starting a business (multiple responses) were securing funds (71.9%), followed by fear of failure (44.1%), and lack of knowledge, skills, and experience (33.6%). The most challenging aspect of management was sales and marketing (69.8%), followed by price reduction for sales and delivery (37.0%) and financial management (29.6%).

The average capital required at startup was about 290 million KRW. Funding sources (multiple responses) mainly included personal funds (94.5%), bank and non-bank loans (20.9%), and private borrowing (14.2%). Some also utilized government loans and guarantees (2.5%), government subsidies (1.2%), and angel or venture capital investments (0.7%).

The gender distribution of startup company representatives was 58.6% male and 41.4% female. By age, those in their 40s (32.4%) and 50s (29.3%) made up 61.7%, indicating a majority of middle-aged entrepreneurs. It was found that 71.8% of entrepreneurs were first-time founders. The proportion of those who prepared for startup as a team was 18.0%, while most (82.0%) prepared individually.

Most startups were independent ventures based on the founder's own ideas (86.0%). Others included technology transfer (8.8%), co-founding with idea holders (2.7%), and startups discovering items through idea exchange and cooperation (2.6%).

The reasons for choosing to start a business (multiple responses) were led by "to achieve greater economic income" at 50.3%, followed by "because it suits my aptitude" (40.5%), and "to contribute to economic and social development" (36.3%).

The average assets per startup company were 530 million KRW (31.4% capital, 68.6% liabilities). Startups possessing research and development (R&D) facilities accounted for 2.2%, and those holding industrial property rights accounted for 1.7%.

Lee Soonbae, Director of Startup Policy at the Ministry of SMEs and Startups, stated, "This survey result is based on data as of the end of 2017, so there is a 26-month time lag at the time of publication, which limits its timeliness. The 2020 Startup Company Survey (based on 2018 data) will be announced by the end of this year, with the survey period and data analysis process advanced to improve the timeliness of statistical use."

This content was produced with the assistance of AI translation services.