[Opinion] A Brief Reflection on the 2020 Global Startup Ecosystem

The year, which began with great difficulty due to the novel coronavirus infection (COVID-19), is coming to an end. It has been a very challenging and tough year worldwide. This situation is expected to continue into the new year. However, despite this harsh ecosystem, the global startup ecosystem, which plays a major role in the world economy, is considered relatively stable. Let's look at a few reasons.

First, contrary to concerns, investments in global startups have not significantly decreased. Although the first half of the year was relatively difficult, in the second half, startup investments increased to the second-largest scale ever, so the overall investment size was not much different compared to last year. The investment regions for startups are still dominated by the United States, but there is a gradual shift toward Asia. In the third quarter, the number of investments and investment amounts in North America, including the U.S., were 1,563 deals and $37.4 billion, with an average investment amount of $23 million. In contrast, Asia had 1,585 deals totaling $23.9 billion, with an average investment amount of $15 million. For the first time, the number of investments in Asia surpassed that of North America, although the average investment amount was lower. However, experts predict that the average investment amount in Asia will soon surpass that of North America. Digital healthcare, artificial intelligence, and e-commerce are expected to be the main investment sectors next year.

Second, the increase in global unicorn companies valued at over 1 trillion won. According to CB Insights, there are 506 unicorn companies this year, with 70% of them being from the U.S. and China. The U.S. has 216, China 118, India 25, the U.K. 24, and Germany 12. South Korea did not see an increase in unicorn companies this year. The rapid growth of global unicorns is due to institutional investors increasing their investments in startups. Central banks around the world competitively lowered benchmark interest rates to respond to COVID-19, which relatively highlighted startups with investment value. Next year is expected to see a rush of initial public offerings (IPOs) from these unicorn companies. In the U.S., 89 companies went public this year, the second-highest ever. In South Korea, seven companies including Viva Republica are preparing for IPOs, and three companies such as Yanolja and Socar have already selected their lead underwriters.

Third, the growth of the Gig Economy. The prolonged COVID-19 pandemic has accelerated changes in the business sector. The term Gig Economy comes from Gig Work, which originated in the early 1920s at jazz venues in the U.S., where performers were hired on the spot. There are 57 million gig economy workers in the U.S., accounting for 36% of the total U.S. workforce. The gig economy market using platforms like Airbnb and Uber is expected to grow to $45.5 billion by 2023. More business models in this field are expected to be created and launched in the market. Government policies need to reflect this growth in the gig economy market.

Fourth, the expansion of the Subscription-Based Business market. While COVID-19 has had a significant impact, even after the pandemic ends, the increase in single-person households and customers seeking convenience is expected to drive substantial growth in the subscription economy. Price Intelligently forecasts that the subscription economy market will grow to $10.5 billion by 2025. The growth of the subscription economy market also means the startup market will expand.

As such, 2020 was heavily influenced by COVID-19 in many aspects, and 2021 is expected to be affected regardless of whether the pandemic ends. For the startup market, this is rather an opportunity. Government startup policies must respond in line with these market trends. / Kyung-Hwan Kim, Professor, Graduate School of Global Entrepreneurship, Sungkyunkwan University

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