"The Future World Innovation Leadership Will Shift from Large Corporations to Startup Companies"

[Direct Talk - Asia Invitation] Jeon Young-min, CEO of Lotte Accelerator

"Over the past 100 years, the driving force behind changing the world has been corporations. It is expected that corporations will continue to play the same role in the future. However, the leadership will shift from large corporations to startup companies. Existing large corporations are increasingly struggling to keep up with the pace of change in the world. The ‘playing field’ for startups is definitely expanding."

This is the reflection shared by CEO Jeon Young-min, who moved to Lotte Accelerator last August. He felt that the creativity of the highly dynamic startup ecosystem is something existing large corporations simply cannot keep up with. Having worked for nearly 30 years in the Lotte Group’s HR team and Lotte Human Resources Development Institute researching ways to make employees creative throughout his life, he expressed, "I was amazed by the dynamism and innovation of startups during the first month after my appointment."

CEO Jeon said, "Even Google, which was praised for its creativity, saw a decline in internal creativity after becoming a large corporation, so it created an organization called Google X to regain dynamism. Eventually, it shifted to a strategy of acquiring startups through mergers and acquisitions (M&A) to discover and inject creativity from outside. Our large corporations are no different; we will need the support of the external startup ecosystem to survive in the long term."

Established in 2016 under the will of Lotte Group Chairman Shin Dong-bin, Lotte Accelerator has been discovering, nurturing, and directly investing in startups for the past five years. To date, it has invested approximately 52.5 billion KRW in a total of 149 startups. Although it is still a business investing in early-stage companies, as these companies grow, more funding will be required, so the investment amount is expected to increase exponentially. The total amount of various funds raised so far, including ‘Lotte Startup Fund No.1,’ ‘Lotte-KDB Open Innovation Fund,’ and ‘Lotte-Front1 Startup Fund,’ is 124.7 billion KRW. CEO Jeon plans to expand this to around 200 billion KRW by the end of this year.

It is rare for large corporations to invest in early-stage startups.

▲While large corporations have invested in startups that have grown to a considerable level, Lotte is the first to invest in early-stage startups. From the perspective of a large corporation, it is about creating a healthy startup ecosystem and providing social value to the community, but from a business perspective, it is also true that they have found tremendous opportunities.

When I worked as the head of the Human Resources Development Institute, I thought about nurturing talent suited for the world five years ahead, but here at Lotte Accelerator, we have to act with a 10-year outlook. Lotte Accelerator has the infrastructure of dozens of affiliated companies. Each company has employees with decades of experience and know-how in various industries, and there is infrastructure related to distribution, research, production, development, and marketing. I believe that combining decades of accumulated experience with new ideas and the passion to change the world can truly change the world.

What kind of startups do you mainly invest in?

▲We try to invest in startups related to Lotte to provide Lotte’s infrastructure and know-how. For example, Miro, which operates the commerce platform ‘LastOrder’ that discounts products nearing their expiration date, commercialized the idea of applying the closing discounts usually done in department stores or large mart food sections to neighborhood restaurants and convenience stores. They aimed to reduce the food waste discarded daily and the huge costs of processing it, thereby solving related social problems. Collaborating with Seven Eleven, Lotte Department Store, and Lotte Mart, they saved about 2.3 billion KRW last year and aim to save 6 billion KRW this year. Our principle is to invest in companies that can make the world brighter. Especially for startups related to ESG (environment, social, governance), we plan to invest regardless of reason or nationality, and we are practicing this.

What is the extent of your role as an accelerator?

▲The basic model of an accelerator is to discover ideas, refine and polish them, and help commercialize them. The competition rate for ‘L Camp,’ which selects startups supported by Lotte Accelerator, always exceeds 30 to 1. Being selected here certifies the validity of the business model and the capability. Usually, after a 3 to 6-month incubation period, a demo day is held to present the business model to investors. Since the startups receive hard training for six months incorporating the know-how of Lotte affiliates, it becomes very easy to receive additional investment at this point.

Even after graduating from L Camp, startups need additional funding during their growth process. Because they continuously need help not only in raising additional funds but also in pivoting their business models, we induce investment and also invest in follow-up stages. It serves as a kind of alumni association.

You have expanded your interest to overseas startups as well.

▲Recently, we invested in ‘Shark Market,’ a corporation founded in Vietnam, and applied for a venture capital (VC) corporation license. If approved, it will become the first foreign venture capital in Vietnam. The founder was an employee at Lotte Mart Vietnam and started an e-commerce business in Ho Chi Minh City. We invested initial capital and are considering including them in the next L Camp program. We have also invested as limited partners (LPs) in VCs located in Singapore, Israel, and Vietnam. This is an attempt to observe and study those markets. We also invested in ‘Bear Robotics,’ a company founded in Silicon Valley by a former Google engineer developing delivery robots that move around restaurants. They are already producing robots in Korea.

Did the startup sector suffer from COVID-19?

▲In Silicon Valley, existing startup and VC activities have not shrunk, but it seems that startup founding and early-stage investments have significantly decreased. However, this is not the case in Korea. According to the Korea Venture Capital Association, the number of venture companies supported by venture capital firms increased from 1,608 in 2019 to 2,130 in 2020, and the investment amount rose from 4.2777 trillion KRW to 4.3045 trillion KRW. This is the dynamic spirit typical of Koreans, showing no contraction at all. As of 2019, Korea ranks 4th in the world in the ratio of startup investment funds to GDP. Only the United States, Israel, and China invest more than Korea. Korean startups are also increasing in Silicon Valley. The number of Koreans employed by Silicon Valley companies has steadily increased, and at some point, they began to independently and boldly start their own businesses, continuing this trend last year. It seems that a great era for startups is wide open.

Interview / Myung Jin-gyu, Head of Consumer Economy Department

Summary / Jo In-kyung, Reporter ikjo@

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