[K Startup Great Transformation] Funding and Workforce Shortages Hinder Progress... Urgent Shift to 'Negative Regulation' Needed

<Part 1> Asking 30 CEOs
On-site impact still limited and evaluations remain cautious

Although the government is promoting the discovery and nurturing of startups as a key policy to lead the digital economy, startup CEOs who are actively conducting business at present unanimously agreed that it is urgent for government policies to shift to a ‘negative regulation’ approach before providing support. When asked about the biggest difficulties in managing startups on the ground, they cited ‘difficulty in attracting investment,’ ‘lack of professional manpower,’ along with ‘excessive government regulations.’ Given this situation, the policy scores perceived by CEOs were found to barely avoid failing grades. While support is increasing quantitatively, opinions were also raised that the execution process is disconnected from the realities of the startup ecosystem.

According to a survey conducted by Asia Economy on the 26th targeting 30 major startup CEOs, more than half, 63.3% (19 people), gave the government’s startup policies a score of 3 or below (out of 5). Despite the government’s intentions, frontline managers did not give high marks. Specifically, nearly half, 14 people (46.7%), gave a score of 3, and 5 people (16.7%) gave a score of 2. On the other hand, no CEO rated the policies 5 points, and 11 people (36.7%) gave 4 points. Since the Moon Jae-in administration elevated the Ministry of SMEs and Startups and promoted startup support as a major policy task, the perceived effects on the ground remain low, and evaluations are still cautious.

Regarding the reasons for this evaluation, many CEOs mentioned that the expected shift to negative regulation, which is urgently needed on the ground, has not been realized. No matter how much support is increased for startups, if there is insufficient flexibility regarding regulations that can fundamentally change the industry framework, it is difficult for new industries to settle and for startups to gain competitiveness.

In fact, 13.3% of CEOs cited excessive regulations causing obstacles to the establishment of new technology industries as the biggest difficulty in founding and managing startups. This was the third most common issue after difficulties in securing funds such as investment attraction (36.7%) and lack of professional manpower and absence of education systems (26.7%). The survey was conducted over a week from the 13th to the 19th, targeting 30 CEOs of major startups, including ‘pre-unicorns’ with a corporate value of over 100 billion KRW.

In this survey, startup CEOs identified investment attraction, manpower acquisition, and government regulations as the biggest obstacles. Along with the core elements of ‘money’ and ‘people’ in a company, deregulation is a key keyword for K-startups to gain global competitiveness. In particular, CEOs emphasized the urgent need to shift from ‘positive regulation,’ which only specifies what is allowed by law, to ‘negative regulation,’ which allows everything in principle except for exceptional prohibitions. Although the need for negative regulation has been advocated for years on the ground, CEOs commonly perceive that there has been little improvement even under the current government that emphasizes startup support.

◆Urgent Need to Shift to Negative Regulation=CEOs unanimously agreed that the paradigm must now change. They believe that if the government tries to prevent all possible problems in advance rather than taking responsibility after problems occur, numerous regulations will inevitably continue to be produced. Overall, it is urgent for policies to shift to a negative regulation approach. The voice from the field is that "the startup ecosystem should prioritize self-sustainability, and the government should only provide necessary guidance."

CEOs also emphasized negative regulation because failing to understand new technologies and user changes while considering the interests of existing industries could cause Korea to fall behind in global competition. One CEO who participated in the survey said, "Rapidly changing IT technologies and international exchanges have made the emergence of new industries indispensable," adding, "Negative regulations agreed upon by various stakeholders will accelerate the growth of Korea’s excellent startups’ global competitiveness." There was also a claim that "regulations on monopolistic companies like Google and Apple are not the same as those on domestic companies, and they are applied in a way unfavorable to domestic companies, so this reverse discrimination issue must be resolved."

◆Policy Effectiveness is Low=Although government support policies have increased quantitatively and revitalized the industry, there are criticisms that they are operated inefficiently, resulting in low effectiveness. While the increase in funding is clearly positive, there is a gap between the actual field conditions and the usage or methods of using these funds. One CEO said, "Programs operated by the government are very impractical and inefficient," adding, "The standards required by the government are often disconnected from reality." There was also an argument that "because the government is unaware of the field, support is biased toward projects that respond quickly to achieve support results." Another CEO said, "There is a lot of budget waste due to policies that do not help startups that are actually working hard."

Problems with difficult evaluation criteria and complicated support procedures by executing agencies were also raised. The administrative paperwork required is excessive, reducing efficiency. One CEO lamented, "To bid for government projects, many certifications are needed, and it is not easy for startups to spend money and time to obtain them, but the conditions and additional points are designed very complicatedly, making it inefficient." There was also an opinion that "because uniform standards are applied to the diverse startup ecosystem, it is difficult for startups that discover new technologies or new markets through technology-based long-term investments to benefit."

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