[Asia Exclusive] "Korea's 'PayPal' Has Arrived... Now Let's Compete with Overseas Startups"

Silicon Valley Investment Legend 'Plug&Play'
Established 37th Corporation in Seoul Last December
Plans to Invest Up to 15 Companies This Year, Averaging 200 Million KRW Each
If Results Are Good, Will Create Korean Corporation's Own Fund
Aiming to Build Startups Capable of Global Sales

David Kim, CEO of Plug and Play Korea, is being interviewed on the 8th at Plug and Play in Seongdong-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Hwang Yoon-joo] "I came to Korea to make a seed investment in Korea's ‘PayPal.’ The return on investment for PayPal, our first investment, was 30 times, Dropbox was 1000 times, and including ‘FiscalNote,’ which is preparing for a Nasdaq listing, we have invested in 1,600 startups so far, with a success rate (growing to a corporate value of over 100 billion KRW) of 10%. We have as many as 29 unicorn companies."

On the afternoon of the 8th, we met David Kim, CEO of Plug&Play Korea, in Seongsu-dong, Seongdong-gu, Seoul. He said this first to Asia Economy. Plug&Play, still unfamiliar in Korea, is a U.S. venture accelerator famous for rewriting the investment myth in Silicon Valley. U.S. media call the Plug&Play headquarters ‘the luckiest building’ in Silicon Valley. Plug&Play established its 37th branch in Seoul last December. This news stirred the startup industry and large corporations first. Korean founders who studied in the U.S. welcomed it, saying ‘if you get picked, you’ll rise.’ Major companies like Samsung Electronics and LG Electronics signed partnerships, and POSCO dispatched personnel to its headquarters tech center.

- Was there a particular reason for establishing a branch in Korea?

△ In recent years, many domestic startups have expanded overseas. There have been cases of receiving investments from Plug&Play headquarters, as well as from its branches in Japan and Singapore, which increased interest in Korean startups. When CEO Saide Amidi visited Korea in 2019 and attended a domestic startup accelerator demo day, it was decisive. There were more high-quality startups than expected. Also, domestic large corporations’ needs for open innovation increased. They want to discover growth engines together with startups. At the same time, Seoul City had a strong will to invest in creating a venture ecosystem. Thus, in 2020, we formed a partnership with Seoul City. However, the sudden passing of former Mayor Park Won-soon and COVID-19 delayed the launch of the branch.

- I’m curious about your investment. What is the success rate of your investments?

△ We have invested in 1,600 startups so far. We invest in 200 to 250 companies annually. The success rate is 10%, which is high for seed investments. We have produced 29 unicorn companies. We do not form funds; CEO Amidi invests directly. Our first investment was Logitech. Google invested through limited partners (LPs).

There is a reason why our investment success rate is high. Our investment method differs from typical accelerators. First, we create shared office buildings and lease offices to startups we invest in. Second, we help with startup networking. We arrange meetings among founders and regularly hold events to showcase startups to private equity, corporate venture capital (CVC), and venture capital firms. We also regularly organize meetings with mentors such as unicorn company founders. Therefore, startups we invest in have a high rate of follow-up investments.

- What are your investment plans in Korea this year?

△ We plan to invest in at least 5 to 15 startups. Investments are made directly from our Silicon Valley headquarters. For domestic startups to expand overseas, foreign capital must come in. If good results come out, we plan to form a fund under the Korean branch itself. Our goal is to expand domestic startup investments and help them enter overseas markets.

- What is the average investment size per startup?

△ It ranges from about 50 million KRW to 500 million KRW. On average, it is about 150 million to 200 million KRW per company. We are seed investors. Startups preparing for IPOs are not our investment targets. That is why the investment size is small.

- Most startups have a brief success and then disappear. What is the problem?

△ It is because founders have not found answers on what direction to take in management. Many startups in promising fields like metaverse (extended virtual world), mobility, etc., see their corporate value drop after IPO. Most founders put all their effort into the IPO (exit). It is not easy to find growth engines after listing. I believe there is a bubble among listed startups. To survive, they need to strengthen business viability through collaboration with traditional large corporations, create new customer pools, and expand overseas. This is difficult for startups to do alone. The role of accelerators is to provide timely support necessary for startups to leap forward. I want to change the Korean startup ecosystem as well.

David Kim, CEO of Plug and Play, is being interviewed on the 8th at Plug and Play in Seongdong-gu, Seoul. Photo by Jinhyung Kang aymsdream@

- Why do you want to change the Korean startup ecosystem? Is there a reason why the domestic venture capital industry lags behind global investors?

△ Recently, investment money has been pouring into startup companies. Investors have diversified from institutions and government to individuals. So, there are many zombie startups. Especially, the government supports startups early on with packages, but some exploit this. They use funds not for growth engines but for other purposes. Sorting out the wheat from the chaff among startups is urgent.

Also, the investment culture and methods unique to the Korean venture capital industry seem somewhat different. When a big investor comes in, other investors often follow. There seems to be reciprocal investment. Startup CEOs with good academic backgrounds and strong networks receive investments well and succeed in exits. But in reality, some cases lack substance.

I also want to change the culture of making domestic startups compete against each other during acceleration. Plug&Play makes domestic and overseas startups compete together. It is important to succeed in overseas markets as well. Although unicorn company Coupang succeeded in U.S. listing, most of its sales come from Korea. We need to find startups capable of generating global sales. Conversely, when communicating with overseas startups and introducing them to domestic investors, we must take responsibility. Korean accelerators are weak in this regard.

- Plug&Play currently has partnerships with major companies such as Samsung, LG Electronics, and Hanjin Group. What role do you play between large corporations and startups?

△ We help corporate open innovation by connecting large corporations and startups. This is different from demo days hosted by the Korea Development Bank or government ministries. We do not just select promising startups but consult on the overall process for cooperation between large corporations and startups. The recently much-mentioned ‘agile’ organization is a representative example. When a large corporation starts a project lasting 3 to 6 months, we connect the necessary startups and then guide the direction for collaboration, M&A, strategic investment, etc. Above all, we have a solid global network, so we can introduce startups worldwide to large corporations and domestic large corporations as investors to startups worldwide. Plug&Play and large corporations also jointly invest in promising startups.

(Interview by Jeon Pil-su, Head of Securities Department; Organized by Reporter Hwang Yoon-joo)

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