[Manbo Jeongdam] "Korea's Economy Facing Prolonged Low Growth, Urgent Need for Startup Vitality"

Yoon Geonsu, Chairman of Korea Venture Capital Association, Walking Interview
The Secret to K-Beauty's Success Is Shifting to Negative Regulation
Korea's Future Depends on Startup Growth... Institutional Improvement Support Is Key

"When the weather is cold, walking in a mall like this is also good. You can feel the trend and walk regardless of the weather."

On the 23rd, when the real cold began after the winter solstice, I met Yoon Geon-su, Chairman of the Korea Venture Capital Association (CEO of DSC Investment), at a large shopping center in Yeouido, Seoul. Chairman Yoon, who usually manages his physical strength through Pilates and walking exercises, enjoys indoor walking during winter. While walking through the mall filled with the year-end atmosphere, I talked with Chairman Yoon about the vitality of the Korean economy.

Yoon Geon-su, Chairman of the Venture Capital Association, is walking in a large shopping mall in Yeouido, Seoul. Photo by Jo Yong-jun

Born in 1962, Chairman Yoon earned a degree in Electronic Engineering from Kyungpook National University and completed an MBA at the MIT Sloan School of Management. He worked at LG Comprehensive Technology Institute and LG Telecom, handling technology planning and service development. Later, he served as Executive Director at Korea Technology Investment and LB Investment, building his career in venture investment. In 2012, he founded DSC Investment and has been serving as its CEO, growing the company into one of Korea's leading venture capital firms. Since February 2023, he has been serving as the 15th Chairman of the Korea Venture Capital Association, working to improve the venture investment environment.

"Take a look at the current global market capitalization rankings."

Chairman Yoon took out his smartphone and showed a list of the top 10 companies by global market capitalization, saying, "Most of these companies are big tech firms run by their founders," and added, "We barely have Samsung Electronics within the top 100." He emphasized, "Samsung is ranked, but it is now a third-generation family business," and stressed, "Our economy desperately needs entrepreneurial vitality right now."

-Large corporations have led Korea's industry so far, but the future depends on the growth of startups. How do you see the potential of K-startups?

K-startups had the advantage of rapid execution. Compared to the U.S. and China, Korea does not have abundant capital, superior technology, or outstanding capabilities, but the speed was fast. That was the greatest competitive edge. Looking at our current system, there are many regulations, and the speed has slowed down. Ultimately, regulation is the problem. The global market is now dominated by K-beauty. Cosmetics in Korea's small and medium venture business sector is almost like the semiconductor industry. It is doing that well. Why did cosmetics suddenly do so well? It is due to differences in regulation. In 2012, the cosmetics regulation policy changed from positive to negative, allowing all ingredients except prohibited ones to be used as cosmetic ingredients. Various creative ideas emerged. Another factor was separating cosmetics marketing, production, and sales. Even without production facilities, anyone with ideas can participate. It is Korea's greatest success story. Looking at policies, giving money is the most backward policy. Changing the system is enough. The private sector has more money and more ideas. Although some worry about the side effects of negative regulation, problems can be solved when they arise. Optimists are the ones who change the world. When the market is difficult like now, the government should support through system improvements rather than spending money. This is the opportunity now.

Yoon Geon-su, Chairman of the Korea Venture Capital Association, is walking in a large shopping mall in Yeouido, Seoul. Photo by Jo Yong-jun

-Despite recent efforts to increase value, the Korean stock market situation is not good

If the KOSDAQ market is not doing well, no matter how much money is put into the venture market, it will not be effective. The market is tightly controlled. There are two ways to open it. The first is to create a KOSDAQ-dedicated investment fund, like funds investing in unlisted stocks through the Industrial Bank of Korea, Korea Development Bank, or government policy funds. How about creating a KOSDAQ dedicated investment fund of 300 billion to 500 billion KRW? Although not a huge amount for policy funds, the message to the market would be significant. The KOSDAQ market is currently considered a market where no one will buy. This atmosphere can be reversed. Ultimately, the market is about sentiment. The KOSDAQ market is currently undervalued. About 60% of companies in the KOSDAQ market have a market capitalization below 100 billion KRW. The scale is too small. In the U.S., Series A funding rounds raise about 100 billion KRW, but ours are too small.

To increase scale, separating the KOSDAQ market should be considered. Recently, EcoPro BM, the second-largest company listed on KOSDAQ, announced it is moving to KOSPI. It is a sad event. Large companies leave for KOSPI. Other companies are also internally considering moving to KOSPI. Then only companies with low market capitalization remain in KOSDAQ. We have only one market, so there is no competition. If separated and made competitive, KOSDAQ can revive. The market should be made into two independent companies. The exchange should separate and make KOSDAQ independent. Then, they will make tremendous efforts to attract good companies. They will try to bring companies to our market and actively hold back companies trying to leave KOSDAQ. KOSDAQ must survive for ventures to survive, and ventures must survive for Korea's future to survive.

-Recently, political issues have also affected the economy, making investment more difficult

There are political issues, but global competition is currently increasing investment difficulty. My grandfather's generation lived by farming in rural Chilgok, Gyeongbuk, without any problem feeding themselves. He never came to Seoul but lived well. My father's generation lived in a provincial city, Daegu, and had no problems until then. But now, I have no problem living in Seoul, but for my children's generation, staying only in Seoul will be equivalent to living in Chilgok or Daegu from a global competition perspective. They have to compete with companies worldwide. The most important thing in the global market is technology. Developing technology sounds easy but is very difficult. It takes a long time and a lot of money. These are all risks, making investment more difficult. The political environment also hinders us from moving quickly. The U.S. is like a 100-meter ball running at 50 km/h, while we are like a 2-cm ball running at 5 km/h. The gap will widen further in 5 to 10 years.

Yoon Geon-su, Chairman of the Korea Venture Capital Association, is being interviewed by Asia Economy at a cafe in Yeouido, Seoul. Photo by Jo Yong-jun

-You once compared Korea's low-growth environment to a 'frog in a slowly heating pot'

-Our market is shrinking in population and economic growth is stagnant. Now, the way we can move forward is through efficiency and globalization. In the past, we worried about 10 to 20 years ahead, but now we must worry about just 5 years ahead. Our country is overall slowing down too much and working too little. The U.S. works like crazy. When parts fall behind in rapid growth, the government protects them, and those who can run faster are allowed to run faster. That is also the government's role. If we only focus on catching up with speed, eventually everyone will fail. Competition must be fiercer, and protection must be stronger. The system must be dualized.

-You have recently put much effort into linking retirement pensions with venture investments

-Under the current system, retirement pension investments in venture funds are impossible. Unlisted stocks are excluded from investment targets. The U.S. and the U.K. conduct retirement pension venture investments. Venture investment is long-term, matching the nature of retirement pensions perfectly. It is unfortunate that it is blocked. The current retirement pension yield is low, about 2% over the past 10 years. It is important for the government to propose alternatives. It is foolish to put money only in banks with principal guarantees. People should be allowed to choose. Investing in individual companies carries risks, but investing in venture funds reduces risks. For example, through a venture fund, you can invest in 10 companies per year for 3 years, totaling 30 companies. This diversifies risks related to time, fund managers, and industries, while maintaining high returns. Over the past 10 years, the average annual return of venture funds invested by pension funds and mutual aid associations has exceeded 10%. The National Pension Service 13.9%, Teachers' Pension 10.1%, and Korea Science and Technology Pension 11.9%, among others.

-There are still public opinion and institutional hurdles regarding retirement pension venture investments

Amendment of enforcement ordinances is necessary. Retirement pensions are very important for people's old-age life. The national pension alone does not guarantee old age. Retirement pensions are important, and the government should not block them in advance but allow people to choose high-yield products. I think public opinion and government movements are not bad now. However, the current government system is stalled, which is unfortunate.

-You have almost completed your two-year term as chairman. Looking back on the past two years

I have experienced a world I had never experienced before. A person who lived quietly had many opportunities to speak outside. I realized that venture investment is much more important nationally and has a much greater ripple effect than I thought two years ago. I have become more committed than before. An environment for active investment must be established for new industries to emerge in Korea. I tell investment officers not to work just for a living but to think of it as serving the country. Because startups must arise for people to make a living. It is about creating a new industrial ecosystem and changing our future. Entrepreneurs have survived life-or-death situations. It is really difficult, but sometimes surprisingly many people with innovative ideas start businesses in various corners. Such ideas should develop more and produce ideas that can shake core industries, not just peripheral ones, in Korea. To be competitive in the global market, connection and cooperation are important. People in Korea who think like me should gather, connect, and cooperate to fight against global number ones. There is hope.

Yoon Geon-su, Chairman of the Korea Venture Capital Association, is being interviewed by Asia Economy at a cafe in Yeouido, Seoul. Photo by Jo Yong-jun

Interview by: Lee Seon-ae, Head of Securities Capital Markets Department

Summary by: Park So-yeon, Deputy Manager of Securities Capital Markets Department

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