[KSS NYC] Venture Capitalists Panel

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(Photo by Dohyun Lee)

 

The Venture Capitalist Panel at the Korean Startup Summit 2015 featured five speakers, each coming from varying backgrounds, but equally influential in their contribution to the startup space and the Korean American venture ecosystem in particular. Tech for Korea summarizes select discussions from the hour-long panel session.

(From left to right)

John Ryu is a Partner at Scout Ventures. He covers the east coast, focusing on tech startups in the early seed stage. His operator background is valuable to his responsibilities as an investor, and he has also worked with large corporate tech companies in the past. John received his B.A. from Yale, and MBA from the Haas School of Business at U.C. Berkeley.

Richard Jun is the Managing Partner at Bam Ventures, renowned for their successful ventures with Shoedazzle and Honest Company. Richard founded his fund with Brian Lee, the creator of LegalZoom, the nationwide leader in online legal services. Previously a transactional attorney, Richard graduated from Harvard College, and received his J.D. at Columbia Law School.

John Nahm of Strong Ventures mostly focuses on investments directly into Korea, and those with Korean founders in the United States. John comes from a variegated background in startups, high-tech and finance, and has so far made a total of 37 investments across two funds. He received both his B.A. in Economics and Masters in International Affairs from Columbia.

David Lee works with multiple funds, among them SK Telecom’s venture fund on the west coast, TomorrowVentures, a family fund by Eric Schmidt, and also Kstartup, one that focuses on Korean startups. At Google, where he was one of the earliest employees, David was in charge of Google’s overseas expansion.

Hyuk-Jeen Suh leads Samsung Ventures East Coast, through which he invests in promising technologies with the potential to create synergy with Samsung’s own products. Hyuk-Jeen comes from a technical background with a Ph.D. in Electrical Engineering from UIUC, augmented by a Yale MBA and experience on Wall Street. He received his B.A. and M.S. from Cornell.

 

Where are Korean startups headed–in the U.S. and in Korea

Hyuk-Jeen sees Korean startups as having an upper hand with their easy access and familiarity to world-class IT infrastructure, observing that many technologies in South Korea are “up to 3~5 years ahead of the U.S., which results in a huge penetration rate in most tech businesses”. However, he noted that at the end of the day, “the challenge is physically getting to the U.S.” for Korean startups to materialize their dreams. Legal issues, employment and culture barriers are just some of the challenges that Korean startups face in breaking into the U.S. tech scene, he said.

John Nahm of Strong Ventures cautioned that “Yes, Korean tech can be more advanced in some areas, but a generalization can be deceiving,” which is evident from many Korean founders who “come over to Silicon Valley and get a reality shock”. John was wary that “some tech sectors are very weak or simply nonexistent in South Korea,” taking the lack of fin-tech, real estate related business, and the absence of Yelp-like services in Korea as examples. “There are many holes within the Korean startup landscape,” says John.

 

To have or not to have your whole team in one location?

For John Ryu of Scout Ventures, who strives to be a hands-on value add investor for his portfolio companies, “physical proximity matters a lot” to build a close mentor relationship with each of his partners. “The ability to jump on a subway, grab a cup of coffee and see how things are going really matters to us.”

John Nahm advises that it really is “best to have your team together“. “Proximity among engineering, marketing, and sales is very important,” he noted.

 

How to successfully move to the U.S. as a Korean Startup

According to Richard Jun, Bam Ventures has seen “a lot of companies in Korea whose ultimate ambition is to come to the US.” But for that to be successful, he says, “there needs to be a natural fit”. Richard notes that very often, “the product is good, but the entrepreneur is not very strong when it comes to pitching the vision and getting investments into the company in the United States.”

David Lee followed up with the example of the Cyworld’s failure in the States. A now-discontinued service provider of the hugely popular “mini-homepages” in Korea in the past decade, Cyworld arrived in the U.S., and “failed to hire the right people, and simply did not grasp the tech culture and its consumers in the States.”

Referring to companies that seek direct investment from VCs in the States, David Lee says it “used to be that most investors weren’t used to getting pitches from companies that they can’t drive to” and that many Korean founders themselves had trouble pitching, once across the Pacific.
“But that’s changing,” he says. “There are a lot more VCs who are comfortable with companies overseas,” and more companies that are comfortable with presentation.

John Nahm agreed with the others that opportunities are better now, and that the caliber of Korean startups continues to improve.
“A new trend is that management teams now have guys with extensive overseas experience and education. A lot of companies that are skyrocketing right now such as Coupang have Korean Americans or those educated outside of Korea”. From this trend, he sees “a lot of opportunity for Korean Americans to be involved in Korean startups both within Korea and those that are coming to the States for expansion”
John went on to suggest that “you want to hire Korean-American co-founders or execs or at least people who speak English fluently and can pitch the product perfectly in the U.S.”

Hyuk-Jeen commented that for startups from Korea, it is “difficult to compete in the U.S. with other tech companies by doing a great pitch.” The only way to differentiate itself is if the technology is A level, he says. “It needs to stand for itself—proven to be better than any other technology. Successful Korean founders may not be able to speak as well as those American home-players who have been doing it for their whole careers in the tech scene here”—the core technology will make or break, he says.

 

East or West?

John Ryu hopes that you “make sure you’ve thought through it”. What makes sense with the industry, or product that you’re working with, will be the answer, he says. Regarding the East Coast, “New York still is a smaller pool. SF is a bigger ocean. But NYC has its advantages. If you’re doing ad sales, etc. you have to be in NYC”

“For some companies, SF is the logical place to be,” says Richard Jun. “It’s where your customers are, where you’ll find your engineers, where your most likely series-A investors will be.” Referring to LA, he notes that there is a difference–“it’s a great place to start something content based, thanks to Hollywood and a very robust Korean American community. There’s more money from the private sector to buoy those industries.” Richard notes that there is “certainly a lot of money in NY, but it’s not all strategic money”. It’s the private equity guys, or the rich uncle, he claims, which do not follow through with the same amount of support behind the money. “In LA, we’re starting to see the advantages of coming together and offering services more than just the money”.

David Lee acknowledges that San Francisco is the default go-to location for startups—just like Detroit and the auto industry. “San Francisco is great because, one, people are open to new ideas – for example, crazy ideas that only SF restaurants would try, and two, people are supportive with your ideas and ambitions.” David also made a distinction between the talent pools —“the Valley has more full-stack engineers—those who can build the entire thing from chipset to software on top, whereas in other cities, they have clearer role divisions – software engineers, app engineers, designers, UI/UX people, etc.”

Hyuk-Jeen provides valuable perspective on the size of the VC market in the United States. “The VC pool in San Francisco / California comprises about half of all VC investments made worldwide,” he noted. “Of the rest, 25% is on the east coast—China, India, Israel, Korea, and the rest are in the last 25%. So although the East Coast is relatively smaller than Silicon Valley, it is still a massive market. In terms of specific cities, for example, Boston is home to more robotics companies than the rest of the U.S. combined. If you’re doing Ad-tech, you cannot be anywhere else than New York City. Again, it depends on what sector you would like to enter.”

 

On “Korean traits” found across the range of entrepreneurs who identify themselves as Korean.

John Nahm found himself talking to a Jewish entrepreneur a few weeks before, and noted similarities between Korea and Israel in that both cultures were often the subject of harassment by neighboring countries. “Threat bred innovation” and the survival mentality of “wanting to survive no matter what” is apparent in entrepreneurs from both cultures, according to John. The mentality characterized by prudence and tenaciousness, augmented by innovation. He had a caveat, however, that such mentality “can sometimes work against you, when you don’t know how to give up even after realizing something is not working.

Richard Jun agreed that Korean startup founders often display an impressive, unyielding entrepreneurial spirit, which he also conjectured to be from family and cultural settings marked by strong work ethic and the value placed on pushing oneself to his limits.

Hyuk-Jeen notes that often, a Korean startup team is so focused on the product, that they do not often assess the bigger picture. He asks his potential investees, “what would you do with your company if you had unlimited resources?” because that is what Samsung effectively provides: “whole team of hundreds of people, engineering resources and data to help you scale”. A difference he’s seen between Korean startups and those in the States is that American companies tend to think globally, beginning with a bigger vision. He suggests “yes, focus on the product, but have a roadmap for scale-up – it makes a big difference in how you build your company when you come across the opportunity for funding.”

 

What are you looking for in your next investment? (Seed round funding range)

JR: “Mobile data, and monetization of that mobile data is what our fund is currently really interested in.” (100k – 200k)

RJ: “We’re opportunistic when it comes to investing. As long as we don’t hate the idea, we’ll probably write a check in to keep options open for the next round. In terms of business, more old school than most – we love companies with core technology competencies that can sell to consumers – service, experience, followup – personal experience is what we’re looking for… and VR!” (50k – 250k)

JN: ”In retrospect, we like platforms, marketplaces, et cetera. We will continue to look for such companies in a variety of areas such as real estate, VR, fintech, bitcoin. However, last-mile delivery is currently huge both in the U.S. and Korea, and we’re looking for startups who can innovate in that sector.”
“Communication is very important. We try to identify founders who will be able to pitch the company to the next investor as well. The ability to pitch to the next series of investors” (5k – Up)

DL: “Looking from a pretty generalist point of view. But when it comes to time for investing, we look at personality of founders—people who have faced adversity and have overcosme that challenge are at the top of our portfolios, and we’re looking for such entrepreneurs.” (50k – 300k)

HJS: “As a corporate investor for Samsung, a tech conglomerate, I’m spending a lot of time looking at artificial intelligence and the healthcare management space. Since 2000 to 2010, in any tech, performance has improved 10x, 15x fold—except for in the biotech space, so we’re looking for those who can innovate there” (250 – 500k)

Yong Bin is interested in finding out what makes budding businesses sustainable in the long term, something he studied as an industrial engineer at school. He became a New Yorker at age 18, and tries to outdo Google in figuring out directions in the City. Yong Bin can be reached at ybkim@techforkorea.com.

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