Korean Startups Get Green Light For Crowdfunding

Crowdfunding is officially open for Korean startups. This week, Korea’s National Assembly passed a package of economic stimulus bills, including one that makes crowdfunding and crowdfunding websites legal in Korea.

Before this bill, Korean entrepreneurs couldn’t ask their compatriots for small investments in return for perks, the basis upon which crowdfunding exists. Their only options were to bootstrap using their own money, raise larger investments from the small-but-growing pool of VC money in Korea, or look at crowdfunding platforms abroad.


In recent years crowdfunding websites in the US have gained huge popularity, as a means to fund new projects, to conduct early stage marketing activities and in part to gauge feedback for final product development. While the most successful campaigns are able to raise millions of dollars, even smaller campaigns such as those recently concluded by Korean startups ZIKTO and WayWearable, serves a vital source of revenue to push projects one step closer to realization.

While crowdfunding, as we’ve seen it rise in the US is at a relatively early stage in Korea, the concept is not new. Korean sites like Tumblbug have been crowdfunding independent artists for some time. The platform has seen relative success generating revenue of about USD $40 million for their different artists.  Their success has led to a USD $1.5 million series A investment earlier this year, led by Korean industry giants such as Naver, early stage investor Strong Ventures, and DCM. It remains to be seen if the change in legislation will lead Tumblbug to offer a service similar to Kickstarter and Indiegogo where any type of project can be funded. Given the difficulty Korean companies face trying to crowdfund on western platforms (language barriers, time zone differences, social media, etc.), there is a lot of incentive for Tumblbug –as well as anyone else– to step in as Korea’s all-inclusive crowdfunding platform.

According to the Korea Joongang Daily “The revised Financial Investment Services and Capital Markets Act – or the so-called crowdfunding act – is one of the most notable bills passed Monday, aimed at supporting start-ups in order to boost the economy and create new jobs for young people.” The paper went on to explain that “The act allows startups to raise initial capital through an online brokerage site, giving individual investors, from the ‘crowd’, opportunities to support small companies.”

At G3 Partners, we know from experience the difficulty Korean companies face attempting crowdfunding on western platforms. I see the change as a legislative milestone for pioneering Korean crowdfunding platforms like Tumblbug, which have until now been limited to helping artists raise money for their projects.

Even with the change, I believe that the big money in crowdfunding will still come from running campaigns on the likes of US-based Indiegogo and Kickstarter. However, I recommend that Korean startups who are exploring crowdfunding to finance projects, also now start considering local options. You probably won’t raise a million dollars on a local site, but the experience of planning and executing a local campaign can prove exceptionally valuable for running a successful global campaign as a next stage.

Whichever way you look at it, the news is a great step forward for Korea in building its domestic startup ecosystem, and enabling the wider public to get involved in supporting some of the most promising domestic technologies.

Written by Nathan Millard (G3 Partners)
The Source http://goo.gl/14rRAx

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