Start-up Seoul is a series featuring players in Korea’s emerging tech start-up scene. This is the 16th installment. ― Ed.
SAN FRANCISCO ― All it took was one phone call in 2009 for Silicon Valley investor Jai Choi to put his money on a fledgling start-up called Coupang.
Its founder, Bom Kim, had just dropped out of Harvard Business School with three or four months’ worth of data in hand. He envisioned bringing the Groupon model to his native Korea through a systematic approach to sales, operations and customer service.
Judging by the sharp way Kim answered their questions, Choi recognized his unique understanding of the metrics of his business and a bigger vision behind what he wanted to build.
“Within an hour, we thought, there’s something different about him,” said Choi, founder and managing partner of San Francisco-based Tekton Ventures. “There was this unrelenting focus that we saw, just from hearing what he wanted to do. … It’s just different.”
Based on that phone call, the Korean-born Choi made his first investment in the country.
While declining to reveal numbers, Choi said he was quite happy with the return potential of his investment in Kim’s start-up. Powered by Kim’s globally minded team, Coupang has scaled step-by-step from a flash-sales Groupon model to a mega e-commerce service akin to Amazon, dwarfing its local rivals. The firm received $1 billion in funding this year to build out its same-day delivery infrastructure nationwide.
Choi, who founded Tekton as a spinoff of Partech Ventures, has funded over 70 start-ups overall, including Korean start-ups Memebox, GreenCar, Limo Taxi and Korbit, as well as Silicon Valley hits like Sidecar and Signifyd.
Considering the premature stage of a young company, seed funders care more about the people than the product. As a seed and early-stage investor, Choi looks at two things: the founder’s vision and his commanding understanding of the metrics, as demonstrated by Coupang.
In Korea, a relatively small market, dominance is key. Choi seeks out start-ups with the tech innovation that will make them market leaders. That’s even more important than having an aim to hit a different market or globalize ― different from having a global perspective ― which, to him, suggests the vision is not focused. Taking a model to where the start-up has no traction or strength makes it difficult to execute successfully.
“If you look at all the high-flying notable companies in Korea today like Kakao, Coupang and possibly Yello (Mobile) … they understand Korea from a bottom-up perspective and figure out what we call ‘cracking the code,’” he added.
They understand their business models from a global perspective as well as the nuances of their local market dynamics, allowing them to locally innovate on proven successful formulas, even combining two or three models to make it work.
“They have this relentless drive, and the best way to describe it is you have to be a little crazy to really do something,” he said particularly of Kim and Dino Ha, the founder of another high-flying e-commerce start-up Memebox. “And they don’t take no for an answer.”
But culturally, the stereotypical Korean goal of edging out the competition rather than innovating is preventing them from becoming No. 1. Many Korean businesses ― judging by the glut of yogurt and coffee shops, he quips ― focus on gaining marginal market share, an idea that is not scalable. Successful entrepreneurs will “look for the jugular” in terms of the next big innovative idea and create a whole new market segment to dominate.
Tekton looks for start-ups with a great team, a capital-efficient model, a product that can solve problems and a high-potential market. At the end of the day, Choi said, the question is whether the start-up has a realistic plan and funding to reach the next level.
He advised Korean entrepreneurs to determine their own core focus, innovation and advantage.
“In many ways there’s this petri dish in Korea and there are certain types of offers you can really gravitate toward because of the density of Korea,” he said. “Figure out an angle in that offering where you can get real scale.”