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Hannah Bae (South Korea) - Can Korea Become a True Start-up Powerhouse?

"Walled garden" is a term that media and technology experts use commonly when describing South Korea's Internet. For years, the country's tightly controlled portal sites, Naver.com, Daum.net and Nate.com, presented an enormous barrier to South Koreans' online innovation.

But the advent of smartphones and tablet computers, along with the freedom of their associated marketplaces like Apple's App Store and Google's Android Market, has ushered in a new wave of entrepreneurship, particularly in the form of homegrown mobile applications and social commerce sites.

As of June 2010, the number of start-ups surpassed 20,000 for the first time, a tenfold growth since 1998, the thick of the dot-com era. The tally reached 24,842 by January, based on Korea Venture Business Association figures, with 400 in social commerce and nearly 700 registered app developers.

The government has taken note. In March 2010, a few months after the iPhone's local launch, the Ministry of Knowledge Economy announced its search for the "the next Steve Jobs or Bill Gates in the software industry." The ministry, come September, will select 10 promising software engineers and offer special government support for their ventures.

In a similar vein, President Lee Myung-bak announced in January his hope to discover the South Korean Mark Zuckerberg. "To nurture such pioneers in Korea, the government will create an open environment where young people can take on new challenges," Lee said.

At the same time, the government has on occasion prevented South Korea from becoming fertile ground for start-ups. In a cruel twist of irony, sales of Air Penguin, a globally best-selling mobile game that is the product of South Korean start-up Gamevil, are banned within the country of its origin.

Apple and Google, facing strict regulations from the state-run Games Rating Board, refuse to sell games in their local online app stores. While the law is set to change in July, neither company has announced plans of adding games to their South Korean offerings.

Private enterprises are doing their part to cultivate would-be entrepreneurs. Seoul Space is one local "start-up incubator" that offers affordable office space, mentoring and, in some cases, seed investment for promising ventures. VentureSquare , meanwhile, paints itself as a Korean version of TechCrunch by using its blog to connect venture firms, media and investors.

Large, well-established corporations are part of this trend. Like Seoul Space, No. 2 mobile service carrier KT provides fledgling programmers with office space and resources at its "Econovation Center." Industry leader SK Telecom offers free courses at its "T-Academy" in hopes of churning out mobile app developers.

Real change is happening in South Korean IT, but the reality is that most South Korean youth prefer the brand name and stability of working for a huge conglomerate like Samsung.

And even when defecting from a large company leads to great success, struggles still mark the road ahead. Take the case of Kim Beom-su, a former CEO of NHN Corp, the parent company of Naver.com, who became a major investor in the wildly popular homegrown mobile app Kakao Talk .

Millions of users have come at a cost for the free app, which is similar to WhatsApp: Staff are now struggling to handle overloaded servers, technical glitches and security breaches (http://nielsfootman.com/kakao-talk-counts-the-cost-of-success/).

So while the start-up boom has begun, this country, which one CEO still described as "a hostile environment for new businesses," has a long way to go before it becomes a true breeding ground for IT innovation.

By Hannah Bae, an American journalist based in Seoul. A former intern at the John S. and James L. Knight Foundation, she is a tech enthusiast. You can follow her on Twitter at @hanbae.

 

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