With its extremely high smartphone penetration rate, speedy broadband connections, and advanced economy, South Korea is one of the richest breeding grounds for tech innovation in Asia. 500 Startups, which has already made several investments in Korean companies, is digging deeper into the country with the launch of 500 Kimchi, a $15 million fund that will focus on mobile companies.
500 Kimchi will be managed by investing partner Tim Chae, who says the fund’s goal is to not only provide promising startups with seed funding, but also bring them to the attention of other Silicon Valley investors.
“Korea is something we have been working on for a bit. Our first investment was in 2012 with a company called Shakr,” Chae told TechCrunch. “Korea is exciting is us because we feel like it is a perfect storm. It’s a developed economy and people spend a lot of money. Its mobile infrastructure and culture is second to none in the world.”
Korean startups also have the benefit of strong financial support from the government. The Korean government has said it plans to put $3.7 billion into fledging tech companies through grants and other programs over the next three years, which makes it the country that offers the most per-capita backing to startups in the world.
Chae points out that even though South Korea is a relatively small country with a population of just 50 million, its startup industry has already spawned several unicorns, including online retailer Coupang and messaging app Kakao. Both managed to achieve billion-dollar valuations even though they operate almost solely in Korea.
Other startups, however, are eyeing expansion into foreign countries. Chae says 500 Kimchi’s investment strategy will take a two-pronged approach. It will be a co-investor in seed rounds for mobile companies that plan to focus specifically on Korea, while startups that plan to go global will be brought into 500 Startup’s accelerator program in Silicon Valley.
“There are a lot of different sectors that have not been taken advantage of. Companies are being built in Korea with technology that is not being tried in the U.S. because of the sheer advances in bandwidth speed,” says Chae.
One example is a company in 500 Startups’ currently accelerator program called Spika, the maker of ShareON. The Android and iOS app lets users share files between devices without any downloads or lag time. For example, if one user has a 10GB movie file, they can instantly stream it to another device.
Products like ShareON are possible because bandwidth speeds are two to three times faster in South Korea than in the U.S., but they have potential to introduce their technology to other markets as local Internet infrastructure catches up.
Other South Korean companies 500 Startups has invested in include Between, Cream, Plugger, and Tapastic.
One of the challenges facing South Korean startups is the current lack of exit opportunities, but Chae hopes that will change as more Silicon Valley investors and companies began paying attention to the ecosystem.
“One of our initiatives is geared toward increasing awareness for Silicon Valley companies that are potential acquirers and bringing them to Korea,” he says.
500 Kimchi is the latest microfund launched by 500 Startups to focus on one country. 500 TukTuks, a $10 million fund for Thailand, was will close soon. Chae says 500 Startups may launch other country-specific funds over the next couple of years.