Even on a rainy Friday, amid a nationwide coronavirus epidemic, there is a buzz in the air in the top startup hub in one of the world’s top techconomies.
It is a 20-minute subway ride south of Seoul’s famed Gangnam Station.
The architecture is relentlessly millennial – suspended walkways traverse broad streets, conveying pedestrians from one steel-and-glass citadel to the next. But unlike the shoulder-to-shoulder capital, there is space. Most buildings are fronted by generous forecourts, populated with installation artworks.
A handful of nameplates say old-school commerce, with conglomerates like SK and Hanwha, plus steel giant Posco. More predominant are the digital brands that survived the bursting of the dotcom bubble. Leading messenger Kakao, gaming giants Nexon and NCSoft, digital all-rounder NHN, Ahn Labs, Korea’s leading anti-virus software provider, and more.
Building interiors feature that mission-critical creative space for digital creatives – a coffee bar. Lobbies are dotted with informal seating and spaces to sprawl. In the leisure spaces, artworks are scattered. In the work areas, high-tech gadgetry such as VR headsets and blank smartphone test units litter shelves and desks.
Unlike traditional Korean workspaces, where be-suited bosses in corner offices monitor worker drones laboring behind grey partitions, offices there are open plan. Before walls decorated with pithy quotes from alpha entrepreneurs like Steve Jobs and Elon Musk, nerds cluster around glowing laptops.
The median age looks to be late 20s to early 30s. And unlike every other business district in South Korea, casual is de riguer. Asia Times spotted one suit the whole day.
Welcome to Pangyo Techno Valley – ground zero of South Korea’s startup sector.
Location, location, location
In a country where every province and city furiously promotes a “tech cluster” or “digital valley,” Pangyo is the hub that works. Its only rival is the city of Daejeon, where startups fostered by the Korea Advanced Institute of Science and Technology cluster.
But if KAIST is academic, Pangyo is business.
“Pangyo is great. It’s where all the hardware and software is,” said Lee Jung-won, CEO of ICTK Holdings, a venture which grew out of a credit card-security company and now designs secure chipsets, using individual semiconducters’ unique IDs – which, once authenticated, cannot be replicated – and related solutions. The key benefit of “inborn-ID security chips” is that while software can be hacked, hardware is virtually unhackable.
lso, he wanted to use the term ‘inborn-ID security chip’ to describe what they’re doing. It’s a hardware ‘root of trust’ solution, as opposed to a software solution. This is one of their key benefits – securing devices and systems at the hardware level, rather than higher in the tech stack. Their thesis is that software can be hacked, whereas hardware is virtually unhackable. You would literally need to break the device and access the chip, rather than hack remotely. Even if that’s possible it wouldn’t be cost effective for hackers.
The company already supplies chips to LG, has investment from Hyundai Motor and is in discussions to supply intelligent door lock solutions to both Amazon and Samsung. “Everybody moved from Gangnam to Pangyo as the government created very favorable terms for tech companies,” Lee said.
According to government data, the plan to create Pangyo as a dedicated business town dates back to 2005. With approval from both local and national government, construction started in 2008 and ended in 2011. The base site covers 660,000 square meters, or 163 acres, though there are plans for future phases. Some 1,700 companies are based in the area.
Location is everything.
To the north of Pangyo is Seoul’s Gangnam district, home to venture capital and startups. Southern Seoul also hosts the headquarters of global giants Samsung Electronics, Hyundai Motors and Kia Motors.
To its northwest is Yeouido, the island on Seoul’s Han River that dominates the national finance cluster. Further north is the media and content cluster of Digital Media City. In southwestern Seoul are industrial complexes such as Guro. And to Pangyo’s south is Suwon, a global hub for chips and displays.
Psy’s 2012 global super hit Gangnam Style offers clues as to why Pangyo took off so suddenly. Home to Seoul’s nouveax riche, it is infamous for ostentation and real estate speculation. Soaring Gangnam rents drove business and HR to Pangyo and its neighboring dormitory town, Bundang.
“The location of Pangyo is perfect,” said Lee, who entered the cluster in 2014. “We started in Gangnam, but we moved because all the companies we were talking to were in Pangyo, and because we needed to expand.”
A herd mentality ignited tech firms’ southward shift – driven, initially, by gaming firms.
“Gaming companies announced that they would move here in 2009-2010, and after that, other companies followed,” said Chang Jin-hwan, CEO and founder of game optimizer Smile Shark. “SMEs moved down, too … [now] there are now more startups in Pangyo than Gangnam.”
People place
Pangyo’s frothy HR market is a major lure.
“All game developers know each other – there are many developers around from NCSoft and Nexon – and most live around here,” said Chang, whose business model is to optimize server architecture and offer technical support to game firms using Amazon’s cloud platform.
“We are arbiters of experience,” Chang, who believes that by specializing in Amazon’s platform, he will generate loyalty from both his clients and from Amazon, which is competing in cloud with MS and Google, explained. “Gaming is very big in Pangyo – when people want to recruit developers, they advertise in Pangyo station.”
Chang lives in Gangnam, close to Amazon’s Seoul offices, but spends more time in Pangyo. “Clients refer clients,” Chang said. “I was thinking I would break even by the end of the year, but things are moving faster than I expected.”
Chang founded Smile Shark in December 2019 after 15 years with Kakao Games and prior experience designing a car rental app that he has now exited.
ICTK’s Lee is almost the stereotypical startup exec – a Korean who abandoned a Harvard PhD in administration to return home. “I used to run a VC and I did a series of venture exits,” Lee said. “But I was more of an entrepreneur.”
‘Reference market’
Another classically entrepreneurial Pangyo denizen is Pankaj Agarwal.
“When you talk about startups, people say, ‘You need to be in Pangyo,’” he told Asia Times. “It is nice, it is new, it is connected and you meet so many people here – the events organization team of the building holds events for the people here.”
An Indian national, Agarwal founded edu-tech startup Taghive. Like others, Agarwal lauds Pangyo’s location.
“You always want sought-after space,” he said. “Pangyo is in the center. I live in Suwon, some people live in Seoul. Samsung Electronics’ research center is just a 15-minute drive.”
Manufacturing of prototypes and small batches is easy to manage.
“Things are much easier here with the hardware,” Agarwal said. “Ten kilometers from here are SMEs that have basic factories and even if you have a small minimum order quantity you can get good quality, fast … the advantage is time, cost and quality.”
Taghive’s solution combines an online database of classroom quizzes with hand-held, electronic clicker devices that children use to answer on-screen questions with. The software, in addition to providing the quizzes, offers teachers feedback on which children are doing well or badly, and administrators information on the performance of teachers and schools.
Taghive’s products are now in use in 350 South Korean schools, but Agarwal is looking at a far juicier market.
“Our target is not Korea – the Korean market is just for fun as there are just 6,500 schools, it is not huge,” he said. He aims to transition the system to a mobile app and sell it to a market where there is minimum in-classroom infrastructure, but where mobile phones are widespread, like India.
For Agarwal, is not just Pangyo, but South Korea – renowned regionwide for its high-tech infrastructure – that provides his solution with an endorsement.
“Here we are able to make the product really awesome. Korea is a reference market,” Agarwal, who has demonstrated his solution to Indian officials visiting Korea, said. “‘Made in Korea’ and ‘Tested in Korea’ are brands – Indians will want to hear this.”
Part II of this series, detailing financial spigots, financial challenges, government support and the lack of a wider startup eco-system can be read here.