Sophie Kim is arguably the most famed female entrepreneur in South Korea today: The founder of soaring on-demand food supplier Market Kurly and a whiz at fundraising told Asia Times in Part 1 of this story how her firm is surging through the Covid-19 era.

That success is underwritten by the care with which Kim precision-engineered Market Kurly to fit Korea’s business conditions.

It is also a product of under-reported paradigm changes underway in the country that are enabling entrepreneurialism and adding a new tier to an economy that has, for decades, been dominated by giant, metal-bashing conglomerates.

But in an economy where venture capital barely existed a decade ago and where traditional investment destinations are drying up, liquidity is rising to flood levels – raising the risk of bubbles.

However, Kim insists that innovative startups generate marketable in-house technologies – and these offer a hedge against potential collapses.

Close horizons, high densities

Kim is supplying a market that is perfectly suited, physically and geographically, for e-commerce.

“One reason that Korea has such high e-commerce penetration is that it is a small country with a high population, and that makes it easier to do logistics,” she said, “If you have high densities, you can raise the quality of logistics services.”

Korea’s 52 million people inhabit a country seven times smaller than Texas. Moreover, it highly urbanized population is concentrated in the high-rise apartment clusters that are the most notable architectural feature of Korean cities and towns.

Market Kurly services the entire nation via just four warehouses (with a fifth under construction). In the vast US, it would be hard to guarantee such key Market Kurly competencies as high-speed delivery or cold-chain (fully refrigerated) nose-to-tail supply nationally.

A related advantage is Korea’s world-class wired/wireless infrastructure, and high levels of digital literacy.

“Korean people in general are very open to trying out new services and digital literacy is very high – the mobile penetration rate is close to 100%,” she said. As a result, e-retailers “have immediate access to 40 million people,” she said, referring to the country’s adult populace.

Market Kurly Founder and CEO Sophie Kim has plenty to smile about. Photo: Market Kurly

Unicorn paradise

Market Kurly is far from the only start up to flourish in Korea’s e-commerce sector. Among South Korea’s 11-strong unicorn flock – a flock that some market watchers reckon Market Kurly is already a member of – the largest number are in e-commerce.

Name                         Valuation ($ billions)                 Sector                      

Coupang$9.00 E-commerce & direct-to-consumer 
Krafton Game Union$5.00 Other 
Yello Mobile$4.00 Mobile & telecommunications 
Toss$2.60 Fintech 
WEMAKEPRICE$2.34 E-commerce & direct-to-consumer 
MUSINSA$1.89 E-commerce & direct-to-consumer 
GPclub$1.32 Other 
L&P Cosmetic$1.19 Consumer & retail 
Aprogen$1.04 Health 
Yanolja$1.00 Travel 
Socar$1.00 Auto & transportation 
Source: CB Insights

This herd is flourishing thanks to seismic changes shaking Korea’s business-cape.

Known as a highly conservative, top-heavy commercial environment dominated by giant chaebol (family-run business conglomerates such as Samsung, Hyundai and LG), Korea is not the economy it was a decade ago.

While the economy’s rump end has always been crowded with mom ‘n pops – shops, restaurants, cafes, cram schools, etc – there have been few entrepreneurial companies capable of ascending into the near-deserted middle tier of businesses.

No longer. The scale of the break with the previous paradigm is visible in the number of unicorns the country is breeding. According to November data from research firm CB Insights, G12 Korea sits comfortably in fifth place worldwide.

Currently, the US leads the pack with 238 unicorns, followed by China with 117. India and the UK are in joint third place, each with 24. In fourth place comes Germany with 12, then Korea in fifth place with 11. Israel, France and Brazil each have seven, while Indonesia rounds out the Global Top 10 with five. 

Outside the Top 10, but elsewhere in the region, Hong Kong and Japan each boast four.

Kim was reluctant to comment on Market Kurly’s valuation, but told Asia Times that estimates published in Korean financial media in February of $780 million were broadly correct – but that the company has grown 50% since then.

Market watchers concur. American Eric Cornelius of Bright Shiny Robot – a firm that assists Korean startups with marketing – reckons Market Kurly is already sprouting a horn.

G12 country Korea is top five globally when it comes to the size of the national unicorn flock. Photo: AFP

Kick-starting startups

One reason for the overall change in Korea’s economy is social shifts, said the 37-year-old Kim. Korea is notorious for its glass ceiling, but Kim, whose interactions tend to be largely with those within her own age group, felt no special reason to comment on gender issues.

Another shift is attitudinal. In the past, business failure would mark an entrepreneur for life. Today, a gentler climate is pushing risk tolerance.

“In my generation, people have become extremely entrepreneurial: I see many smart young people taking risks, doing their own thing and testing new ideas,” she said. “Korean society is perceived to be very conservative, but it is changing very quickly, with people in their 20s and 30s being the main force of innovation.”

In the same way that most foreign business reporting on Korea focuses exclusively on chaebol, much overseas reporting of society focuses on “Hell Joseon” – a belief current among some youths that society has become less fair and overly competitive. An under-reported story is the ever-improving platforms young entrepreneurs are able to access.

This indicates that – as has always been the case with Korean industrial development – strong policy is a change agent.

Players like Cornelius credit the Park Geun-hye administration (2013-2017) for its “creative economy” policies. These required financial institutions to release capital that had previously been monopolized by chaebol to startups. It also created a wide range of support and incubation programs for entrepreneurs that are now coming of age.

As a result, plentiful capital has been added to the physical, digital and attitudinal advantages young Koreans already leverage.

In terms of government entities, capital suppliers include “Korea Development Bank, the Korean Venture Investment Corporation and so on – and the National Pension Service runs a regular beauty contest for VC,” James Kim of Tandui Partners said. With local governments also pitching in, “There is tons of money out there if you have a decent business plan.”

Another factor driving cash toward private equity and venture capital is the ongoing constriction of customary investment destinations.

Stocks have long been considered risky investments in Korea, while the low-interest rate era means banks are poor places to park money. And this year, the government has been cracking down on the classic safe bet, real estate, in an attempt to curb rising prices.

While startups tend to source seed money locally, once they expand, they can reach out to overseas players. Some are investing hundreds of millions of dollars.

According to CB Insights, the lead investors in Korean unicorns hail from multiple geographies – including the US (such as Sequoia Capital and Goldman Sachs), Korea (such as Formation 8 and IMM Investment), China (Tencent Partners) and Japan (Nichi Iko Pharmaceutical).

Cornelius notes a change in the profile of global VC executives arriving in Korea. The pioneers were Korean-Americans, but now, he said, “We are seeing VCs from the US making investments on the basis of good opportunities, rather than being made by Korean-Americans who have ties to the country.”

Government support does not stop at liquidity provision. Seoul has adopted a UK-style “regulatory sandbox” to test ideas, and a wide range of consulting services are offered – from matching, to marketing, to going overseas.

Overall, aspirations have changed. “A large percentage of young, smart and intelligent people now want to start a business, and  lot of that has to do with easy access to capital.” Tiandui’s Kim said. “There is quite a high failure rate, but one big change since probably 10 years ago is that failure in business is kind of acceptable.”

Has the pendulum swung too far? The CEO of a successful SME told Asia Times that she formerly mentored young entrepreneurs, but now is so appalled by the wastage of public monies, that she has withdrawn her services.

Old problems, too, persist. Market Kurly’s Kim said that many older people distrust startups, and dissuade their children from working therein. And old-school government practices and personalities remain problematic.

“Regulatory issues are a hot issue in the startup community,” she said. “Officials and regulatory bodies have little understanding of new innovation.”

Many in the community were frustrated this year when officialdom favored a taxi-drivers’ lobby, that had already driven Uber out of the market, over a local ride-sharing firm, TaDa.

Sustaining startups

At a time when there are jitters over the sustainability of some earlier Korean unicorns, Cornelius reckons Kim is well positioned to gallop ahead. “With revenue per employee of around $400,000, and a valuation of just over $1 million per employee, Market Kurly’s fundamentals look fantastic,” he said.

Certainly, the firm has survived – even thrived – amid Covid. But can a dedicated ecommerce company survive its aftermath?

Kim reckons that populations will, indeed, return to offline retail and dining post-pandemic, but that the conveniences she provides will remain selling points. She also thinks Covid has renewed focus on home and family.

“Think about the joy of cooking at a private location with family – that is home,” she said, citing current heavy spend on kitchen appliances and interior design. “There is a shift in focus from external activities to home and family, and it is related to food consumption.”

Market Kurly is concentrating on bringing its ready-to-cook meal kits up to restaurant quality, and expanding variety.

Other risks hover over the wider sector. With so much capital chasing so few investments, could a dotcom-style bubble burst, decimating startups and unicorns?

“I am sure some will go bust, but that is no different than listed companies – it’s a probability game,” Kim said. “Valuation bubbles exist in every market.”

If bubbles burst and business models fail, tech startups have a fallback option: Their in-house, bespoke technologies.

“Investors invest in a proven, core business model but they also invest in tech and customer data,” she said. “If the bubble bursts, one of the big advantages of tech companies is that if you build – say – software, it is applicable to other industries,”

In Market Kurly’s case, self-engineered software can digest and analyze a billion pieces of data a day. Numbers are crunched overnight, then arranged on a dashboard for managerial perusal the following morning.

“We call it a 24-hour cycle,” she said. “So when we don’t hit our numbers, we know what to do.”

This data-management system, which evolved out of Market Kurly’s main business model, Kim says, is a marketable asset in and of itself.

“One new business we are thinking about is whether we could be a software service company,” she said. “Our software reflects all the errors we made and fixed over the years, so could be hugely valuable.”

Looking forward, Kim sees herself leading retail innovation, rather than simply food.

She is considering starting offline operations and also going upstream, given the success of existing own-brand products. Market Kurly has already spun off two business units – one that scouts products overseas, and one that provides logistics solutions.  

Speaking of overseas: The ideal geographies for a future Market Kurly expansion would be not be the G2 economies of China or the US, which have lower digital literacy rates and wider population dispersals than Korea, Kim said. Instead, Hong Kong, Singapore and Taiwan, which offer similar conditions to Korea, are preferential.

She dismisses rumors that a big offline retail chain has approached Market Kurly for a merger. Though she does not rule out being acquired, her long game is an IPO.

“That is about ownership and about what kind of person you would like as a shareholder,” she said. “We would like one day to go public – to make our existing customers our shareholders.”