This is the first post in our series: Discover Korea’s Tech, where we will talk to a mix of Korean startup entrepreneurs who stood their own ground with their technology, in Korea’s economy notorious dominated by gigantic companies. Stay tuned over the coming month as we talk to Korean entrepreneurs. You can follow our updates @technodechina for new stories in the series. 

When you think of ‘South Korea’, what comes to mind? You might think of big companies like Samsung, LG, Hyundai, or K-POP and Korean drama, if not, you might as well have heard of the song ‘Gangnam Style’. You might also think of President Park Guen-hye, the first woman President of South Korea. Surprisingly, this is exactly what constitutes the Korean startup ecosystem.

Seasoned engineers from Samsung and LG boldly come out of the company to start their own business, which makes Korean startup ecosystem full of technology based-startups. K-POP and Korean drama takes a huge part in the content business and marketing efforts locally and globally. Gangnam, being the most vibrant commercial area, became home for most Korean startups and co-working spaces like Google Campus, WeWork, D.CAMP and TIPS town and accelerators like SparkLabs and Lotte Accelerator. The Korean government has established huge government funds to support young entrepreneurs to start their business. That’s how I, once an ordinary University student in Korea three years ago, took up a valuable opportunity to work in Israel and Silicon Valley, to finally settle down in fastest growing startup scene in China.

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Once people ask what are the characteristics of South Korean startup scene, I tell them, it’s technology, content and design. In this 10 series of articles “Discover Korea’s Tech”, we will introduce 10 technology-based startups and how they mingle with Korea’s traditional industries. Before we go on, let’s take a look at some of the startup trends in 2015.

The year 2015 was the most exciting year for O2O and Fintech startups in Korea. Investments toward O2O and Fintech related field have been largely escalated, according to 2015 Startup Investment Trend issued by Platum research team.

Both the number of invested companies (210 companies) and investment total amount increased ($695.4 million USD) significantly in 2015. Here are five sectors that are booming and slowing down sector in South Korea’s startup scene.

Booming Sectors In 2015 

1) O2O

In contrast to China, where the O2O boom has cooled down, South Korea saw a tremendous O2O boom last year and is still seeing the growth this year. The 32% of the total investment amount ($223.5 million USD out of $695.4 million USD) was involved in O2O in life service, food, and real estate sectors.

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In China, online payment has been widespread throughout the whole country. However, mobile payment service in South Korea as a bad reputation a for long and cumbersome transaction process. Korean people mostly pay using their debit cards or credit cards, and widely accepted card payment option in brick-and-mortar stores make it difficult for Korean O2O companies to take off and turn a profit.

Kakao, South Korea’s most widely used messaging app KakaoTalk’s operator, introduced its mobile payment system to allow startups within its platform to monetize from the transaction. The big news last year was the merger of Daum and Kakao. Since then, O2O battle raged between Kakao and Yello Mobile, a three-year-old, yet giant startup that has acquired 65 other startups in Korea. Backed by Silicon Valley-based Formation 8, Yello Mobile is valued at a $4 billion USD.

Here the top funding amount sectors in O2O.

O2O Life services totalled the funding amount of $113.5 million USD to 23 companies. Car sharing service Socar raised $55.3 million USD, marking the top funding amount raised in 2015. O2O commerce platform YAP raised $35.7 million USD, and hotel booking service Daily Hotel raised $8.5 million USD last year.

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In food startup sector, $59.1 million USD was poured into 13 companies. Top food delivery service includes food delivery app Yogiyo, backed by Germany-based head company Delivery Hero and Goldman Sachs-backed Baedal Minjok. Other services include restaurant review service Seeon (Siksin Hotplace) raising $6.8 million USD, restaurant recommendation service Mango Plate raising $6.1 million USD, and Diningcode raising $1.7 million USD.

In the real estate sector, property listing service Zigbang had sewn up a $33 million USD investment led by Goldman Sachs and its competitior Dabang raised $17.9 million USD.

2) Fintech

China’s internet finance market reached $1.8 trillion USD and has already exceeded other markets by number of users and amount spent, according to McKinsey. South Korea’s financial institutions are trying to catch up, and government is supporting that move.

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The Financial Services Commission estimates there are 360 fintech startups in Korea as of last year. Last week, the Korean government announced that it would offer 3 trillion won ($2.65 billion) in financial support over the three years for the development of the fintech sector.

The funding in Finance/Insurance sector in 2015 includes B2B O2O fintech platform Energy7 raising $30 million USD, and P2P service 8percent. Eight crowdfunding platforms scooped $8.5 million USD of funding in total. In 2015, big-data driven stock analysis service NewsyStock was acquired by Yello Mobile.

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3) MCN

Thanks to widespread 4G LTE network in Korea, in the subways you can easily see Korean people watching live-streamed drama or movie. This frequent video consuming habit led to the boom of consuming short videos created by famous YouTube stars, including game players, and makeup instructors. In order to embrace these content creators, MCN (Multi-Channel Network) companies set out in early 2015 to cultivate them.

The investment made into the entertainment sector last year was $65.4 million USD, among which $38.3 million USD was thrown into Video/broadcasting/MCN sector. Major MCN startups in Korea include Makeus, raising $17 million USD, and Treasure Hunter, raising $13.4 million USD.

4) Bio/Healthcare sector

Bio/Healthcare sector showed the highest progress ratio with an increase of $39.1 million USD compared to last year. The South Korean government has also announced initiatives to support bio and healthcare sector. One of the reasons that bio and healthcare startups started in Korea is because medical services are high in quality, yet highly affordable, making it difficult for doctors to make a profit. Many of the doctor have started their own businesses, leading the boom of Korean healthcare device innovation.

Healthcare startups raised $20.6 million USD in 2015. Mobile health care service Noom raising $16.1 million USD and Gencurix raising $6.8 million USD last year.

Five companies in medical sector raised 16.8 million in total, including medical hemostatic development company Inno Therapy raising $6 million USD and Way Wearables raising $1.7 million USD in December.

Live Stream of BigBang Concert on Tencent (image credit: Douban)

5) Fashion & Beauty sector 

Fashion and beauty startups benefited from global fandom of Korean dramas and K-POP stars. Fashion and beauty ecommerce startups boomed last year, including Y Combinator-graduated beauty ecommerce Memebox raising $29.5 million USD, and China-focused beauty startup B2LINK raising $3.5 million USD last year.

Slowing Down Sector In 2015: Gaming

Total funding in the gaming sector decreased by almost half (from $29 million USD to $16 million USD). Gaming industry was affected by South Korean government’s restrictions, such as 10 p.m. curfew on online gameplay at internet cafes and monthly spending on online games limited to a $300 USD per person.

In gaming sector, Kakao’s gaming affiliate NZIN raised $10.2 million USD and mobile game developing company Innospark raised $6.1 million USD.

In 2014, 4:33 Creative Lab was included in the gaming sector, and received an investment of over $100 million USD and contributed to most of the investments that year.

Technode has scraped together a selection of our favorite Korean startup founders for a series of interviews looking at what it’s like to tackle big-companies-dominated country and set up shop as an expat-preneur in China’s tech scene. You can follow us @technodechina to see the stories unfold. The ten startups that we will introduce are based in K-ICT Born2Global Center, a major Korean government agency under the Ministry of Science, ICT and Future Planning (MSIP).

Image Credit: TechNode