South Korea, a New Social Entrepreneurship Hub of Asia

Tech start-up incubators have sprung up across the world, in a concerted effort to uncover the next Google or Facebook and make a lot of money. But in Seoul, the government is driving a big push towards funding and incubating not just tech start-ups, but also those that have a socially good element to them.

On the surface, Seoul looks and feels like a great place; it’s clean, well organized, has delicious food and great nightlife, addictive KPOP and good looking people. But below the surface, like every other country, Korea does have many social problems.  One of the biggest problems is very high youth unemployment, which now stands at 8.3% for people below 30 years old. High youth unemployment is a result of a cycle that is hard to stop. Many graduates without jobs, create more competition for jobs, making young people frustrated and forcing them back into education which is getting more expensive, causing more stress because they can’t afford to pay it off, plus Korea is already an expensive country to live in.

This of course creates a lot of headache for the government to manage.  In a creative way, the government is looking to other young people with an entrepreneurial spirit to solve these problems by establishing incubation centers. On offer are funding grants of around 30M Korean Won (USD$30K) per enterprise per year, office space and other services like mentoring and education.  Social enterprises also enjoy favourable tax treatment and bank loan interest rates.

Beyond solving the social problem of high youth unemployment, the South Korean government has a responsibility to undertake more social projects. One reason is because South Korea is a part of the OECD (Organisation for Economic Co-operation and Development) group of countries and has a quota to meet for number of social enterprises created. Another reason is that once upon a time, South Korea was a poor country. But after the recent four decades of rapid economic development, and some neglect for social welfare, it is time to make up for it. In some sense it has graduated from poor to rich country and now feels the need to give back to society.

Such incubators are popping up all over Korea. There are five alone in Seoul and around 21 in Korea in total.

In Seoul, I had the opportunity to visit one center called Social Enterprise Incubating Center. I chatted to Kyung Seok Yang from Social Cube, who operates the center. She explained there are three main types of social enterprises. One is those aimed at job creation, especially for South Korea’s youth. Secondly, there are those that employ people with disabilities or the elderly. Thirdly, it could be a mix of both. One example is an enterprise called WeCAN, which employs disabled people to make cookies and the profits go back to disabled people.

Another recent example is an enterprise called Cizion. Similar to Disqus, it is a social comments manager for blogs. At first I was confused how this could be a social enterprise but it became apparent. Since South Korea has such a strong entertainment industry, many people like to talk about celebrities like singers and actors. But some of this chatter is gossip and rumours which have a detrimental impact on the minds of celebrities who feel ashamed, leading some to even commit suicide. Therefore Cizion aims to filter out untrue comments, by creating a blacklist of commentors through Facebook or Twitter.

While at the Social Enterprise Incubation center I chatted with two start-ups being incubated there currently.

The first was Life Seed, a group aiming to support baby sitters. The problem with child services in South Korea is that the quality of government support is rather low quality and there is poor monetary compensation. Baby sitters in South Korea are mainly students, social workers or elders and many are untrained in how to properly handle babies or young children. Therfore Life Seed wants to provide an education system, teaching sitters how to baby sit and how to manage long term stress.  To also create a support structure, the enterprise wants to create an offline community that can share and learn from each other. The mission of Life Seed is to change the eco-system of child care where the government, teachers, parents and sitters can work together to improve the system. Life Seed is a four person team led by Han Kyung-Jin and Choi Eun-Joo.

The second was InnoCrowd, a freelancing platform for designers in South Korea, similar to Elance. Just walking around South Korea’s young hot spots like Hongdae, it is clear to see the groundswell of design talent. However, high youth unemployment is making it difficult for these people to get jobs or projects, meaning there is an excess supply of talent. To better utlize South Korea’s talent, InnoCrowd wants to connect creators from the graphics, engineering, UI/UX and Product fields to find willing demand from outside Korea like Japan, China and Taiwan. Businesses with projects can post a project, designers can apply to work on the project, and then the businesses can review and select the designers they want. Once selected, InnoCrowd will allocate Project Managers to oversee the completion of the project for a fee. InnoCrowd will charge per project and its size. Currently InnoCrowd is in the development phase and will launch in July in open beta. Co-founder and CEO, Sean Park leads a team of four and is aiming to secure government funding for arts and culture social enterprises. South Korea’s government wants to back such projects because they want their small to medium sized companies to be more internationally competitive and design competent.

One of the biggest challenges for social enterprise incubators is funding.  Unlike more transparent and easy to understand business like manufacturing, companies and venture capital firms don’t understand how to value social impact and therefore don’t know how to justify how much to give. Traditional manufacturing companies use a % of expenditure model to figure out how much money they need, but of course this can’t be applied in the same way to social enterprise start-ups. Such a challenge remains a bottle neck in really promoting social or non-profit organizations.

In some sense, China is undergoing the same path South Korea is. Now experiencing a period of unprecedented economic growth, many poor and marginalized people on the sidelines are being forgotten. China can learn from South Korea’s experience and balance economic growth with sustainable and equitable social welfare. More emphasis should be put on social entrepreneurship rather than start-ups that can simply raise a lot of VC funding and have a big exit.