Language barrier hinders Hong Kong startups setting up shop in Korea

Justin Suen, founder of Ossfila Technology, a Hong Kong startup company, holds up his bone filament products on Feb. 23, 2023 in Seoul. Korea Times photo by Jack Lau

Korean gov't urged to streamline regulations

By Jack Lau

Last year, Justin Suen Long-kiu's biotech company joined the K-Startup Grand Challenge (KSGC) accelerator program organized by the Korean government to explore markets outside his native Hong Kong.

The program lured him in with a $10,000 (13.2 million won) cash stipend to support his staff's living expenses as he tried to set up shop in Korea. Like most startups, his bone implant 3D printing company, Ossfila Technology, had little cash to spare to test the waters of potential markets. Being in the program would also raise his company's profile.

But he was surprised by the difficulties faced as a businessman not knowing the Korean language. He had to rely on the undergraduate Korean intern assigned to him by the KSGC program, who worked primarily as an interpreter. Government information and paperwork needed to maintain a Korean subsidiary are often only in the Korean language. And when they are available in English, the Korean versions are more detailed and accurate.

Korea has great hopes for its startup market, with its Ministry of SMEs and Startups saying that promoting the "openness of the domestic startup and venture ecosystem" is a policy goal for 2023.

Suen and other foreign startup founders from Hong Kong, which was Korea's 10th biggest trade partner last year, however, found the bureaucracy hard to navigate and the lack of English spoken in corporate environments alienating.

"Direct communication is the most sincere and honest," said Suen, the CEO and co-founder of Ossfila Technology. "Everyone would know what the other party is thinking, which makes it easier to make decisions."

Justin Suen says the lack of Korean language skills poses a barrier to entering the Korean market. Korea Times photo by Jack Lau

With the interns ― some of whom are fresh graduates ― it would be hard for the entrepreneur to know if they have grasped the full meaning of the jargon used in biotechnology, engineering or other fields related to the business, he said.

"That's a risk I have to take and accept. That's a big risk I have to bear. Success or failure, it's on the shoulders of the intern," Suen added.

That most information on government funding for startups and potential clients only exists in Korean also made it difficult for Suen to develop his business.

Much of the venture capital funding for startups in Korea comes from the government. To bolster the startup market, the state provides capital as a limited partner to venture firms that invest in startups without overseeing the everyday operations of startup companies.

"Many of the difficulties come back to the language barrier, but the barrier is exhausting in itself," he said.

Alex Wong, the CEO and co-founder of another Hong Kong startup, Mixup Solution Company, agreed that language was a problem. Without a Korean speaker in his company, Wong would not be able to work with Korean insurance companies, managers at Korean insurers had told him.

Wong's company, which trades as MixCare Health, runs a platform for corporate employees to select from a range of health and wellness services, often in addition to their medical insurance schemes.

Alex Wong, founder of MixCare Health, a Hong Kong startup company, poses for a photo on Feb. 23, 2023 in Seoul. Korea Times photo by Jack Lau

Wong's team had written business proposals and presentation slide decks in English for a Korean insurer, but the company wanted them to be translated into Korean.

He said he thought Korean firms were unwilling to hire translators merely to do business with his company.

"It's us approaching them," Wong said of what he believed to be the insurer's thinking. "If you can't even translate your materials into Korean ― it's about sincerity. If you're trying to localize your business, that's a basic requirement."

He hired a general manager from Korea who can speak Korean and English to oversee MixCare Health's Korean operations. He also had to empower the manager to make decisions on his behalf and overcome what he said was Korea's hierarchical corporate culture, Wong said, which often rests decision-making power with senior executives.

Marta Allina, the founder of the startup community Seoul Startups, said Korean executives were very conscious of their English level and do not want to embarrass themselves in front of foreign counterparts.

"It's a very twisted logic but that's what goes through their minds," said Allina, who also runs an accelerator venture capital firm in Korea.

However, the younger generation of Koreans have a greater grasp of English, are more exposed globally and are more communicative, she said, which makes the language issue less concerning once younger entrepreneurs take over the startup ecosystem.

Marta Allina, founder of the startup community Seoul Startups, speaks at an event. Courtesy of Marta Allina.

However, Allina said she was worried about the complicated and unfriendly infrastructure for startups, such as the bureaucracy over banking and corporate management. Changing a company address, for example, required a trip to the court and a law firm.

"I had to get at least a dozen different documents submitted in three different places before it could be done," she said. "So it wasn't a one day thing. It was more like a three day adventure."

A Ministry of SMEs and Startups (MSS) spokesman said the ministry is improving the working environment for both domestic and international startups through measures such as reforming the regulations so that entrepreneurs can focus on their business and R&D activities "without any hassle."

Unlike other startup scenes, Korea's is centered on the government, and experts said some of the policies are unfriendly to foreign startups. While there is no official differential treatment, there is practical discrimination, such as language barriers, said Kim Jun-mo, the director of Bigbang Angels, an early-stage venture capital and accelerator based in Korea and Singapore.

For example, the Tech Incubation Program for Startup, or TIPS, a signature state-run startup scheme helps fund startups by connecting them with investors and a matching R&D grant from the government. But it comes with the requirement that the startup's main founder must be a Korean citizen who must hold more than 60 percent of shares in the startup.

"If it's a subsidiary of the overseas startup or the company, it's almost impossible to like meet the criteria," said Kim said.

Many of the private venture capital firms also fund startups with government money, most likely provided by the Korea Venture Investment Corporation (KVIC), a government-backed fund that finances private venture capital firms and, to a lesser extent, small and medium-sized enterprises. With the KVIC, the government directs funding toward certain sectors and sets the criteria for investment.

"As far as I'm concerned, more than 25 or 30 percent of the capital comes from that VC, the one single Korean fund of funds," Kim said, referring to the KVIC.

Allina also said the government, as the driver of the startup market, seldom asks entrepreneurs about their needs and plans. Instead it falls back on economic policy goals of creating jobs and directs the startup funding towards industries they identify to be developing, she said.

She said the government should focus more on educating the next generation on entrepreneurship and step back on grant programs, which has created a proliferation of "zombie startups" ― firms without a viable business model that survive by applying for one grant after another.

The MSS spokesman said in a statement that the government has now recognized the importance of a private sector-led startup ecosystem, and would monitor the state of "zombie startups," and investigate any fraud or misuse of government funding and subsidies that could lead to criminal liability.

"Currently, MSS is doing its best to provide a basis for private sectors to raise more private funding such as institutional support, Silicon Valley-like advanced financing programs."

He added that startup support programs, such as the KSGC, and an in-house translation internship are available to support foreign startups in Korea to address the language barrier.

Jack Lau is a reporter with the South China Morning Post. He is currently based in Seoul, writing for both The Korea Times and the South China Morning Post under an exchange program.