It has been shown that more than half of South Korean startup accelerators had been open without any business and any investment last year. Although more than 300 startup accelerators have been registered since the South Korean government introduced an accelerator system five years ago, most of them have only been providing consulting for startups in order to obtain government subsidies. They have not been keeping up with their responsibility to publicly announce their performance in startup incubation and investment as well. Many believe that these issues are the result of the South Korean government focusing only on increasing number of startup accelerators without proper management and supervision.
After the Electronic Times conducted a complete investigation on electronics disclosures from South Korean accelerators, it was shown that 110 accelerators out of 308 accelerators registered by the Ministry of SMEs and Startups did not make any investment in 2020. There were also 81 accelerators that did not publicly disclose their business contents. In other words, only 38% of the accelerators had been active in 2020.
Work related to incubation is also a mess. There were 140 accelerators without any result in incubation. The number is very low even when companies that do not disclose their results from individual mentoring due to a practical reason and other reasons are considered. The industry believes that more than a third of the registered accelerators had not had any activity in 2020.
Accelerators are defined as startup planners that select startups in their early stage and carry out incubation and investments. After the South Korean government introduced an accelerator system back in 2017, the number of accelerators surpassed 300 in less than five years. The government introduced the system in order to find and develop startups within the venture capital market that has been growing and branching out gradually.
“Due to low standards set by the government, brokers and consulting companies that had been obtaining government subsidies in the past have been registering themselves as accelerators just by preparing a space for incubation.” said one official from the industry. “As the government has been focusing only on increasing number of accelerators, accelerators that have been properly carrying out their work have been suffering as well.”
In fact, companies with at least $905,000 (100 million KRW) in capital, executives and employees with at least three years of experience working in the startup field, two full-time employees, and a space for incubation can register themselves as accelerators. Submitting a business plan that is required during the registration process is also basically an act of formality. While companies that want to register themselves as accelerators are legally required to submit their business plans for incubation and investments, there is no clear requirement regarding business plans.
Post management is also not taking place properly. There is no disadvantage even when an accelerator does not follow a responsibility to make a public announcement. There is also no specific sanction even when an accelerator does not follow a responsibility to make an investment within the three years after registering as an accelerator.
It becomes even more difficult to classify a company if it registers itself as a startup investment company and an accelerator. There is no separation between which tasks correspond to startup investment and which tasks correspond to early investment for startup planning.
As the industry is filled with accelerators without certain abilities, the market for startups is also facing issues. Not only are there companies that set up offices at schools and fulfill necessary conditions and provide consulting on government subsidies, there are also fake accelerators that have just set up small offices. Many of these companies cause an issue that requires performance-based incentives in regard to receiving government subsidies.
A representative for a startup company pointed out that accelerators that select promising startups and create commercialized models and continue making investments can be the victims of fake accelerators.
Regarding these issues, a spokesperson for the Ministry of SMEs and Startups said that the ministry is looking into revising relevant laws so that the revised laws tighten management and supervision on accelerators even more as accelerators are already legally required to carry out incubation and investments within the duration that has been set.
Staff Reporter Ryu, Geunil | ryuryu@etnews.com