Enthusiasm Wanes for IT Start-Ups

http://english.chosun.com/w21data/html/news/200804/200804080011.html Updated Apr.8,2008 06:57 KST

Enthusiasm Wanes for IT Start-Ups

Enthusiasm for IT venture start-ups, which have served as a growth engine for tech-savvy South Korea, has been falling rapidly. According to the Korea Association of Information & Telecommunication, the number of IT start-ups totaled 3,941 in 2005, but that figure has declined for two consecutive years, to 3,842 in 2006 and 3,380 in 2007.
Besides the dwindling number of start-ups, the number of existing IT venture firms -- new tech-oriented small and medium-size enterprises whose technologies have been certified by the government -- has also decreased rapidly, from 7,563 in 2005 to 5,945 in 2007.
Investment in start-up companies has also been sluggish. According to the Korean Venture Capital Association, the number of companies investing in IT start-ups fell from 438 in 2002 to 246 in 2007. These investors have switched their major investment targets from start-ups to mid-size companies that are five to seven years old.
The sluggishness in start-up investment means that the entire IT industry is becoming more conservative, while the "entrepreneurial spirit" of seeking new profit models is ebbing.
Kim Tack-jin, CEO of NCsoft, said, "It's a problem to blindly and recklessly launch an IT start-up with a view to hitting the jackpot. It's also very difficult these days to scout out talented engineers who have a challenging spirit."
Executives of IT firms are feeling the crunch. Byun Dae-gyu, CEO of Humax. said, "Talented engineers are avoiding IT venture firms. If this situation is left unattended, I'm afraid that there will be no more IT-oriented firms springing up in Korea."
Some still ambitious start-up firms are turning their attention to foreign markets. But no start-ups have yet made any conspicuous progress in this regard, and support for IT firms looking to advance into foreign markets has been insignificant.
IT is one sector in which South Korea enjoys higher competitiveness than other countries, and it has been very effective in creating jobs and earning profits. That the nation might lose its edge in this field is a painful thought for some.
Kim Jae-yun, director of technology and industry at the Samsung Economic Research Institute, pointed out that the country's large conglomerates have their own limits in creating jobs, and that IT start-ups are a new source of jobs.
(englishnews@chosun.com )

http://english.chosun.com/w21data/html/news/200804/200804080011.html