For the past several years, various funds and mentoring programs for youth start-ups have supported the rise of interest in entrepreneurship amongst millennials. Start-up Café Sinchon, an information hub for young entrepreneurs, and Ewha Startup 52nd st., where students start small retails, are just some of the examples. With such various companies and programs, the number of young entrepreneurs reached 26,945 last year, a significant increase from 21,311 in 2013, according to the Small and Medium Business Administration (SMBA).
“I think the overwhelming number of advertisements for these programs caught students’ attentions, leading to this high interest in entrepreneurship,” claimed a sophomore majoring in history.
However, various statistics show that the investments made on these start-ups are inefficient. Although the overall number of start-up owners has increased, entrepreneurs less than 39 years old has remained the same, at just 28 percent for the past five years. According to the SMBA and Higher Education in Korea, 267 out of 750 start-ups by university students failed to make any profit. The average government funding received by these companies was around 50 million won, while the average sales made was only around 10 million won.
Various factors contribute to the failure of investment, the main being the inconsistent support system. At least a few years are needed in order for a start-up to stabilize its foundation and make stable profit. However, many support programs are either one-time or short-term, resulting in the support being cut off after a year or two without providing steady help. According to National Statistics Office, it was found that only 16 percent of start-ups by youths remained in business after five years of establishment. Some pointed out that the procedure to receive funding is too complicated.
“I remember having to stay up late to complete application documents,” mentioned a university student who tried to take part in start-up contests. “Some programs require presentations, and some even require fourth or fifth round of assessments to receive funding. The process is lengthy and difficult, and potential start-up owners tend to give up, especially those who are not affiliated with a university club, and have to work on their own.”
However, these programs are now making revisions. Ewha Startup 52nd st. has made its transition to Incubating Project for Young adult Start-up Mall, where 22 businesses were selected to run in the alley next to Ewha’s main gate to increase youth employment rates and vitalize the local commercial area.
“The advantage of the business was that any Ewha student or graduate could establish a start-up without having to worry about one’s budget, whereas the disadvantage was the lack of assessment for consumer’s needs, the development process and the revenue process,” mentioned Jin Young-ju, director of Business Incubator Center. “This year, start-up recruitment was done through four rounds of assessment nationwide, verifying business feasibility and determination of the applicant.”
In order to avoid going out of business after the termination of governmental support, the business is pushing forward a cooperative association between the owners of start-ups. Persistent growth within the community can be achieved through such effort.
In concluding his interview, Jin mentioned the importance of verification of a business before establishing a start-up.
“For a successful youth start-up, we need to focus on the consumer and market as well,” Jin emphasized. “Thus, verifying both the business and revenue model, and providing mentoring throughout the foundation of the start-up is essential.”