For an odd reason or two, crowdfunding was illegal in Korea until mid-2015. While this meant that many startups were forced to go abroad with their crowdfunding needs, it also meant that domestic startups without English capability were stranded between success and startup limbo.
That all changed in July 2015 when the Korean government passed a bill to legalize crowdfunding platforms and with it, boost economic growth. Until the regulatory changes early-stage startups could not ask for small investments in exchange perks (products). Depending on which sou rce is cited, there are now between 20 to 30 platforms launched in Korea, leading to an explosion of newly funded projects.
What do the regulatory changes actually mean for the future of Korea’s entrepreneurs?
In the past hardware startups have had to sell their products to larger companies, like Samsung and LG, in order to secure vital funding and to successfully execute production, marketing and distribution.
Eric Cornelius, Co-founder of G3 Partners, said that through crowdfunding small businesses in Korea have finally found a way to market and sell their products directly into western markets. “The success of Kickstarter projects, such as YOLK’s USD $1 million dollar campaign proves that crowdfunding platforms are a great way to reach out internationally and we were able to help Korean projects attract over USD $1.5 million in contributions in 2015 alone,” he said.
He believes that while Korea’s crowdfunding scene is still in its infancy, it is likely to see significant growth in the coming years as more local companies realise its advantages.
We’ve gathered a couple of the best local platforms that have taken advantage of the legislation change.
Crowdfunding Platforms
1. tumblbug
Founded in 2011, tumblbug is Korea’s largest and fastest growing online crowdfunding platform. The platform raised a $1.5 million series A with Korea’s largest online portal, Naver leading the round. With the slogan “get smart, fund art” tumblbug has so far helped to raise over USD $40 million for artists, filmmakers, musicians and game developers.
Tumblbug is the birthplace of several award-winning movie and music projects such as the Sundance Film “Jiseul” and “The King of Jokgu.” Locally developed mobile games are also doing well and Tumblbug is said to be a major source for funding in Korea’s indie game industry. At the time of this article there were over 200 games seeking funding on the platform.
2. Wadiz
Wadiz is a social network-based crowdfunding platform that provides small businesses and startup events an avenue for funding. It also enables a forum for investors to meet online and share information. Since its founding in 2015, Wadiz has helped projects raise $3 million and has successfully funded 1500 projects.
While the average pot is smaller than its US peers, Wadiz currently boasts an exceptionally high rate of funding success, with close to 70% of projects achieving their funding goals.
Much like the team that founded Kickstarter in 2009, David Shin, CEO of Wadiz, believes that crowdfunding can changes people’s lives. Whether providing people with niche interests find an opportunity to fund content creators or for content creators to ask for support, Wadiz aims to diversify content options.
Shin also established the Crowd Research Institute in Korea, which analyses successful crowdfunding platforms and campaigns from around the world. The institute aims to build a knowledge base for the local industry to boost success.
Wadiz’s notable successes include Lab Nosh, a healthy meal in bottle concept, and Begin Again: Youngchul Burger, a project to revive a once famous burger chain in Korea.
3. MakeStar
Hallyu, the global boom of Korean pop culture, has helped establish the Korean nation and its army of rising stars as a global force among youngsters across the globe. But beyond the spotlight shining on Korea’s most famous actors and pop icons, the majority of wannabes struggle to build a fan base in Korea, never mind overseas.
Despite the difficulties, a lust for pop fame is inspiring a sizable portion of Korea’s youth to embark on long and strenuous preparation for stardom. MakeStar aims to level the playing field for up-and-comers and give every voice a fighting chance by connecting Korean artists to potential fans.
Founded in 2015, MakeStar has developed a crowdfunding and marketing platform that promise to enhance the content and appeal of Korean entertainment, including TV dramas, movies, and K-pop music. Entertainment executives can launch projects on the platform for their young stars and if picked, they get a boost through MakeStar’s various marketing channels and third party affiliates. Popular projects range from funding girl groups to album productions.
4. Opentrade
Founded in May 2012, Opentrade, has created the first of its kind equity crowdfunding platform in Korea. What stands out about the platform is that companies can directly browse for angel investors, venture capitalists, and businesses to support and share featured projects.
Unlike US based crowdfunding platforms OpenTrade aims to furnish investors with valuable information on which to base investment decisions. They can evaluate featured companies against built in investment and growth metrics and can access business plans on the platform that are compiled using a standard template.
Rather than getting perks like products or T-shirts, backers on OpenTrade receive equity in the companies they support. Projects range from Counsring Inc, a mobile counseling service to OnOffMix an events management solution that raised almost $700 thousand on the platform.
Ko Yong-gi, CEO of OpenTrade is also the chairman of ‘Korea Crowdfunding Platforms’, Korea’s most established crowdfunding association and has acted as an adviser to the government on crowdfunding policy. As such he was an instrumental private sector individual behind the legislative changes in Korea last year. According to a recent interview he believes that crowdfunding could inject up to $1 billion into Korea’s economy over the next five years.