Co-Founder and Managing Partner of Strong Ventures John Nam interacted with startups in one of Seoul VC Connect’s five Bootcamp sessions. Operated by the Seoul Metropolitan Government and G3 Partners, Seoul VC Connect supports Seoul-based startups in their international fundraising goals.
In this session, John advises Korean startups on how to expand internationally and what mistakes to avoid when entering the global market. He also shares his experiences as an investor in COVID-19 struck 2020.
How can startups decide when is the right time to consider international expansion, whether for investment, or market expansion?
Generally speaking, I think startups should avoid pursuing two markets – for instance, South Korea and the U.S. – at the same time as early-stage startups. So if you’re a startup in South Korea, it’d be best to establish yourselves in your home market first but if you feel the domestic market is too small, I’d encourage you to venture into the international market that gives you a better opportunity. What’s most important here is to go all-in into that one market that you choose in your seed or early stage.
For startups you’ve seen from Korea that have failed in their international expansion, what were the main reasons for that failure and how could others avoid those mistakes / issues?
Korean startups tend to open up their business in the U.S. with a business approach or mentality that’s more fit for South Korea which just doesn’t work. When you’re starting your business in the U.S. market you need to adapt your product to the U.S. market.
Another problem you tend to see with such companies is that they send out Korean staff from their headquarters with limited language skills to the U.S. to pitch to partners, customers and investors. If you’re ready to expand your business to the international market, at the very least, you need bilingual and bicultural senior team members that can not only communicate in foreign languages but understand the nuances of business culture in your domestic and international market. Hiring an interpreter will not do it because you need someone who truly understands the business culture and how the industry works.
What are some things that you would advise startups do / prepare before reaching out to international investors or partners?
Let’s again look at the model where, as a startup, you find your domestic market is not as big or exciting as you hoped and you’ve decided to venture into the international market. In such a situation you have to go in with a mindset of total abandonment. A successful startup case that illustrates this is weight-loss program startup Noom. CEO Saeju Jeong abandoned everything in South Korea, packed his bags, moved to New York and started his business from scratch and went all in. He hired personal tutors and spent hours practicing speaking and improving his English with their help. Another notable case is that of Chang Kim who started Tapas Media. He sold his company to Google, moved to Silicon Valley and founded his startup in the U.S. as well to target the U.S. market. So basically you can’t have one foot here and the other there, you need to dedicate yourself solely to one market.
Now the other model to consider is where your startup made a mark in the domestic market and is looking to expand operations abroad. In this case, you need to have solid numbers and graphs including everything from your number of B2B customers, number of clients, revenue and monthly active users that show a strong growth story.
Do you advise all startups to try to get into an international accelerator if possible? Why or Why not?
There is no right or wrong answer. You can go with or without the help of international accelerators. Accelerators are training grounds that help you acclimate to the international market and become more agile. Sendbird co-founder John Kim actually participated in two U.S. accelerator programs – Techstars and Y Combinator. Most of John’s business experience was in South Korea and then he sold his company to Gree in Japan. So he wasn’t quite comfortable yet treading into the global or U.S. market so he chose to get familiar with it by applying to accelerator programs.
So it depends on your particular situation, and yes accelerators will take about six to seven percent of your business equity at a low valuation but potentially they can support you with networking and help you hone your skills.
Have you seen any cultural faux pas or habits that you see as a turn-off for many international discussions?
People think most markets are mainly transactional and while that is important, too, no matter where you do business, it’s all about relationships whether it be between investor and founder, or with partners or customers or vendors.
In order to build good relationships in your target market, it is important to also build language and cultural sensitivity. You can’t solely depend on your international staff or interpreter so I encourage founders to invest time into it if you want to be a global company.
How has 2020 been for you, as an investor?
I’ll talk about my experience in Korea as I spent time from August to early November there. For us at Strong Ventures, this year was actually the busiest and this was of course partly because we have the money to invest but also because of the philosophy my business partner Kihong and I share — when others fear, get greedy. When we realized that investors were not investing from March to June, we went all in and invested in a startup every week in that period and it was great because we didn’t have any competitors until later in June when VCs started coming back to the table.
In the U.S. too there was a period of little to no investments being made and investors started jumping back in July, but unlike South Korea, the U.S. market hasn’t been as hyperactive.
In addition to his role at Strong Ventures, John is a Venture Partner of Primer, S. Korea’s first and top startup accelerator program. He is also the Executive Director of KOLABS, a co-working space created in partnership between BAM Ventures and Strong Ventures, in the heart of Ktown LA. Prior to becoming a seed investor, he co-founded and headed Phonevite, a top internet telephony startup that grew to profitability serving thousands of schools, nonprofits and community groups. John started his Silicon Valley career as a Senior Product Manager and Business Development Manager at Dialpad, a hybrid Korean-Silicon Valley voiceover IP company that was acquired by Yahoo!, and which became Yahoo! Voice.