U.S. Search Company Provides Links to Venture Capitalists, Helping Tech Firms Build Global Profiles
SEOUL—Until about nine months ago, Dave Cho woke up every morning to teach fifth-graders math, history and science at a school in the South Korean port city of Incheon.
But Mr. Cho's audience has changed. These days, the 28-year-old Mr. Cho is busy pitching his young technology startup to venture capitalists in Silicon Valley, Asia and the U.K., with assistance from Google Inc.
Earlier this year, Mr. Cho's company secured an investment of one billion won ($941,000) from SoftBank Ventures Korea, an arm of SoftBank Corp., the Japanese telecommunications and Internet company.
Mr. Cho's rapidly changing fortunes are one reflection of South Korea's growing software ambitions. Just as the country's best-known technology companies, including Samsung Electronics Co. and LG Electronics Inc., climbed onto the world stage by manufacturing high-tech devices, South Korea's software prowess is starting to attract attention outside this highly domestic-focused market.
For several years, the country has played host to a lively startup scene, led by mobile-game developers and social-media entrepreneurs.
But the boom has only recently drawn the notice of venture capitalists and established software companies such as Google, which has taken a particularly active role in nurturing some of these companies. "Korea's startups were way too insular and needed to be pushed onto the international stage," said a Google spokesman.
Over the past two years, the search company, which is based in Mountain View, Calif., has been taking its favorite South Korean software startups to London and California to meet with venture capitalists and help the companies build a global profile. Next week, it is taking five such companies to Silicon Valley.
Google isn't the only company taking notice. Last month, the founders of SparkLabs, a startup accelerator based in Seoul and San Francisco, said they would start a $30 million fund to invest in early-stage software companies, alongside former Facebook Inc. executive Net Jacobsson and London-based venture capitalist Frank Meehan.
To be sure, South Korea has shown such promise before only to see its software success stop at its borders. A decade ago, SK Communications Co.'s Facebook-like social network, Cyworld, was nearly ubiquitous in this country.
But Cyworld's attempt to enter the U.S. market flopped. Today, Facebook is South Korea's most widely used social network.
Kakao Inc., creator of South Korea's dominant mobile-messaging app, and Naver Corp.'s search portal, which is ahead of Google domestically, have also failed so far to make much of a dent anywhere else.
Mr. Meehan compared South Korea's startup scene with that of Israel's four or five years ago, which was fueled by entrepreneurs returning from overseas with an eye on conquering the globe.
"I sincerely believe that Asia is on the cusp of a big explosion of startups," said Mr. Meehan, who sat on the board of music-streaming service Spotify Ltd. while helping run investments for Horizons Ventures Ltd., the private investment arm for Hong Kong billionaire Li Ka-shing.
"The difference is that Korean entrepreneurs are coming back with a sense of how to take on the U.S. market, and they're thinking of building things that aren't just built for Korea," he said. "The Samsung-type juggernaut will happen in software too."
Sensing an opportunity, the South Korean government is jumping into the fray, too. Earlier this year, President Park Geun-hye created a new office, known in Korean as the Ministry of the Future, that has created programs that it hopes will help young startups take their ideas to a global stage.
In October 2012 Google picked Mr. Cho's educational social-media mobile app company, Classting Inc., as one of its 29 favorite startups in a field of 246 hopefuls at a competition that Google sponsored together with the Korean government.
Google then took Classting and some of the other winners on the road to London and the San Francisco Bay area to meet with venture capitalists. Since then, nine of the companies have collectively attracted 4.3 billion won ($4 million) in outside investments, according to Google.
Notably, none of that investment is from Google itself, which has forked over the money to run the startup competition, but hasn't sought equity stakes in any of the startups.
However, the search company stands to benefit from increased Internet usage more broadly, which Google in turn believes is driven by innovative startups.
Google has done work with entrepreneurs in other countries, but says that its effort in South Korea is the product of a realization that Google executives made about two years ago: Many of the most popular games on its global mobile-app store were ones that had been developed by Korean companies.
As the company sought out innovative startups in South Korea, however, it found that many of the most promising companies were, like Classting, built around the country's rigorous educational system.
Mr. Cho, the 28-year-old former teacher, first cooked up the idea for Classting—a social-media network for the classroom that allows teachers to interact with students and their parents—after trying to first engage his students through Facebook and Twitter.
Mr. Cho found that students weren't willing to open up their social-media profiles to their teachers and parents, or that schools wanted to ban smartphones outright in the classroom.
So Mr. Cho and his co-founder, a high-school friend and programmer, developed an app they thought could fill that need. They spent two years working on the app, which they named Classting—a portmanteau of "class" and "meeting"—while working their day jobs.
Thanks to its success in startup contests funded mainly by the South Korean government, Mr. Cho and his staff have been able to give up their day jobs. And in June, Classting brought in SoftBank Ventures—its first outside investor—as the app gained traction in its home market. Classting is now being used at about 6,000 of the country's 11,000 schools, Mr. Cho said.
Classting has expanded to 13 employees and moved into a three-story, penthouse-style office in an alley off Seoul's fashionable Garosu-gil shopping district, where several South Korean startups are clustered. Classting is now putting the finishing touches on a Japanese version of the app, which it plans to roll out next year.
"We want to build the most influential educational service on the planet," Mr. Cho said.