BUSINESS

Foreign start-ups seek legal clarity

By Korea Herald
  • Published : Jul 27, 2015 - 20:12
  • Updated : Jul 27, 2015 - 20:15
This is the seventh and final article in a series on foreigners working in Korea’s technology start-up ecosystem. ― Ed.

PinStory, a food recommendation start-up in Seoul, is the poster image of diversity: A Korean ex-banker and a Spanish ex-restaurateur and developer spotted a shortage of restaurant information in English and joined together last year to create a quality-driven directory of Seoul’s best eateries for a foreign audience.
PinStory CEO Universe Shin (left, back row) poses with the team at their office in Pangyo, Gyeonggi Province. (PinStory)

Universe Shin, the start-up’s cofounder and CEO, said he finds value in the diverse backgrounds of his staff, which now includes members from the U.S., Spain, Ethiopia, Korea and Japan.

“Even if we focus on the Korean market, I think different points of view are very, very important,” he said. “For a tech start-up, before making any decisions, we should be careful to listen to every idea. Different point of views come from diversity, be it race, nationality, sex or age.”

The Pangyo, Gyeonggi Province-based start-up’s multicultural staff is an exceptional case in Korea. Shin was able to hire whomever he needed with no fuss from immigration services, but he admits that most start-ups find it difficult to hire foreigners.

Foreign entrepreneurs in Korea say their biggest hurdle is not the cultural challenges ― ranging from language barriers to hierarchical business traditions ― but instead those opportunities out of reach due to the legal difficulties of hiring a foreigner or founding a company.

“The major obstacle is the visa system. It is so difficult for foreigners to legally work with start-ups that many end up quitting,” said Nick Szabo, chief operating officer of Swizzle, a video-clipping app.

Entrepreneurs complain that not only is the visa requirement information hard to find, but too many regulations are subject to interpretation by the immigration office agent, such as whether the applicant has relevant work experience and documentation. Some said they have spent several months procuring documents, only to later find out they were the wrong ones.

“Nobody seems to actually understand the system. Everyone I have talked to about getting a visa, either as an entrepreneur or an employee, has said the same thing: ‘Go to the immigration office two times, and you will get two completely different answers to every question you ask,’” Szabo said.

The government has made efforts to ease the process by creating a start-up visa for technology entrepreneurs, but some applicants have found themselves facing confused immigration officers who do not understand the new requirements.

Moreover, the Korea Institute of Science and Technology and Gwangju Institute of Science and Technology, two institutes offering a class called OASIS-9 for entrepreneurs to collect points toward the start-up visa and gain up to 50 million won ($43,000) in public funding, have recently cut their budgets from funding 15 teams to eight ― meaning foreign entrepreneurs will have even less access to seed funding ― and now require foreign entrepreneurs to have a Korean partner to qualify for financial support.

“(The visa regulation system) is definitely a problem that needs to change if this start-up ecosystem really wants to get off the ground. Seoul could very easily take over as the bridge from East to West if they got a handle on this,” Szabo added.

Industry observers speculate that government efforts to increase support for foreigners, both legal and financial, are stymied by a public sense of protectionism that foreign workers will directly compete with local jobs. Some entrepreneurs say to make the ecosystem more global-friendly, foreigners need to be perceived as collaborative and contributing to the local industry.

Korea, ranked No. 5 this year in the World Bank’s Ease of Doing Business rankings, has long been a leader especially in Asia in welcoming foreign business through free trade agreements, free economic zones and foreign investment attraction. But to create a healthy ecosystem for small, innovative businesses like technology start-ups, the next step is to integrate the influx of foreigners and foreign companies by improving the infrastructure for visas and Korean education, noted Jason Minkee Kim, creator of story-sharing platform My Memoirs.

Likewise, foreigners should learn how to assimilate into the Korean workforce and market their technical abilities where they are needed in Korea’s strong industries like high-tech exports, Kim said.

“If foreigners want to integrate in Korea, they must focus on making themselves presentable in these industries,” he added. “If you can create something valuable in Korea as a foreigner, you can change the perception and market, paving the way for future foreigners to create something amazing as well.”

Entrepreneurs claim that foreigners can play a specific role in making Korea’s nascent creative economy richer by using their individual backgrounds to bring disparate ideas together.

The majority of start-ups in Korea have global aspirations, but the local market is so different from the rest of the world that a global team is vital for doing business abroad, from talking to foreign investors to developing strategies for different markets, said Szabo of Swizzle.

CEO David Park of KOISRA Seed Partners, a Korean-Israeli seed fund and accelerator, pointed out the government’s key priority for the creative economy is solving youth unemployment by forming new job opportunities, though the government has not yet reached the point of knowing how to advance its creativity. To get to the next level, he added, Korea must consider the role of diversity in its start-up industry.

Park encouraged more programs to have Korean and foreign entrepreneurs working side by side instead of in separate incubation centers, and suggested that any start-up assistance for Koreans should be available to foreigners. “Wherever there is a Korean start-up, there should be a center or person who can help them do business with foreigners,” he said.

Beyond giving out funding and office space, the most practical solution for a better working environment is normalizing regulations, entrepreneurs say.

The brittle changes in the laws make foreign entrepreneurs, researchers and investors nervous about entering the local ecosystem, which is still restrictive in terms of labor laws and intellectual protection, said David-Pierre Jalicon, chairman of the French-Korean Chamber of Commerce and Industry.

“When (foreign investors) arrive, they don’t see development. Or sometimes they see the law change in a totally opposite direction,” he said, citing the reform last year of ordinary wages that was proposed to be applied retroactively. “We need more predictability.”

The government’s key role in facilitating foreigners doing business here, he stressed, is to provide a stable, predictable intellectual property, legal, tax and business environment that is unambiguous and straightforward.

To do that, it should focus on either deregulating or providing a one-stop system to provide comprehensive information on the laws in English, such as through a central call center, annual meeting or clear announcements to inform foreigners of legal reforms, Jalicon said.

The Seoul Global Center, a Seoul City-run expat assistance agency, is a helpful source for foreigners, he noted, but there are many issues that cannot be worked out by local governments, he and other industry observers noted. The French chamber is likewise limited. He said that an “umbrella” system that helps entrepreneurs handle visa and other issues all under one roof would assuage foreigners’ fears of doing business here.

“Once there is this (umbrella system), and once this is communicated abroad, I’m sure many people will plug in,” Jalicon said.

Jeet Dhindsa, creator of medical tourism platform My Seoul Secret and one of the first recipients of Korea’s start-up visa, said Korea’s own stigma against the creative process and focus on the end game are its biggest hurdles to creative growth.

“I think that a lot of challenges in their way is Korean culture itself,” Dhindsa said. “If you want a creative economy, you have to have a creative process, and in the creative process, there are no rules. And they might break rules that are going to make the culture feel uncomfortable, so that’s going to be the challenge.”

Ultimately, fostering this spirit of creativity to drive an innovative economy requires a change of mindset that values diverse ideas and ways of thinking, which can only be cultivated in the long term through education, industry experts and entrepreneurs said.

Jalicon believes cross-cultural connections can be a win-win for Korean and foreign entrepreneurs. Korean companies ― and their investors ― are too focused on short-term, results-driven, practical applications that hinder a truly creative progress, as evidenced by the country’s failure to produce Nobel Prize winners, he said. Meanwhile, countries like France exercise limitless innovation, but may not know how to apply their developments.

He points out a need for two-way openness toward change between Korea and the rest of the world, adding that Europe would like to see more Korean investors to help facilitate change as well. In the creative economy, the different mindsets can complement each other by mixing France’s innovation with Korea’s application, Jalicon said.

He suggested starting out with small projects under a long-term vision, and praised the tangible efforts coming from both countries. Korea’s KAIST has signed a number of memorandums of understanding with overseas institutions to promote innovation-driven collaboration, including with France’s public investment bank Bpifrance to create Korean-French start-ups, he noted.

He stressed that foreigners cannot and should not aim to change Korea, but that citizens must be self-motivated to improve their own creative economy.

“It is not overnight and I really believe in the current capacity of changing. When they see the reality, when they fight the issue, they have a capacity to change.”

By Elaine Ramirez

(elaine@heraldcorp.com)