Last week, I have shared on start-up supporting efforts in Korea. Further on the series this week is the hands-on insights from an expert in the game – a venture capitalist. I met with Mr. James Kwon, a senior manager at Qualcomm Ventures, and he shared his candid views on building a successful start-up company in Korea. So let’s hear him.

First off, I wondered if Qualcomm Ventures had a strategic focus on any specific industry or market.

“Because we’re from Qualcomm people think that we’d be focused on a specific segment,” says Mr. Kwon. “True that some of our portfolio companies are working closely with Qualcomm or are customers to Qualcomm. But we’re basically open to any opportunity. However the strategic interests are rather strong in mobile.”

Certainly there are lots and lots of activities in mobile business now. However, to me it seemed certain that given the size of Korea’s mobile service market it would be very challenging to generate sufficient cash-flows to sustain as a business in the industry. And it should never be a desirable situation for investors.

“Korea’s market is rather small,” answers Mr. Kwon. “And I think it’s why M&A as an exit method for investors is still weak. It is hard to generate a good attractiveness to be a successful M&A candidate when the size of the market is limited. However, there are also some very successful M&A exit stories as well: Enswers, Lotiple, and ThinkReals can be the examples.”

“It’s all about which core competency or the edge you have or even whether you have them,” elaborates Mr. Kwon. “For example, Enswers has its edge in technology. They invented an original technology to search videos on the web. And Lotiple and ThinkReals’ edge was the people; they are rockstar developers. All in all, to be a successful start-up company, you’ll need more than a good product, you’ll need an edge.”

Mr. Kwon also adds, “An entrepreneur who wants to exit through M&A should think about the alignment of interests between his/her start-up company and the potential buyers.”

As an entrepreneur myself, I also tend to notice a certain mentality that most of entrepreneur share – to go public. However, the IPO success rate in Korea is below 2% as I’ve pointed out in one of my previous reports, and it wouldn’t seem much favorable if I were an investor. So I wondered if the low number ever bothered him.

“I don’t see it (low IPO success rate) much as a threat to venture capital investments,” answers Mr. Kwon. “I only see it as if it was a natural course of natural competitions. I get to view, say, 100 investment proposals but only end up investing in about two of them. That’s about 2%. Considering that percentage, the IPO success rate doesn’t sound much like a harsh situation, nor do I think it’s a ‘Korea only’ situation. Regardless of the IPO success rate, we’ll keep investing in good companies.”

Ok, it surely is a good relief for start-up companies. But, what is a good company? What would his definition of a ‘good company’?

“I meet many start-ups that could give a fantastic presentation for an hour,” says Mr. Kwon. “And after the presentations, when I finally ask, ‘so what is the pain-point are you trying to tackle?’ Surprisingly a good number of entrepreneurs turns out that they just haven’t thought about that.”

It has been studied that many tech-entrepreneurs, especially in high-tech market, misbelieve that customers will choose their product because their product is superior to others in terms of the technology level. On the other hand, in the real world, customers in the market tend to hesitate to purchase such a high-tech product for two major reasons. First, customers are reluctant to purchase a product without existing reference. Second, because they know that there will be rapid upgrades in the future, they fear what they’re purchasing will go obsolete very quickly. Hence, to entice customers to fully appreciate a new product, any new business must spend a quite some amount of resources to marketing and customer acquisition. However, as mentioned by Bernard Moon, the co-founding CEO of Vidquik, in one of previous interviews, “What is underestimated, especially for B2C companies, is customer acquisition costs.”

For start-up companies with limited resources that cannot afford a hefty campaign, this is why they must have clear pain-point to tackle; If they clearly identified which pain-point to tackle the customers who identified the same pain-point would identify with the product. “You must first be able to give a crystal clear answer to ‘what’s the current problem that we are trying to solve?’” says Mr. Kwon. “Then you must come up with a unique and standing-out solution to the problem, upon a very clear edge.”

In strategy we call it a competitive advantage but whatever you want to call it, start-up companies need “it”, and it is more than just a good product. And you need to build up your own solution, preferably creative and favorable one, to a specific pain-point based upon “it”. Then, I asked Mr. Kwon of final thoughts to share.

“I would like to see more colorful original services, in mobile apps and what not,” answers Mr. Kwon. “And it will help Korea’s entrepreneurial ecosystem be more dynamic. Some say that Korea’s ecosystem for entrepreneurs is weaker than that of U.S. and to a certain extent it is true. And I think it’s because the entrepreneurial scene in U.S has much longer history and throughout the history they have accumulated a huge amount of tacit knowledge from entrepreneurs in the previous generations. XG Ventures can be the example: the ex-Googlers pass their know-hows onto the next generations.  What many don’t know is that there are many success stories in Korea, including small mergers and acquisitions; we just don’t know because they are under our radar. So, in time we’ll catch up.”

According to Mr. Kwon, VC firms in Korea are actively sourcing potential investments however it’s rare to find a great investment.  Every opportunity comes with a catch. And in Korea, the window of opportunity is perhaps the low maturity level in the start-up ecosystem. Ever felt an urge to buck the status quo and tackle what bothers you? The Land of Morning Calm just might be your Land of Opportunity.