Best way to learn is to imitate (and how it should apply to startups in emerging markets)

Recently there were interesting articles beng circulated and discussed in the valley. One is Black Swan Farming by Paul Graham and the other one is Screw the Black Swans by Dave McClure. Interestingly enough, the fireside chat with Vinod Khosla at the TechCrunch Disrupt SF 2012 was a timely interview and speaks to the different viewpoints.

I suspected, but was surprised to learn that out of all YC companies, Airbnb and Dropbox account for three quarters (3/4) in terms of about $10 Billion valuation. Paul was saying how difficult it is to pick a game changer winner. What makes it more difficult is how great ideas seem like bad ideas in the beginning. If an idea looks good, then everyone including large companies will work on it, and startups will have even less chance of succeeding. It’s when an idea seems bad and thus hard time getting funded, but at the end succeeds, it’s a game changer (homerun).

Vinod Khosla said pretty much the same. His fund looks for companies that will make tremendous impact when successful. It doesn’t matter when they fail. Founders will move on to a new project. But they don’t want to invest in companies that will make a little to no impact when successful. Again, Vinod is looking for a game changer (homerun) company.

Dave on the other hand is saying that 500 startups focus on Ichiro’s of the world (consistent hitting) rather than Barry Bond’s of the world (homerun king). He goes further into discussing the differences between YC and 500 startups (like hackers vs. hustlers), but my main takeaway was what kind of companies they were looking to fund.

These discussions made me think about how startups in emerging markets (including Korea) could do better. When babies are born, they learn mostly by imitating people around them. There is also an old saying, “Imitation is the best form of flattery”. Many amateur athletes also learn by imitating professional players (watching and learning). Korea is the only country I know best outside the US, and I always noticed the lack of virtuous seed funding cycle in Korea – successful founders seed investing in other startups. Once startup is up and running, and shows notable tractions, they can raise money from VCs and the process and valuation will be much better. However, startups often fail even before they could show traction because either they make multiple mistakes or run out of money before they can pivot. Without proper seed funding (and mentoring), they will have really hard time reaching the traction point.

At any rate, I think the best way for startups in Korea (or in emerging markets) to produce good enough winners to start the virtuous cycle is to imitate successful US startups in Korea (or in emerging markets), and after having a few successful exits, the founders can help other founders by investing and mentoring them. Furthermore, after successful exits, those founders would be in much better position to take bigger risk and attempt to make big impacts. In baseball analogy, it would be something along the line of having a few good seasons of hitting consistently, then you can swing for homeruns. No doubt those good seasons would be a confidence builder as well.

I keep hearing how there are many incubators and accelerators popping up in Korea. Someone recently expressed a concern that it’s like a startup bubble and a few failures will have devastating effect on the whole startup movements. I think this type of imitation strategy will be good at least in the beginning. After there are good number of successful and experienced founders, they would be better equipped to make sounding decisions and also to help other up-and-coming founders. It would truly strengthen startup community in Korea (or in emerging markets).

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Korea will be left behind

It’s okay to be patriotic. You should love your country, but it should not keep you from being objective.

In one way, Koreans are kind of Xenophobic. It’s not exactly it because they don’t hate foreigners, but because they think they are better than others. It was very clear when I lived in Korea for two years. It’s media’s fault, which is pretty much propaganda machine for everything to do with Korea. Come to think of it, this kind of blind loyalty is rampant in Korea.

When you are in the middle of it, it’s really hard to tell others about different things. But it becomes crystal clear when you are outside Korea. Whatever Koreans think they are best at, people in other parts of world simply don’t care.

Now, you may ask, “why do you care?” I shouldn’t. What Korea does or doesn’t do doesn’t affect me. So, why? I used to ask that myself, and I found an answer. Because I am a Korean, too (well, 1/2 of me is. Not that I am mixed, but I just happened to live 1/2 of my life in the US). I didn’t want to care, but I can’t help it.

Anyhow, I think Korea is in big trouble. They will be completely left behind in 10 years or so. Because they don’t invest in important technologies. But, you might say, “C’mon. Korea has the highest rate of Broadband penetration! Their mobile technology is way ahead of the Continue reading

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Why there are not many startups in Korea

When I set out to translate Paul Graham’s Why to Not Not Start a Startup to Korean, my former colleague who is much better in written Korean helped me. I read the article before, but re-reading it and discussing it with the former colleague made me realize that there are two very fundamental cultural differences that prevent many people, especially the young, from starting a company.

The first is very bad stigma against failure. In Korean society, they have deep seeded notion that success is measured by the path you take in life – where you went to school, where you work, what title you have, where you live, who you marry, etc. Any deviation from that is frowned upon. It doesn’t mean there isn’t anyone like that, but it’s very rare. Those who don’t follow the “right” path is considered failure and treated as such. And they wouldn’t be able to get a good job or will not be promoted high enough even if s/he has a job, because they don’t have the right credentials. Considering that, failure from a startup company is even worse. When you do, getting a job becomes extremely hard. There is an additional element of lack of venture funding. That means most startups are infused with founders’ money or loan, and if they fail, they lose literally everything.

The second is age hierarchy. Because in Confucius society (which Korea society is based on), you have to respect the elders, it’s very hard to challenge any notion from the elders. It had also seeped into corporate culture, where people are promoted mostly based on ages. Thus, people with higher titles tend to be older. And thus, it’s hard to challenge them, culturally. That totally kills or severely limits innovations.

Those two reasons alone would be enough to inhibit anyone from attempting to start  a company.

A stereotype say Asians generally study harder and score higher in test exams. That in no way means higher intelligence or smartness. What matters in a startup is not book smart, but almost start smart and being resourceful. That’s why hackers are better fit for founders of startups.

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