In a tiny office space at a WeWork building in the financial district, David Yoo and Dino Ha look just like the hundreds of other startups operating in the popular coworking space. But unlike the startups at WeWork, both Yoo and Ha work for South Korea-based startups and are in New York City to fulfill one purpose: secure funding.
Yoo and Ha are part of South Korea’s fledgling startup community that is sending founders to New York City to raise money from the city’s growing venture capital community. If this partnership between South Korea and New York City proves mutually beneficial, New York City’s tech community could soon benefit from yet another bump in jobs creation and economic expansion as another group of foreign companies make New York City their second home.
Both David Yoo and Dino Ha’s startups received funding to expand into the U.S. market from the South Korean government and SparkLabs, a tech accelerator that aims to grow South Korea’s startup industry. Yoo is a cofounder of KnowRe, a math learning game for middle school students, and Ha is a cofounder of MemeBox, a monthly subscription-based Korean cosmetics retailer.
The South Korean government and SparkLabs supported KnowRe and MemeBox by giving them seed funding because both startups demonstrated potential for expanding into the U.S. market.
“The government is now recognizing this industry and putting money into it,” Yoo said.
South Korean government announced in last August that it will invest $2.97 billion into the tech industry, and is also offering tax incentives for angel investors to encourage a generally risk-averse business community to invest in startups. The government’s aggressive promotion and support for its tech industry are being felt in New York City as successful startups from South Korea expand their business to the U.S.
One such startup is KnowRe. When KnowRe (pronounced NO-REE) developed their interactive math learning game, they quickly realized that their market was not in South Korea.
“Korean moms don’t view the computer as an educational tool so there are real cultural issues that prohibit us from puncturing the Korean market,” said Yoo.
After winning funding from the South Korean government and SparkLabs, KnowRe decided to launch their game at conferences for teachers in the U.S.—where parents are more open to video games as learning devices.
“We had a basic demo, but the teacher’s response was crazy. They loved our product,” Yoo said.
Today, KnowRe has run a successful pilot launch of their game at more than 30 schools across the United States and is raising funds to continue marketing and distributing their game to more schools.
Similarly, MemeBox (pronounced MEE-MEE-BOX) realized it had a winning startup idea when Korean cosmetics quickly became a favorite category for U.S. cosmetics retailers. Even though most of MemeBox’s operations and distribution center are based in South Korea, they have already launched their e-commerce site and are shipping to the United States, Ha said. If Ha secures funding from U.S. venture capital firms, he believes MemeBox could be selling more products to customers stateside.
“We are looking for funding but it totally depends on the investors – if they are willing to fund a company from Korea,” Ha said. If MemeBox grows in the U.S., Ha said that could mean jobs and perhaps even a distribution center in the metro area.
Still, these startups face the challenge of convincing venture capital firms to fund foreign companies – something experts say firms are unwilling to do because it is difficult to feel connected to a startup on a different continent.
“For a typical venture capital firm, the face to face aspect is very important. Venture capitalists like to be within a two-hour drive or flight from the startups they fund,” said John Taylor, head of research at the National Venture Capital Association.
Firms are also unwilling to fund foreign startups because it is too much trouble to learn another country’s tax and business laws.
“There are limitations on a VC sending money overseas. They have to be cognizant of the jurisdictions governing other countries and it just gets very complicated,” Yoo said. “They have to know where the assets live and all the legal aspects of that are very difficult.”
As a result, Yoo and Ha understand that they must establish a strong presence in the U.S. for their startups so they can secure increased funding. If they pull enough funding to open major offices here, it could mean more jobs, talent and benefits for New York City
Yoo began fundraising for KnowRe in August and has raised 60 percent of KnowRe’s fundraising goal. If he secures the funding, Yoo is convinced that KnowRe could revolutionize math education in the New York City public schools.
“New York is the largest public school system in the country, and so a lot of education technology companies believe that if I can penetrate this market, then I can get anywhere,” Yoo said.
MemeBox is also eager to grow jobs for New York City. The startup already employs more than 50 people in South Korea, and two more staff are moving to join Ha in New York City. As New York City’s tech community continues to expand, welcoming eager new players like KnowRe and MemeBox into the field will be a crucial step in the city’s growth.
“Our cofounders have been to the U.S. and they believe there is big potential to do something here,” Ha said.