Invest KOREA

Altos Ventures is a Korean-American venture capital firm that started in 1996 in Menlo Park, USA. It is led by co-founders and managing general partners Han Kim, Ho Nam, and Anthony Lee.

They first met at Stanford MBA and began managing their first fund in 1996 through an introduction from their professor. Later, by chance in 2006, they were introduced to Korea's Pandora TV through a global company. At that time, Pandora TV's traffic surpassed that of YouTube, which led them to recognize the remarkable growth rate of the Korean mobile market. After meeting many of Korea's first-generation IT entrepreneurs, they discovered that there was a lack of capital to support their growth. Altos Ventures decided they could fill this gap and began identifying promising early-stage companies in Korea.

The headquarters is currently located near Burlingame, California, and the Korean team consists of about 10 key talents. They are responsible for identifying excellent early-stage startups in Korea and supporting their scale-up. Despite being a US VC, the reason for receiving such support from Korean startups is that they have long trusted and accompanied the growth of the Korean market, and have been with promising companies from their early stages.

What is Altos’ investment philosophy and why has it been so successful in its investments?

Altos Ventures pursues value investing. The key is to patiently stay invested in companies with high capital efficiency over the long term. Our investment approach can be divided into three stages. First, we look for companies with the potential to grow into great companies. Second, after investing, we actively support the management and assess whether the company can genuinely grow into a great one. Third, if we are convinced, we support them with patience through follow-up investments until the company grows sufficiently.

In particular, we adhere to the principle of long-term investment. In fact, our fund maturity period is longer than other VCs in Korea. This gives founders ample time to develop their business.

Based on this 'value investing' philosophy, Altos Ventures has clearly established the type of entrepreneurs we prefer. We uniquely categorize entrepreneurs' tendencies using the metaphor of 'foxes and hedgehogs'. Foxes represent clever and shrewd entrepreneurs, while hedgehogs represent somewhat slower but steadfast entrepreneurs.

David Baszucki of Roblox is an example of a typical hedgehog-type entrepreneur according to the Altos team. Altos' relationship with Roblox began in 2007. The idea originated from a quiet, introverted computer engineer and father of four who wished to 'nurture children's creativity'. Kim Bong-jin, the founder of Woowa-Brothers, is also a hedgehog-type entrepreneur. Despite Altos rejecting investment in ‘Baemin’ twice initially, Kim persistently knocked on Altos Ventures' door.

As the Altos team observed the surprisingly growing revenue data each month, they realized the value of 'entrepreneurs with drive, substantial growth, and perseverance’. The biggest advantage of hedgehog-type leaders is that they don't give up, constantly focus, and steadily move forward towards their goals.

We all know that Altos was at the forefront of offering growth opportunities to Korea’s innovative startups like Coupang, Krafton, Daangn, Woowa Brothers, Viva Republica, and LiMO TAXI—just to name a few. Why did your company decide to invest in Korean startups?

What we focused on was the pattern of urban development in Korea and the United States. Especially in terms of population. When comparing the top 20 cities in the U.S. and Korea, Korean cities have larger populations and higher population densities than U.S. cities. However, the ratio of consumer spending to income is similar in both countries. At the time, Korea had a GDP that supported considerable purchasing power, and the national character, which was sensitive to trends and had rapid adaptability, stood out.

Moreover, after the release of the iPhone in 2009, the smartphone adoption rate grew more rapidly than in the U.S., exceeding the U.S.'s 80% penetration rate to record over 90% in the late 2010s. As a result, consumers naturally transitioned from PCs to mobile devices for their purchasing and communication needs. We believe there is still potential for innovative companies to emerge in the mobile market, and we are actively working to anticipate the rise of next-generation leading companies and the forthcoming major trends (the next big wave).

What are the advantages of doing business in Korea, and why are people starting up new business ventures here?

Ironically, during the Asian Financial Crisis (also known as the IMF crisis here) in the late 1990s, Korea chose the internet and IT services as the key industries to drive its growth. During the same period, numerous IT talents emerged, and by fostering an investment environment conducive to the growth of venture companies and startups, Korea rapidly developed all the essentials for new industries to thrive. As a result, companies like Naver, Coupang, and Toss swiftly emerged as leading IT players in their respective sectors.

Another advantage that facilitates the rapid growth of new industries in Korea is its homogeneity. People are trend-sensitive, quick to adopt, and because users share the same language and culture, there's an advantage in having lower explanation costs.

Furthermore, the creativity and innovation of Koreans have turned K-pop and K-content into global phenomena, with fashion and beauty products worn by actors, celebrities, and idols in these contents spreading rapidly.

All these various factors intertwine to solidify Korea's position as a country with significant growth potential.

How has Korea’s startup ecosystem evolved over the last 15-20 years?

In the early 2000s, no one could have predicted that a company with a valuation reaching KRW 1 trillion would emerge from Korea's KOSDAQ market. At that time, the prevailing belief was that even reaching a valuation of KRW 100 billion would be challenging, and surpassing KRW 200 billion was deemed impossible. Consequently, it was also difficult for startups in Korea to secure investments exceeding KRW 50 billion, even with new technology.

However, companies like Baedal Minjok (Woowa Brothers), Hyperconnect, Krafton, Coupang, Ridi, and more recently, Webtoon Entertainment, have accomplished all of this. They successfully expanded overseas, went public, or achieved mergers and acquisitions. Initially, the dominant expectation was that these companies would fail, but instead, they turned profitable and steadily increased their market share.

These success stories have captured the attention of foreign investors. As the recognition that "such large companies can emerge from Korea" spread, global capital naturally began to take notice. Now, investments exceeding KRW 50 billion have become commonplace, and companies with valuations of KRW 1 trillion are emerging one after another. What's remarkable is that all these changes have occurred within just a decade.

What are some of the major startup trends you’re seeing in Korea’s startup environment?

Amid various changes and trends, one of the most noteworthy is the emergence of second-generation (or 2.5-generation) startup founders. Entrepreneurs who have gained experience at companies like Toss, Coupang, Hyperconnect, and Woowa Brothers are now founding their own startups, leveraging the growth know-how and organizational culture they acquired from these companies.

In fact, some of the companies we have recently invested in were founded by developers, product managers, and business developers from the early-stage startups we initially invested in within Korea. Additionally, for young and talented newcomers in Korea, joining a startup has become an increasingly attractive career path for personal growth and value realization.

Beyond this, we are closely monitoring the continued success potential of Korean content, the impact of demographic changes on industries, the potential for AI to lead market shifts, and the global expansion efforts of Korean B2B SaaS companies.

How does this compare to countries with the highest startup success rates like the U.S., China and Germany?

It's difficult to make a comparison with other countries, but let’s use the United States as an example since that’s where we started out. Despite being a country that respects diversity, there are still areas or communities in the U.S. that receive relatively little attention—immigrants, for instance. As immigrants ourselves, we could better understand their efforts and passion. A notable example is the founder of Roblox, a global gaming phenomenon, who is of Polish descent.

However, what is most important is not nationality or country, but the individual. If an environment allows such entrepreneurs to keep challenging themselves and trying new things, their chances of success could be higher. Korea, in its journey to becoming an IT powerhouse, has experience in government-led development. Moving forward, it must continue to put effort into nurturing new entrepreneurs.

What advice would you give startups to enable them to boost competitiveness in Korea and increase their chances of attracting investment?

If a company grows sufficiently in Korea and reaches a certain scale, it will naturally expand abroad or attract interest from overseas without needing to be pushed. Therefore, it's not advisable to think, "It's difficult to grow in Korea, but there's a bigger and better market overseas, so I'll expand abroad."

Instead, we suggest gaining as much experience as possible in Korea. It's better to consider expanding internationally after building strong competitiveness domestically. If a business finds success in a service it offers, it usually means there’s enough confidence there to grow the company further, and naturally, more customers, revenue, and investment is bound to follow.