Investment That Behaves Like a Loan
The central problem with startup investment in Korea is the redeemable convertible preferred shareRCPS. Because the structure lets investors pull their money back whenever they choose, it ends up behaving much like a loan. When a startup fails, the founder is often the one left holding the debt.
US venture capital works differently. It operates on the assumption that one in ten investments will succeed. The other nine can fail, as long as that one pays off in a big way. It's not unusual for tens of millions of dollars to go into nothing more than an early proof-of-concept stage. That's because the culture bets on a technology's potential and its growth curve.
This is where the two diverge. In Korea, the first reaction tends to be, “Is that ever going to work?” In the US, the very same idea draws support instead. That, at least, is what Kwak Seok-young says he saw on Stanford's campus: students chasing ideas that would look preposterous by Korean standards, and getting cheered on by investors.
A Country With Only One Way Out
It isn't only the investment structure. The routes for cashing outexit are also extremely narrow.
In Korea, there is effectively just one way for a startup to return its investors' money: a listing on the KOSDAQ. Mergers and acquisitionsM&A by large corporations are almost nonexistent. Getting to an IPO takes years, and if the cash runs dry along the way, it's over.
In the US, there are paths beyond going public. Big Tech companies acquire startups as a matter of routine. An acquired team often doesn't disband; many go on to found something new. Even a team that failed can become an acquisition target if it has real technical chops. So capital circulates. Whether a founder succeeds or fails, the structure opens up a next round.
Korea is different. Fail, and you're saddled with debt; succeed, and you still have to squeeze through the narrow door of an IPO. The burden is heavy for founders and investors alike. In a structure like this, how hollow does “dream big” really sound?
The Government Gave Us Fertilizer. Now We Need Soil.
Without the Korean government's support for entrepreneurship, today's startup ecosystem wouldn't exist at all. Programs like TIPS offer real help to early-stage teams. But the limits are just as clear.
Lim Geun-hwi — a former Samsung Electronics executive vice president who founded an AI biotech startup in the US and now serves as its CTO — puts it this way: “TIPS acts as fertilizer for the ecosystem, but government policy alone can't create a self-sustaining virtuous cycle.”
No matter how good the fertilizer, nothing takes root in barren soil. And here, the soil is the private-sector ecosystem — a cycle in which large companies collaborate with startups, acquire promising technologies, and let that capital flow back into new ventures. In Korea, that cycle is blocked.
Some argue that certain government grants are awarded less for genuine business viability than for a team's skill at executing the grant program itself. That's why there are growing calls to bring more experienced entrepreneurs and private investors into the selection process.
The Talent Drain Is a Symptom, Not a Cause
According to a report from the global HR platform Deel, 58.2% of the world's AI trainers are based in the US, and 55% of startups that have raised more than $100 million are headquartered there. AI talent and capital are pooling in one place.
Starting a company in the US is hardly easy for Koreans. There's the language barrier, and their networks are thinner than those of founders from India or China. The pool of senior founders to learn from is shallow, too. And yet they still prefer to head to the US — because Korea's structural limits are severe enough to make those high barriers worth bearing.
The talent leaving is not the cause but the result. Unless the investment structure changes, unless exit paths widen, unless the penalty for failure eases, telling people to “start your company in Korea” will remain nothing but empty words.
What Has to Change Is the Nature of the Money
Here's the bottom line. It's not that Korea has no money. The problem is the nature of that money. It's called investment, but the terms for getting it back look more like a loan; even success leads only to a narrow exit; and failure leaves the founder in debt. In a structure like this, no matter how good your idea is, you have no choice but to start small and move cautiously.
The US isn't superior on every count. The competition is far fiercer, and being Korean is a real handicap. People leave anyway because Korea's structure simply doesn't allow for “big dreams.”
Yoon Sung-hee, CEO of Erudio Bio and a former executive vice president at SK Hynix, cuts to the heart of it: “US venture capital bets boldly on innovation, assuming that one in ten investments will succeed. Korea still leans heavily on short-term, performance-driven evaluation.”
Betting on one success out of ten and accepting the other nine failures as a cost of the ecosystem is the original grammar of venture investing. Until Korea's investment culture returns to that grammar, the outflow of talent and ideas can only continue. Because no matter how much fertilizer the government spreads, nothing will take root until the soil itself changes.
