Singapore start-ups making inroads into South Korea, Japan

SEOUL, TOKYO – South Korea and Japan are markets that are notoriously tough to crack due to barriers such as language, bureaucracy and traditional insularism.

The Straits Times speaks to the Singapore start-ups that managed to make inroads there.

South Korea: Companies leverage opportunities brought by Covid-19

One firm helps people attend events remotely via personal guides. Another builds digital concierge platforms for hotels, while the third provides data labelling services to improve machine learning.

These are three Singapore-based start-up companies that managed to break into the South Korean market last year by leveraging opportunities arising from the Covid-19 pandemic.

Digital concierge provider Vouch was able to convince hotels, which took a massive hit due to loss of inbound tourism, to transfer some of their manpower budget to upgrading e-services instead.

“The human touch is still important but with our platform we can provide hotels with data on how guests used it and how hotels can better anticipate customer needs and streamline their operations,” Vouch’s Korea manager Daniel Lee told The Straits Times.

Vouch was one of 11 Singapore start-ups that made it to the finals of last year’s K-Startup Grand Challenge (KSGC) programme, organised annually since 2017 by the South Korean government to draw budding tech firms from all over the world to set up office in the country.

South Korea is not an easy market to crack due to barriers such as language, deep-seated hierarchy and insularism. However, the government is aggressively courting foreign start-ups – while also fostering local start-ups – in a bid to turn the country into a vibrant global hub for innovation, with its own version of Silicon Valley located in Pangyo city, south-east of Seoul.

The government’s budget for start-up companies reached 849.2 billion won (S$1 billion) last year – more than double 2016’s 376.6 billion won.

The efforts have paid off. The number of new start-ups here grew to 123,305 last year, up from 61,456 in 2000, while venture investments in start-ups doubled within a decade to 4.3 trillion won last year.

Thirteen start-ups have become unicorns, which means they are worth more than US$1 billion (S$1.35 billion). They include e-commerce platform Coupang and Woowa Brothers, which runs food delivery platform Baedal Minjok.

All three boomed last year due to a surge in demand for home delivery services during the coronavirus outbreak.

Covid-19 also allowed a small but growing number of Singapore start-ups to break into South Korea.

Travel without flying

Mr Philip Man (right), co-founder and chief executive of Singapore-based remote travel service Port, in Seoul. PHOTO: PORT

Remote travel service Port was working with the Korea Tourism Organisation to promote South Korea as a travel destination for Singaporeans when it seized the chance to join the KSGC and set up base in South Korea.

Each of the 60 teams that made it to the finals received perks such as funding of US$10,000, free office space, support from Korean interns and the chance to join a three-month accelerator programme to help them acclimatise to the country.

Port’s co-founder and chief executive officer Philip Man told ST that the firm’s entry into South Korea was timely as it could offer its remote travel services to companies keen to explore the exhibitions and trade shows still being held in the country despite Covid-19 without actually flying here.

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Users just book a bilingual guide via Port and, through a video call, get the guide to visit booths and talk to exhibitors on their behalf.

“There’s growing interest in technology and innovation coming out of Korea,” said Mr Man. “We see great prospects for us to continue doing this.”

Filmplace, a start-up that makes it easy to book homes, offices and cafes for filming, decided to target the South Korean market as the country has a vibrant entertainment scene.

The company has since inked an agreement with Doowon Technical University, located in Gyeonggi province surrounding Seoul, to use the campus as a filming location.

“The university has a big and beautiful library,” Filmplace’s business development manager Kim Min-seo said. “We hope more people can discover the library when cross-border filming resumes after Covid-19.”

Meanwhile, a Singapore-made robot that can sort out library books is now deployed in a facility in the southern port city of Yeosu.

Mr Peter Mao, CEO of Senserbot, the firm that made the robot, said it has “attracted quite a fair bit of attention in the library market in South Korea” and the company has appointed a new Korean partner to market its products.

“The Aurora robot is setting a new level of innovation in library automation using robots,” Mr Mao told ST. “The demand for the Aurora robot is there and we intend to seize it and take a large market share in the Korean market.”

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Building connections

South Korea is attractive to Singapore start-ups because it is a much bigger market and they can benefit from strong government support, such as access to funding, and accelerator programmes.

“South Korea is known for its strong pool of tech start-ups that specialise in shared economy, Internet of Things (IoT) as well as deep tech (for example, fintech, medtech and foodtech) – which are synergistic with Singapore’s drive to support the rise of such emerging technologies,” said Mr Fabian Tan, regional group director of North-east Asia and Oceania at Enterprise Singapore.

Enterprise Singapore’s Korea office will also do its part to help Singapore start-ups gain a foothold in the country, such as by matching them with partners and investors.

“Singapore’s global connections, market familiarity and geography in Asia makes them great partners to Korean start-ups,” said Mr Tan.

Even so, Singapore start-ups that choose to venture into South Korea will need to overcome challenges such as language barriers and differences in business culture. There is also a tendency for Korean firms to prefer working with more established local partners.

Mr Man from Port said that “if people don’t know you, they may not want to work with you, so you need to build connections first”.

Kevin Quah (left), CEO of Tictag, with two seniors at an activity centre in South Korea in October 2020. PHOTO: TICTAG

To counter this, many Singapore start-ups hire local staff to build bridges with Korean partners. Ms Kim Se-eun, Korea manager for Tictag, which is focused on data labelling, said:

“Some Korean people don’t want to take risks working with foreign firms, but I’m Korean so I can explain all about my company to them and they will trust me. Once the relationship is built, things will move very smoothly.”

Singapore based firm with South Korean artisanal shoemakers 

Joanna Lam (right) and Yang So-mang, the founders of a Singapore-based startup using image analysis to accurately measure feet size to allow women to order to custom-made heels online. PHOTO: KADA:KUDU

South Korean Yang So-mang had worn high-heels  for many years, but it was only after an ankle surgery four years ago that she realised the importance of wearing well-fitted, comfortable shoes.

She could not find ergonomic shoes online, and worse, realised that the return rate for online-bought footwear was up to 40 per cent due to size and fit issues.

“No one was fixing this problem so I was going to take a shot at it,” she said.

She created an image analysis technology to allow users to custom-make shoes using their mobile phones and asked a  former colleague, Singaporean Joanna Lam, to help market the shoes.

Their company Well Heel’d is based in Singapore but their shoes are hand-stitched in the Seongsu-dong Handmade Shoe Street in Seoul, which has over 350 artisanal shoemakers. 

One of them, Mr Yoo Hong-sik, is well known for making the first pair of shoes for President Moon Jae-in after he was sworn into office in 2017.

Mr Yoo said Seongsu-dong has always been a mecca for shoes, but younger shoemakers left as time went by. He praised government efforts to inject more life into the street by creating display spaces for shoes. 

Efforts by Ms Yang and Ms Lam also count towards digitalising an old industry. 

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A customer just needs to answer a simple quiz and take photos of her feet with her phone, and the company’s measurement technology will do the rest. This way, those with issues such as wide feet, bunions and different- sized feet will be able to get shoes customised for each foot.

The company’s first shoe brand is called Kada:kudu, which means shoes for going places in Korean. 

“We want women who wear them to be able to run for the bus but also look professional at meetings and get through the entire day,” said Ms Yang.

The company has sold more than 200 pairs of shoes since February to places such as the United States, United Kingdom, South Korea and Singapore.

While  Covid-19 is keeping people at home and away from the need to wear shoes, Ms Lam believes there is huge potential for growth once the pandemic is over. “People want to get dressed up, after all these months of wearing slippers and sweatpants,” she said.

The two partners have big plans for their measurement technology. 

“Eventually, our algorithm should be good enough to be able to compare between different brands and different styles of shoes and be able to suggest the perfect fit for any customer, so that when you’re shopping for shoes online, you don’t have to wonder whether they are going to fit or not,” said Ms Yang.

Japan: Cracking markets from craft beer to transport services

MetroResidences, a Singaporean start-up in the residential and serviced apartment leasing business, has weathered the Covid-19 storm in Japan despite its traditional reliance on foreign clientele.

Founder Lester Kang, 38, who now manages a team of about 20 employees, attributes this to having a pulse on the ground.

“To borrow a surfing analogy, I quite like catching the wave,” he tells The Straits Times. “You need to be aware of what is happening, to be able to spot trends.”

The Rakuten-backed company was founded in Singapore in 2015 and entered Japan two years later. Its revenue for Japan has already exceeded that of Singapore.

Mr Lester Kang, 38, founder of Singapore start-up MetroResidences, in a serviced apartment that the company is managing. PHOTO:METRORESIDENCES

While Softbank-backed Oyo, its key competitor, has struggled and sold off its residential unit this year, MetroResidences set a new monthly sales record in April last year, just as borders were shut.

“We noticed a spike in foreign visitorship to the firm’s Japanese portal, just as traffic to the English site plunged,” Mr Kang says. “This led us to realise that many overseas Japanese were rushing back to Japan and wanted to secure a short-term lease fast. Hence, we switched our marketing strategy to target these returnees.”

This year, MetroResidences has scored a major contract to host incoming media delegations for the Olympics, with more than half of its rooms reserved since February.

It is but one of the many Singaporean start-ups that are making inroads in Japan, a market that is notoriously tough to crack due to language, bureaucracy and insularism.

Yet, the opportunities outweigh the challenges for some start-ups looking to expand beyond tiny Singapore, as the barriers of entry are gradually being lowered with Japan making good on its ambitions to grow as a start-up hub.

Cities from Tokyo to Fukuoka are running accelerator programmes, while global venture capital (VC) funds like Plug And Play and 500 Startups have set up shop in Japan.

Cash-rich corporations are ready to invest and tertiary institutions are running incubators.

Enterprise Singapore (ESG) is also working with Japan’s deep technology innovation platform Leave A Nest to help Singapore start-ups grow in Japan, the world’s third-largest economy and home to many Fortune 500 companies.

“We connect Singaporean start-ups with Japanese intermediaries, accelerators or VCs, who can offer advice and help them strategise according to what ticks with local investors, buyers and partners,” says Mr Fabian Tan, ESG regional director for North-east Asia and Oceania.

“It can be challenging to navigate the market if you can’t speak the language and lack an appreciation of Japanese cultural norms and business etiquette,” he adds, noting that this could hurt trust-building.

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Covid-19 has disrupted Japanese society by catalysing demand for digital innovation.

AI firm has built a platform of more than 60 AI functions that clients can “assemble like Lego blocks”, founder Christopher Yeo, 59, tells The Straits Times, though he notes the challenge that AI is evolving much faster than the sales cycle of consensus-based Japanese companies.

“There is a lot of resistance, but our value proposition is that we provide a wide range of APIs (application programming interfaces) that they can combine and mix and match like Lego blocks to build an application of their own,” he says.

But the signs are positive, and the company, which started in Singapore in 2017 and branched into Japan in 2019 has clients including a Nagoya-based manufacturer and investors including the VC arm of Japanese media company Asahi Broadcasting Group.

Mr Yeo says he is optimistic that Japan will account for half of the company’s revenue by next year.

Meanwhile, sports-tech start-up ELXR, which has subsidies from the Kobe City government, aims to grow a sporting community like what it has achieved in Singapore. It started in Singapore in 2018 and set up a firm in Japan last year.

With more instructors going freelance in Japan, ELXR is exploring ways to connect trainers with clients, and plans to hold more community boot-camps and events, founder Steffan Fung, 41, says.

Finding solutions

Singapore start-ups are also taking aim at the perennial needs in Japan of mobility and sustainability.

Swat Mobility, a transport-on-demand service that started in Singapore in 2015, is backed by the University of Tokyo Edge Capital and has held a successful trial in Niigata City with a local bus operator. Routes are optimised for passengers, who can “hire” a bus via a mobile app or a call centre to be picked up and dropped off at bus stops.

Japan head Masashi Suehiro, 37, notes that steep rural depopulation poses the challenges of “infrequent bus schedules and difficulty in getting around without a car”.

But at the same time, seniors are being urged to avoid driving and even surrender their licences amid a wave of accidents. Swat Mobility’s service can thus make public transport more efficient and improve road safety, in a positive step for Japan’s drive to meet sustainable development goals (SDGs).

Another company with an eye on the SDGs is Crust Group, a food-tech company started in 2019 that upcycles edible bread leftovers into craft beer.

Founder Travin Singh, 30, tells The Straits Times that the start-up saw the opportunity in Japan because of the country’s push to reduce waste and pursuit of SDGs. The company also took part in two Japan accelerator programmes.

As the local partner for Singapore start-up Crust Group, Hakuba Brewing Company does the production, storage and distribution of Crust Lager in Japan. ST PHOTO: WALTER SIM

Crust’s local partner, Hakuba Brewing Company, which the start-up found on Facebook, manufactures and distributes Crust Lager for the Japanese market.

The start-up has pitched its business idea to the Environment and Trade Ministries in Japan and is now focused on networking and growing relationships with supermarkets, convenience stores, hotels and eateries amid a boom in craft beer popularity in Japan.

Separately, it is developing a non-alcoholic offshoot Crop, using fruit and vegetable waste, in Singapore, with plans to produce in Japan too.

“There are alternatives in the meat space with plant-based or cell-based versions, but hardly any in the beverage space,” Mr Singh says. “The difficulty comes in how I have no reference in what I’m doing. But because I have no reference, I can then be the reference and innovate in that space.”

Fintech hub race

Japan’s decades-old ambitions of becoming a fintech hub were buoyed by Prime Minister Yoshihide Suga’s vow last year to remove bottlenecks and barriers of entry for foreign businesses.

“With the aim of making Tokyo a financial hub for Asia and the world, we welcome financial professionals from overseas,” he said. “We will promptly review the relevant parts of the taxation system, provide a wider range of administrative services in English, and relax residency requirements.”

This is expected to be a fillip for Tokyo as it competes for business, capital and talent and follows the statement of intent by Tokyo Governor Yuriko Koike when she launched the FinCity.Tokyo initiative in 2019 to promote Tokyo as a top-class global financial city.

Japan has enacted reforms to reduce tax burdens on corporate, inheritance and income tax.

FinCity.Tokyo chairman Hiroshi Nakaso told a fintech event in February: “History tells us that when there is a sense of urgency and a shared single purpose, Japan can act collectively and promptly.”

Ms Koike added that Covid-19 was a “wake-up call” for Japan. “It alerted us to imminent challenges we must resolve. We must accelerate digital transformation and be ahead of the curve in addressing climate change,” she said.

The Yano Research Institute forecast that Japan’s fintech market will more than triple in value from US$3.27 billion (S$4.4 billion) in 2019 to US$11 billion next year.

Among the start-ups that are poised to ride the fintech wave is RootAnt, founded by Mr Lincoln Yin Likun, 29, who was named on Forbes Magazine’s 30 Under 30 list this year.

RootAnt, founded in Singapore in 2018, launched in Japan in 2019 with the backing of financial services giant SBI Holdings. The Tokyo Metropolitan Government supported by setting up meetings with banks and potential clients.

RootAnt facilitates open digital banking between businesses and financial institutions by digitising moveable assets and improving risk management in supply chain financing.

Mr Yin tells ST that there is huge demand for a financing model that can reduce delays, save money and build overall efficiency through digital oversight of the entire web of supply chain transactions, which is called “deep-tier supply chain finance”.

RootAnt has built in green financing into its product as well.

“There are many large companies – even in Singapore – without the digital solutions to manage their accounts payable, accounts receivables and orders,” he says.

RootAnt has raised US$1.11 million in seed funding and also has a branch office in China.

Going forward, RootAnt is looking into providing supply chain finance banking engines for financial institutions, and already has projects with a few leading banks in the pipeline.

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