Hit by shrinking liquidity around the globe, startups in South Korea are coming up with different ways to cut costs, most notably in human resources.
Viva Republica Inc., the operator of fintech platform Toss, saw its valuation plunge 49% to 10.8 trillion won ($8.3 billion) on July 4 from the previous 21.1 trillion won ($16.2 billion) seen on January 7, according to over-the-counter (OTC) securities trading platform PSX.
In other words, the valuation halved in just six months.
A number of other unicorns, or private firms with at least $1 billion in valuation, also saw their values nosedive.
The values of Dunamu Inc., Yanolja Co., and Kurly Inc. have slid 44%, 28%, and 55% respectively.
“The fact that most unicorns are still in the red also pushed down theirs corporate values,” a venture capitalist told The Korea Economic Daily.
The industry insider added: “Danggeun Market received hefty investment in mid-2021 with a valuation of 3 trillion won. While the valuation surged to around 5 trillion won since then, some say it recently plummeted to hover around 1 trillion won.”
Danggeun is the publisher of South Korea’s hyperlocal community app Karrot, with a strong focus on used goods sales among neighbors.
LEARNING FROM UNICORNS
Seeing the rapid decline in valuation for unicorn startups and the cooling-off of the initial public offering (IPO) market, the more nascent startups are cutting their staff and minimizing the benefits offered to those who are staying.
“We are tightening our belts,” said Ziptoss CEO Lee Jae-yoon. “We are getting by because each person is taking on a two-person workload.”
The number of staff at Ziptoss slid more than 30% from about 220 last November to around 150 in June.
Logo of Ziptoss, a real state brokerage app
The adjustment is unusual for a startup that is seeing a rapid rise in its accumulated trading volume, which jumped from 1 trillion won early last year to recently exceeding 2 trillion won. The contraction comes as the real estate brokerage app did not meet its funding goal.
Spoon Radio Inc., a Seoul-based startup with a San Francisco office, recently cut its workforce by more than 35% from last year’s 140 to around 90.
South Korea's Ministry of Employment and Labor awarded Spoon last July for its contribution to the country’s job creation.
Since being founded in 2013, the company secured more than 60 billion won in funding but failed to garner more capital in the recent Series D funding round.
Spoon Radio is an audio live-streaming app
Just last year, a number of South Korean startups lured in developers with the promises of high pay and unprecedented benefits.
Some have signed leases for office space in the upscale Gangnam district to attract top talents.
But when the global economic downturn forced venture capital firms to be more prudent with their investments, the startups cut down on labor costs.
“If the investment crunch continues for more than six months, we will start to see some startups waving the white flag,” Hwang Sung-hyun, CEO of startup human resources firm Quantum Insight Inc. said. “It will be time to get serious about discerning gems from pebbles.”
PROFITABILITY BOOST
As VCs have become more cautious in their investments, startups are more eager than ever to strengthen their revenue stream.
Drama & Company, which runs the digital business card organizing app Remember, has tweaked its billing method for the hiring solutions product to increase the fees.
Edutech startup TeamSparta launched a new program that teaches the users how to create games within the uber-popular metaverse platform Zepeto.
“Startups used to be more concerned about increasing the number of users than their revenue,” an industry insider said. “But they have recently shifted their focus to making money.”
Write to Joo Wan Kim, Eun-Yi Ko at kjwan@hankyung.com Jee Abbey Lee edited this article.
