Byunghwan Hyun, Professor of Daejeon University

Recently, an extensive consulting market has opened on a global scale. Due to a sudden rise in consulting demands starting from the second half of last year, the Asia market alone, where the value of the consulting market was 47 billion dollars in 2017, has risen to 53.9 billion dollars in 2019. In South Korea, most of the demands come from large conglomerates such as Samsung, LG and LS. Future uncertainties, combined with a sluggish economy at home and abroad, various regulations, and the urgency to sophisticate their major businesses in this 4th industrial revolution era, these companies have been catapulted into a need for consulting.
 
Where the center of gravity has shifted from manufacturing to services, developed countries like the US have completed or are in the process of industrial restructuring. The proportion of manufacturing out of total added values throughout the globe reduced to 16 percent or less in 2017 from 25.7 percent in 1970. This portends that the economic structure of the entire world is moving away from manufacturing into the services industry. However, the contribution of the manufacturing sector to the national GDP growth is still 40 percent or higher in South Korea. Even so, it is inevitable for South Korea to see its economy shift away from manufacturing into the services industry because it has far more added values than manufacturing.
 
As one of the major quaternary industries, bio healthcare belongs to a technology-intensive, technology-led and labor-intensive services sector. This induced the government or corporations to select this sector as the destination for strategic and intensive investments. Last May, the Korean government announced that it would invest 4 trillion KRW in R&Ds each year until 2025 under its innovative strategies for bio healthcare. In this context, it also declared its plan to foster semiconductors, future-oriented vehicles and bio healthcare as three major industries to focus on. The government is committed to supporting R&D investments in the bio healthcare sector as much as 4 trillion KRW on an annual basis until 2025 and investing another 2 trillion KRW or more in scale-up funds over the five-year period to achieve exports of 50 billion dollars and the creation of 300,000 jobs in the bio healthcare sector.
 


The private sector is also playing its role. With exports of 14.6 billion dollars last year in the healthcare sector, including pharmaceutical products, medical devices and cosmetics, it has grown by 21 percent on an annual average for five years. In 2018, the sales of public companies in those areas were posted at 36.6 trillion KRW with an increase of 7.8 percent compared to the previous year, while R&D costs increased by 16.4 percent to record 2.1 trillion KRW, contributing to a high market expectation. Despite a plunge of bio shares owing to a series of reasons including the investigation by the Prosecutors’ Office into fraudulent accounting of Samsung Biologics, revocation of a license given to Invossa’s gene medicine for osteoarthritis, Hanmi Pharmaceutical’s retraction of technology exports and HLB’s failed clinical study in the US, a whopping 10 billion-plus KRW has flocked to promising bio stocks, posting the venture capital investments in the bio healthcare sector at 523.3 billion KRW for the first half-year. It amounts to 27.5 percent of the total venture capital investments (about 1,899.6 billion KRW), which is a rise of 26.8 percent from 412.7 billion KRW year-on-year and expected to overtake the ICT sector for the first time, surpassing the 1 trillion KRW mark this year.
 
At the center of these investments are Daedeok biotech firms. With a membership of 114 biotech firms, bio investment/financial firms, and hospitals, including six companies listed on KOSDAQ and two on KONEX, Bio Healthcare Association generates 5 trillion KRW’s worth of corporate values.
 
To assist all this, I take the helm of Bio I-Corps that carries out the government’s supports for biotech start-ups. Bio I-Corps integrates the US start-up system into Korea and, based on this, helps Korean biotech firms establish their corporate entities in the States and grow to a global scale. Besides that, it also supports biotech firms to be listed on KOSDAQ.
 
Led by Mr. Bob Story at the Johns Hopkins University located in Baltimore, who takes charge of industrialization of biotech firms by nurturing them to be listed on NASDAQ the training and mentoring for biotech start-ups has been taking place in the States. These biotech firms can tap into advanced experiences and powerful mentors. By comparing their support system and the Korean system based on my experience, I have discovered two significant features that differ from the Korean system.
 
Generally speaking, for a company to succeed, a lot shall be supported, such as the creation of an early business model, funding, technical assistance, space support, support for research strategies, business strategies, assistance for company listing and marketing strategies, which have also been done well in South Korea. However, before doing all this, I discovered that those who would like to start a business actively engaged in customer discovery. Such a practice exists in the concept of technical business development in South Korea, but in the States, they meet at least a hundred or hundreds of customers, and listen to their views and opinions, letting customers judge their business model. In this process, if business models turn out to be unacceptable by the market, entrepreneurs give up their business or are advised to change their business model or if they insist on doing the business to make it more market-friendly (i.e. able to create customer value).

Another big difference is that outstanding mentor groups are ready to provide mentoring services as needed. In the States, to be qualified as a mentor in most cases, one has to be rich in wealth, experiences and networks from having started their own business in the relevant sector and exited from it. These mentors receive three to five percent of shares from a mentee company as a shareholder and provide all the support for networks, management and funding needed for the company to succeed. This paradigm exemplifies the excellent start-up supporting system in the US where capitalism has matured. In South Korea, would-be entrepreneurs or those who support start-ups should also focus more on the fundamentals to increase a success rate when they start their businesses.

 
Also, while I support and provide training for biotech start-ups along with the US, I have come to believe that what matters most is building a system compatible with America’s. In this regard, I would like to create a foothold in Boston or New York in the eastern part of the US or San Francisco in the western area where Korean biotech firms can be established. Currently, Daejeon city is benchmarking on Boston’s LabCentral and pursuing its support for biotech start-ups in the city under an agreement with ERA (Entrepreneurs Roundtable Accelerator).

On top of that, to support shared testing devices and instruments, connect with start-up supporting organizations and offer a space of 15 to 35 square meters for each firm, it is necessary to provide biotech start-ups with a foothold in the States by leasing buildings with an area of hundreds of pyeong (3.3 ㎡) in a biotech cluster where industries, academia, research institutes and hospitals are concentrated. By doing so, the start-ups could reside in the States and more easily participate in a seminar of industries, academia, research institutes and hospitals that occasionally takes place, thereby opening opportunities to access information and networks; devise technical and marketing strategies; win some US SRIR research funds; and come up with a joint business with other tenant companies through active networking. We need more creative and enterprising business practices.
 
While operating Bio I-Corps to help Korean biotech firms advance into the US market, over the past three years, I’ve seen firsthand that how far those firms have come and how creative they have become with training and networks in several months in the States. Thus, we desperately need such a training/supporting system.
 
Because there are biotech firms that have a high ROI multiple for investments, customer discovery through a US foothold is expected to help biotech firms that inevitably have to pursue global products to achieve their targets. Bio healthcare has been a typical government-led industry, and such governmental supports for the past two decades have come to fruition and helped the bio healthcare industry take its first step as a key industry. While planning governmental supports for bio healthcare over the past 30 years, I have now witnessed its beginning as a key industry. If a global base is established for research businesses at this time, I believe it would be a huge stepping stone for biotech firms to further leap forward.
 

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